Tag: Wichita city government

  • It’s not the same as pee in the swimming pool

    A repeat of a column from 2008. Mark McCormick no longer writes for the Wichita Eagle. Recently that newspaper concluded that because Wichita’s smoking ban caused no economic harm, it was a good thing to do. Let’s hope this regulatory zeal doesn’t spread to other areas.

    In a column in the February 27, 2008 Wichita Eagle (“Smoking ban issue not one to negotiate”), columnist Mark McCormick quotes Charlie Claycomb, co-chair of Tobacco Free Wichita, equating a smoking section in a restaurant with “a urinating section in a swimming pool.”

    This is a ridiculous comparison. A person can’t tell upon entering a swimming pool if someone has urinated in it. But people can easily tell upon entering a restaurant or bar if people are smoking.

    Besides this, Mr. McCormick’s article seeks to explain how markets aren’t able to solve the smoking problem, and that there is no negotiating room, no middle ground. There must be a smoking ban, he concludes.

    As way of argument, McCormick claims, I think, that restaurants prepare food in sanitary kitchens only because of government regulation, not because of markets. We see, however, that food is still being prepared in unsanitary kitchens, and food recalls, even in meat processing plants where government inspectors are present every day, still manage to happen. So government regulation itself is not a failsafe measure.

    Despite the doubts of nanny-state regulators, markets — that is, consumers — exert powerful forces on businesses. If a restaurant serves food that makes people ill, which do you think the restaurant management fears most: a government fine, or the negative publicity? Restaurants live and die by their reputation. Those that serve poor quality food or food that makes people ill will suffer losses, not as much from government regulation as from the workings of markets.

    But I will grant that McCormick does have a small point here. Just by looking at food, you probably can’t tell if it’s going to make you ill. Someone’s probably going to need to get sick before the word gets out.

    But you easily can tell if someone’s smoking in the bar or restaurant you just entered.

    The problem with a smoking ban written into law — rather than reliance on markets and individual choice — is that everyone has to live by the same rules. Living by the same rules is good when the purpose is to keep people and their property safe from harm, as is the case with laws against theft and murder. But it’s different when we pass laws intended to keep people safe from harms that they themselves can easily avoid, just by staying out of those places where people are smoking.

    For the people who value being in the smoky place more than they dislike the negative effects of the smoke, they can make that decision. McCormick and Claycomb want to deny people that choice.

    This is not a middle-ground position. It is a position that respects the individual. It lets each person have what they individually prefer, rather than having a majority — no matter how lop-sided — make the same decision for everyone. Especially when that decision, as Claycomb stated in another Wichita Eagle article, will “tick off everybody.” Who benefits from a law that does that?

  • Kansas historic preservation building tax credits discussed

    Sometimes on blogs people don’t take the time to read comments left to posts. Sometimes those comments provide valuable discussion and illumination of public policy issues. So here I take a moment to elevate a few comments left to a recent blog post.

    On Wednesday afternoon, a reader — we’ll call him “Larry” — left this comment to my post Kansas historic preservation tax credits should be eliminated. In that post, I argue that tax credits for the preservation of historic buildings are economically the same as a direct payment by the state to the developer, and that this practice is bad public policy that should be ceased. Here’s what Larry wrote:

    Bob, I want to understand your point of view. I do not claim to be an expert in this area so these are observations / questions.

    1. Wasn’t Wichita High School owned by the WATC and therefore tax exempt?

    2. If a developer puts, say $6M into the building to get it open the property with 68 units renting for $1000 to $2000 a month then I would assume it would have a value that in turn would generate higher taxes than the building now pays, correct?

    3. As I understand the Historic Tax Credit the person that put up the $6M and now has to pay the new property tax can take a credit of about 25% of the eligible construction cost (not all of the construction cost is eligible) against the new taxes he/she would pay to the state, correct?

    So if I have this right a building that is paying no taxes to the state has $6M spent on it and now is paying taxes into the state coffer but will pay 25% less in taxes than it would have if the building were not historic. Do I have it right? If so where is the payment you allude to being made by the state to the developer? Also don’t forget that when renovating a historical building you can not renovate it using the most economical methods but have to keep it “historically” correct and that in itself is more expensive.

