Bob Weeks discusses planning for downtown Wichita revitalization and what he learned on his trip to the Platinum Triangle in Anaheim, California. Host Tim Brown and guest Randy Brown also appear. From the KPTS Television show Kansas Week, August 14, 2009.
The article referred to is Wichita’s getting ready to plan.
As the City of Wichita develops a grand plan for downtown revitalization, can we have a process that is freedom-friendly and respects property rights? I went to Anaheim to find out.
Leaders in Wichita — both private and public sector — believe that Wichita needs a plan for downtown. To support this, the city is seeking to develop a Downtown Revitalization Master Plan, a “a twenty-year vision for its thriving downtown.” Right away I want to ask: if downtown is thriving, why does it need revitalization?
The document Wichita used to lure planning firms to apply for the planning job is full of ambitious and colorful language: “a community synergy that is contagious,” “casting a grand vision to realize our potential,” “the bold vision the community is seeking.”
The danger we face is that Wichita’s plan will end up like almost all other urban plans — a top-down effort micromanaged by politicians and bureaucrats, people whose incentives are all wrong. We already have the structure in place, with our mayor promoting the plan for downtown as his signature achievement, and a tax-supported downtown development organization headed by a young and energetic planning professional.
There is a different way to go about redevelopment, a way that respects freedom and property rights, while at the same time promising a better chance of success.
Last month I visited Anaheim, California, to learn more about the Platinum Triangle. This is an area of low-rise warehouses and industry that the city thought would be a good place for redevelopment. (Anaheim’s old downtown was redeveloped starting in the 1970s, is fairly nondescript, and has not met expectations.)
What Anaheim decided to do with the Platinum Triangle is to employ “freedom-friendly” principles in the district’s development. Or, as the subtitle to an article written by Anaheim Mayor Curt Pringle states, a “Foundation of Freedom Inspires Urban Growth.”
Here are the important things that Anaheim has done that are out of the ordinary:
No use of eminent domain to take property. The forceful taking of property by government for the purposes of giving it to someone else is one of the worst violations of property rights and liberty that we can imagine. But it’s a prime tool of redevelopment, one that the planning profession says is essential to their efforts to reshape cities.
In Kansas, we have a relatively new eminent domain law that, on its face, should provide strong protection to property owners. It’s unknown whether this protection will be effective when a city such as Wichita asks the legislature to allow the use of eminent domain, which is what the law requires. If a city makes the case that the success of Wichita and thousands of jobs depend on the use of eminent domain, will legislators go along?
Overlay zoning that respects existing land use. Instead of replacing existing zoning, the city added an “overlay zone.” This meant that while the land had new permissible uses and restrictions, existing rights were protected. It’s only if existing property owners wanted to pursue new development that they would have to conform to the new development standards contained in the overlay zoning.
No public subsidies or incentives. In California, they’re called redevelopment districts. In Kansas, we call them tax increment financing or TIF districts. In either case, this mechanism allows property owners to, in effect, retain their own increased property taxes for the benefit of their developments, something that the average taxpayer — or real estate developer not working in a politically-favored area — can’t do.
The City of Wichita views TIF districts as a powerful tool for development. The city has many existing TIF districts, and we can expect that others will be created to support downtown revitalization. While many people recognize and agree that the taking of land through eminent domain for economic development is bad, the taking of tax revenues through TIF is subtle. Most citizens don’t know this is happening.
Anaheim did a few other things: it streamlined the permitting process, reduced parking regulation, developed a broad-based environment impact report, and relaxed requirements for balancing commercial and residential uses.
It also used a “first-come, first served” housing permit allocation process. Instead of allocating housing permits to each parcel, permits were allocated to a much larger district. Developers could claim them through a competitive process and use them flexibly.
What’s been the result in the Platinum Triangle? After the district was formed in 2004, development started at a fast pace. But the housing crisis in California has definitely put a damper on the pace of development. An illustration: In a loft project in the Platinum Triangle, condos originally priced at $400,000 are now offered at $250,000. It’s expected that as the housing crisis eases, developers will go ahead with their plans.
The Platinum Triangle offers a distinctly different model for redevelopment than that practiced in most cities. A few other cities in California have noticed and are adopting Platinum Triangle-style, freedom-friendly, principles.
The question we in Wichita now face is this: Will Wichita adopt a freedom-friendly approach to downtown revitalization?
A recent letter in the Wichita Eagle by Alden Wilner of Bel Aire worries that “flat, dusty and hot” parking lots in the neighborhood of the Intrust Bank Arena (formerly known as the downtown Wichita arena) in downtown Wichita will hamper downtown revitalization.
I don’t know if this claim is true or not, but I do know that the solution Wilner proposes — “an area wide light-rail system” — would be an absolute disaster for Wichita. These systems are costly to build and operate, suffer from low ridership almost everywhere they are built, and have many other problems.
In a recent article, Randal O’Toole presented the costs of light rail versus highways:
The average mile of light-rail line costs two to five times as much as an urban freeway lane-mile. Yet in 2007 the average light-rail line carried less than one-seventh as many people as the average freeway lane-mile in cities with light rail.
Do the math: Light rail costs 14 to 35 times as much to move people as highways.
The Government Accountability Office found that bus-rapid transit—frequent buses with limited stops—provided faster, better service at 2 percent of the capital cost and lower operating costs than light rail.