    Then the reader “Pat” wrote this comment:

    Larry, you are correct in that there is no money given to the developer by the state. No payments. Typically, the tax credits are used as barter for a developer to sell the credits at a significant discount on the open market to those that need are in need of a “credit”. On historic projects, the money raised by the sale of the tax credits has to be used on certain eligible costs. The building will not pay property taxes on a reduced valuation but will pay taxes on its fair market value.

    Wednesday evening I left this comment:

    For Larry’s points 1 and 2, I’ll take his word that these are correct. I don’t think I’ve ever made a claim to the contrary.

    For point 3, the issue of the historic preservation tax credits and property taxes are entirely separate matters. The savings of 25% of building costs arising from the historic preservation tax credit is a one-time event, while property taxes are an ongoing event year after year.

    The payment made by the state to the developer is the tax credit itself, which might take the form of a document from the state containing language like “This certificate may be sent to the state of Kansas instead of a check for $1,000,000 in payment of taxes.”

    As Pat correctly notes, the recipient of such a certificate might keep it and use it to pay all or part of their taxes, or might sell it to someone at any price they mutually agree on. This ability to sell the tax credit document has been cited by WDDC president Jeff Fluhr as important.

    So how is issuing a tax credit not the same as making a payment to the developer?

    (By the way, Pat, if I knew I was getting a tax credit, I would immediately adjust my periodic tax payments to the state. It’s not necessary to wait until annual tax time to benefit from the credit.)

    Furthermore, the fact that the tax credit may be used for only certain purposes is a total red herring. If I gave you $100 on the condition that you could spend it only on a Monday, would you deny that I had enriched you by $100? Or would you contend that I had enriched you by something less than $100? I would think that you would simply shift your spending around and benefit fully from the $100 that I gave you.

    Finally, the fact that historic renovation is expensive is just like having granite countertops. It’s a premium amenity that is freely chosen by those who value it, it benefits those who choose it, and should be fully paid for by them.

    Interesting? Or not?

  • Wichita downtown planners hosting events

    The Wichita Downtown Development Corporation is holding two events in February that should be of interest to those concerned about the future of downtown Wichita and the city and region as a whole.

    The first event is the WDDC annual lecture. This event will take place on Thursday February 25 at the Wichita Scottish Rite Temple, corner of First and Topeka Streets. This year’s guest lecturer is Mr. Jim Cloar, noted for his work in the cities of Tampa, Florida (sports arena development); Dallas, Texas (Arts District Development); and St. Louis Missouri (downtown residential and retail). The lecture will focus on how to take a master plan from the vision to implementation. Opening reception will start at 5:30 pm, lecture will follow at 6:30 pm. At the conclusion of the lecture there will be a question and answer session with Cloar and the Goody Clancy team. To RSVP, email info@downtownwichita.org or call 316.264.6005.

    The second event is the Wichita Downtown Master Plan Charrette, to be held on Saturday, February 27, from 9:00 am to 4:00 pm at the Wichita Art Museum. (A charrette is “an intense period of design activity.”) The Downtown Master Plan Charrette is the cornerstone event that will provide key visioning for the new downtown master plan. To RSVP, email info@downtownwichita.org or call 316.264.6005.

  • Randal O’Toole on Wichita’s WaterWalk and government planning

    As part of Randal O’Toole’s visit to Wichita, he recorded some remarks in front of a few of Wichita’s monuments to government planning. Paul Soutar of Kansas Watchdog recorded video and assembled the remarks. His reporting is Randal O’Toole on Wichita’s WaterWalk and Government Planning.

  • Businesses in Old Town Cinema district fought property taxes

    As reported in the Wichita Eagle by Brent Wistrom: “Business owners in a special taxing district surrounding the Old Town Warren Theatre have fought to have their property taxes reduced, forcing the city to cover debts incurred when the city bought land, installed utilities and built a park to spur the development.”

    I guess no one wants to pay taxes, even when those taxes go to pay off bonds that benefited your property. That’s true even though the city has made a no-interest and low-interest loan to the primary business in this TIF district. As the Eagle story reports: “The move was seen as a way to ensure the theater’s success and give the TIF district a boost.”

    We see the desire to skirt paying a full load of taxes playing out in the Power & Light District in Kansas City, Missouri, which is often cited as an example of what we’d like to have in Wichita. There, the Cordish Company refers to the project as an $850 million investment. But according to Kansas City Business Journal reporting, the company wants the appraised value for tax purposes to be just $12.3 million.

    This didn’t go over well with the writer of an editorial in the same publication. The anonymous author wrote: “But for all of The Cordish Co.’s skill in conjuring the entertainment district, the developer doesn’t seem to miss an opportunity to kick its host community in the shins. The latest kick comes in the form of a protest by Cordish of the appraised value of the Power & Light District.”

    Further: “Cordish isn’t bickering with the county about a slight variance in figures — it is claiming a value that is less than one-tenth of the county’s number.”

    We don’t have many more details about the situation in Wichita. I’ve made a records request that should tell us which property owners appealed their tax valuations, their reasons why, and the result of the appeal.

  • Wichita city council signals possible change in economic development incentive policy

    At today’s meeting of the Wichita City Council, discussion by council members and their vote may signal a change in the city’s stance toward economic development incentives.

    At issue was a request for extension of economic development incentives for a Wichita company. Five years ago the city council approved an economic development package for the company that included a tax abatement. As is the city’s policy, the council revisits the issue in five years to see if the company has meet its goal commitments. In the case of this company, one commitment — the building of a new facility — was met. The other commitment — creation of a certain number of jobs — was met early on during the period of the tax abatement, but employment has been declining in recent years, and employment is currently 100 jobs below the goal.

    Recently the city council adopted new guidelines for companies that are not meeting their goals at the time of review. These guidelines make it easier for companies to qualify for the extension of the abatement. If the WSU Current Conditions Index has declined since the awarding of the incentives, the company will qualify for an extension if a majority of the goals are met. A company will also qualify for extension if their peak job creation numbers exceeded the goal, even if the number has fallen, as is the case with the company under consideration today.

    Based on the new guidelines, city staff recommended to approve the extension of the incentives.

    Council member Lavonta Williams asked if it was possible if, as an company receiving an incentive, could “I hire five people today and fire them by Friday and then meet my criteria?” The answer by city economic development director Allen Bell is that the policy contains no such guideline as to minimum period of employment.

    Wichita city manager Bob Layton interjected that staff’s recommendation to approve the extension is a difficult one to make, as this company is in a declining pattern of employment. Additionally, the newly calculated benefit-to-cost ratios are low, and he said he is uncomfortable with that: “We’re actually subsidizing this business, so to speak, or others are subsidizing or bearing their load for debt service.”

    Council member Sue Schlapp asked a question not covered by policy: if we deny the extension today, and next year the company improves its situation, could they come back and ask for the extension of the tax abatement then? There is no definitive answer to this question at this time, according to Bell and Layton.

    Schlapp added that it seems like we’re “lowering the bar all the time” as to the granting of incentives.

    Council member Paul Gray remarked that the council makes itself look bad in these situations, as it always grants extensions even though the city has created policies that should hold companies accountable to their committed goals. The reason for awarding the incentives, he said, was for the increase in employment, and that employment level has not been kept. “We need to start taking a harder stand on this, as we’re going to run out of money if we keep giving it all away.” Vice mayor Jim Skelton agreed.

    No one from the public was there to speak on this matter.

    Wichita mayor Carl BrewerWichita Mayor Carl Brewer was on the losing end of a 6 to 1 vote.

    Gray made a motion to deny the staff recommendation of approval of the extension. Mayor Carl Brewer said that this vote, if it proceeds in the direction it appears to be going, will change the direction of many things that affect businesses in Wichita. He said that the intent of the council is to start holding individuals accountable, and there’s not been a track record of that. It’s been worse since the economy entered the recession, he said. He urged council members to make sure they know which way they’re going with this action. “This will be the direction that we’ll be going as we start working on policy, and it will be effective for everyone, whether it be large or whether it be small. … Just making sure that when we press that button and we head down this path, that we know what we’re doing.”

    The vote was 6 to 1 in favor of Gray’s motion, with the mayor being the lone “No” vote.

    Analysis

    This action by the Wichita city council, being nearly unanimous, is very much different from its action just one week ago, when it employed one new method plus several existing methods to heap millions in subsidy on a downtown hotel developer.

    Today’s discussion is another illustration of just how difficult it is to pick winners and losers, and how difficult it is to choose which companies the city should invest in. This is why I have recommended that Wichita grant tax abatements on all new capital investment.

    Today’s action is especially cruel to the subject company. In the past, city staff has argued that withdrawing tax abatements when a company is struggling is harmful. In December 2008, economic development director Bell said this regarding a company that had not met its performance commitments: “I don’t think it would be productive at this time to further penalize them — as the market has already penalized them — by putting them back on the tax roles at this time.” This is further evidence that taxes are harmful to business and economic growth.

    Council member Williams’ question about hiring and then quickly firing employees indicates that she must not be familiar with the costs of hiring and firing. Furthermore, a company’s unemployment insurance premiums are based on its history, and actions like this would certainly raise premiums by a large amount.

    Extension of EDX Tax Exemption (Sharpline Converting, Inc.)

  • Urban planning: Wichita should reject the fads Portland has followed

    By Randal O’Toole

    Randal O'Toole speaking in WichitaRandal O’Toole in Wichita.

    Urban planners say they can make our cities more livable, our downtowns more vibrant, and our traffic calmer. The problem is that urban planners do not understand how cities work, so all of their plans often turn out disastrously wrong.

    Many urban planners are quite capable of planning a sewer line, a road, a bus route, or a school. But it is huge leap from “I can locate a water main” to “I should have the power to decide how every piece of land in your urban area should be used.”

    That is the power urban planners want. But cities are too complicated for anyone to plan, so giving anyone this power is asking for trouble.

    Take my former hometown of Portland, Oregon, whose planners say they are making streets “vibrant” and the city “livable” by encouraging walking and transit ridership and discouraging driving.

    To stop “sprawl,” planners told rural landowners around Portland that they cannot build a house on their own land unless they own at least 80 acres and earn $80,000 a year farming it. To promote “compact development,” planners rezoned many neighborhoods of single-family homes for multi-family housing with zoning so strict that, if someone’s house burns down, they can only replace it with an apartment.

    Planners believe your only property rights are the rights planning commissions decide to give you — subject to change any time.

    Portland has spent well over $2 billion building light-rail and streetcar lines. To encourage transit ridership, planners allowed rush-hour congestion on all major freeways and streets to increase to stop-and-go levels. Doing anything to relieve congestion, planners feared, “would eliminate transit ridership.”

    To further encourage transit and walking, planners zoned all the land near light-rail stations for high-density, mixed-use development, so people could walk from their apartment buildings to a cafe or grocery store. When nothing got built — developers said Portland already had a surplus of multi-family housing — the city started subsidizing it, and has so far given around $2 billion in public funds to developers.

    The results are attractive if you like the idea of dodging trolleys as you wander through canyons of four- and five-story apartment buildings. But the practical effects on Portland residents are mostly negative.

    Planners successfully increased congestion by more than six times since 1982, about the time most of these plans began. But that hasn’t gotten people out of their cars: the share of commuters taking transit to work declined from 9.8 percent in 1980 to 6.5 percent in 2007.

    Planners more than doubled housing prices, so a $150,000 home in Wichita would cost well over $300,000 in Portland. But that hasn’t made high-density housing particularly successful: many of these developments have high vacancy rates and several have gone bankrupt.

    High housing prices forced many families with children to move to distant suburbs, and the remaining childless households eat out a lot, so Portland has lots of restaurants. But it also has high taxes and urban services have deteriorated as funds once dedicated to fire, police, public health, and other programs have been diverted to subsidies to developers.

    Terrible traffic, unaffordable housing, high taxes, and reduced property rights: those are the legacies of Portland planning. That’s the future planners want to bring to Wichita. I recommend you just say no.

    Randal O’Toole (rot@cato.org) is senior fellow with the Cato Institute and author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future. He recently visited Wichita for a series of speaking engagements and meetings.

  • Randal O’Toole discusses urban planning in Wichita

    Randal O'Toole in WichitaRandal O’Toole in front of WaterWalk Place in Wichita, a monument to the failure of TIF districts, eminent domain, and urban planning by government.

    Last week Cato Institute Senior Fellow Randal O’Toole was in Wichita. He delivered a public lecture Thursday evening to a crowd that braved poor weather to attend.

    O’Toole said he spent 15 years studying urban planning, and he said he’s learned this: “Urban planners promise us paradise on earth, but first we have to give them the power to create it.”

    Imagine an urban planner in 1950 writing a 50-year plan for Wichita. O’Toole showed illustrations of some things we take for granted today but were unknown at that time, such as direct dialing a long-distance telephone call, using a personal computer, and flying on a commercial jet aircraft. But, he said, nearly everyone had rode on trains.

    We know that predictions made in the past often turn out to be nowhere near accurate. But urban planners still make these type of long-range plans. The problem, O’Toole said, is that when plans are made, someone is going to benefit from that plan. Those people will lobby to keep the plan in effect so that they continue to benefit. This will be true even if the plan turns out to be totally wrong and a disaster for everyone else.

    Cities are too complicated to plan, O’Toole said. There are too many people, and there are too many parcels of land with too many possible uses. Despite this complexity, planners think they should be allowed to dictate the use for each parcel of land.

    Since planning is so complicated, planners follow fads. As an example, O’Toole showed an example of a city that created a pedestrian mall downtown, as did some 200 cities across the country. Almost all have since been reopened to traffic.

    Another fad was slum clearance, where high-rise housing projects were built to replace slums. These buildings proved to be unlivable, and many have been torn down.

    One of the latest fads is “smart growth,” which seeks to increase the density of urban development. O’Toole’s hometown of Portland has embraced this fad. There, an urban growth boundary limits the expansion of developed areas. Instead of growing out, planners want the city to grow up. Minimum density zoning means that high-density housing replaces single family housing.

    Row houses in PortlandRow houses in Portland. These replaced a single-family home.

    O’Toole showed a photograph of a nice house that he said sells for $160,000 in Houston. In Portland, at the peak of the bubble, a similar house would sell for $380,000. He said that Portland planners are proud of the fact that developers will buy a house on a quarter-acre lot, tear it down, and replace it with four skinny row houses.

    Could this happen in Kansas, he asked? O’Toole said that President Obama’s Secretary of Transportation has decided to require all metropolitan areas to write plans to include compact development.

    Light rail is another favorite tool of urban planners that hasn’t worked. O’Toole told how Portland built light rail rather than highways. Federal dollars encouraged this. But light rail was so expensive that Portland had to cut back on its thriving bus service. Bus fares were raised and service was cut, so bus ridership plummeted.

    Light rail in MoscowA light rail train in front of an apartment building in Moscow …
    Light rail in Moscow… and the same in Portland.

    Portland built still more light rail, however, urged on by campaign contributions from rail contractors. Land near the light rail stations was zoned for high-density development. But no one wanted to develop there, because there was a surplus of high-density development and no parking around these light rail stations — except for train riders, and few people rode the trains. So Portland subsidized high-density development along light rail lines.

    Portland also created tax increment financing (or TIF districts) along the light rail lines. O’Toole referred to the money allocated to TIF districts as stolen from police and fire services, and from public schools. But still more TIF districts were created along even more light rail train lines.

    Cars parked illegally in PortlandCars parked illegally at a high-density, transit-friendly development in Portland. Management knows that if parking regulations are enforced, tenants will leave.

    The claim by government officials is that light rail promotes economic development. But it’s a zero-sum game, O’Toole said. Development is promoted in one place at the expense of development elsewhere. The added tax burden of TIF makes it a negative-sum game, as the cost of TIF financing slows the economic growth of cities that use TIF compared to those that don’t.

    O’Toole showed a photograph of a mixed-use development in Portland with three floors of apartments upstairs, with shops on the bottom floor. But all the stores are empty, because there is no parking for shoppers.

    All the spending on light rail in Portland has led to a decrease in the share of commuting trips taken using transit, O’Toole said.

    So what is the result of following urban planning fads in Portland? O’Toole said: “If your goal is to make housing unaffordable, make your streets more congested, increase taxes or reduce the quality of urban services, then by all means follow the kind of fads that Portland is doing.”

    O’Toole said that cities should follow the type of planning efforts that Anaheim, California has followed in the Platinum Triangle. Instead of using TIF financing to sell bonds and take land by eminent domain, cities should not rely on eminent domain and subsidy. Government should get out of the way, he said.

    Randal O’Toole’s appearance on the KPTS Television public affairs program Kansas Week may be viewed at Urban planning discussed on Kansas Week.