Light rail is the mantra of those who hate cars. They must love waste and failure in its place. Portland is an example of an area that’s built a lot of light rail in recent years. O’Toole points out that in 1980 — before the light rail building boom — 9.8 percent of the region’s commuters took transit to work. Now that number, despite the light rail building boom, has declined to 7.6 percent.
Another article by O’Toole (Light Rail Doesn’t Work) tells of the huge costs, inconvenience, congestion, misallocation of economic development, and increased energy consumption and greenhouse gas output that light rail projects produce.
O’Toole is the author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future. As Wichita prepares to undertake large-scale planning for the revitalization of downtown, I would urge our leaders to read this book.
The following article by Dave Trabert, president of the Flint Hills Center for Public Policy, was printed in yesterday’s Wichita Eagle.
Trabert makes the case for broad-based policies that will benefit all companies, not just those who happen to qualify for government economic development programs.
A specific example of a small business struggling but not qualifying for assistance was presented by Steve Compton, owner of the Eaton Steakhouse in Wichita. In February he spoke to the Wichita City Council and explained the difficulties his business is facing. He asked the council to consider small businesses just as much as large businesses and corporations when deciding who will receive economic assistance. My post At Wichita City Council, why are some doors open, and others closed? holds Mr. Compton’s remarks. The post In Wichita, let’s have economic development for all holds further information about this.
At nearly every Wichita city council meeting, the city dishes out economic development favors. Many are in the form of industrial revenue bonds, which allow companies to buy property without paying property tax for some term of years, and in some cases, they can avoid paying sales tax on the purchase. These favors seek to narrow the tax base at the same time politicians like Mayor Carl Brewer promote broadening the tax base. For those companies who can’t qualify for these economic development programs — not to mention residents — their taxes are higher than they would be.
Dave Trabert
Flint Hills Center for Public Policy
A recent Wichita Eagle commentary by Doug Stanley, vice chairman of the Greater Wichita Economic Development Coalition, made the case for government to invest taxpayer money in developing “shovel-ready” sites to attract a wide range of new employers, especially large industrial and manufacturing companies. He says consultants who work with large employers on site selection give preference to communities that have made the upfront investment to save them time and obviously, a lot of money.
The logic is that communities want jobs, so some companies and their site consultants use that carrot to entice local and state governments to absorb a portion of their upfront risk. It’s easy to understand what’s in it for the company receiving a taxpayer-funded inducement to build, and these deals certainly give elected officials a chance to show taxpayers that they’re working to create jobs. Some jobs are created if one of these deals gets done and that’s a good thing, but “buying” those jobs is not the best use of taxpayer money.
First of all, it’s a roll of the dice as to whether spending money on shovel-ready sites will actually result in job creation, and even when it does, it’s not unheard of for some recipients of taxpayer money to close or leave town. Sometimes they even threaten to leave if they don’t get more money for new projects. It’s not unlike betting money in Las Vegas; you might win once in a while but the House is the only winner in the long run. Come to think of it, though, the bettor always wins in this case. If they place a bet on a site and eventually land some jobs, they get the credit; if they lose, well, it wasn’t their money … it belonged to taxpayers.
The real conundrum, though, is why government and economic development entities place risky bets that only really pay off for a select few instead of going after a sure thing where everyone wins. A new employer coming to town with a few hundred or even a thousand jobs gets a lot of headlines and large employers are certainly important, but they pale in comparison to the jobs provided by small business. According to Dun & Bradstreet data analyzed at YourEconomy.org, 73.5% of Kansans employed in 2007 worked for businesses that employed fewer than 100 people.
Instead of picking winners and losers, government should be doing things that benefit all taxpayers and employers of all sizes. Find ways to operate more efficiently and reduce property, sales and income taxes. Eliminate a lot of the bureaucratic red tape in the licensing and permitting process. Creating a stable, pro taxpayer environment is the best kind of economic development; instead of costing taxpayers money, it puts money in their pockets.
There’s no doubt that governments and economic development agencies feel pressure to compete with communities that offer inducements to potential employers, but they should be creating strategies that benefit all taxpayers instead of a select few.
In a post concerning the possible privatization of City of Wichita parks maintenance, I called for, in a rather oblique way, privatization of city parks. A commenter picked up on this and wrote “I’m wondering how the parks would be decided by the market. Wouldn’t the parks have to charge an entry fee in that case?”
It’s a good question. Broadly, what would happen if the City of Wichita decided not to provide public parks? Would there then be any privately owned parks? What would these parks be like, if there were any?
As there are very few examples of privately-owned parks in America, we don’t really know how privately-owned parks would work. But that’s no reason we shouldn’t consider this idea.
The first thing we need to do is to dissuade ourselves of the false notion that the present system of municipal parks means free parks. They aren’t free. They seem to be free — or nearly so — to those who use them, because there is no admission fee charged.
One way that private parks might work is that their owners would charge an admission fee. This doesn’t necessarily mean that there would be an impenetrable fence surrounding the park and a toll gate at the single entrance. There could be other ways to collect admission fees.
Another way that a private owner might generate revenue and potential profit through owning a park is by the selling of concessions. Besides the obvious selling of food and drink, some other examples come to mind. A vendor might rent lockers for the storage of bicycles, so that it would be convenient for people to drive to the park and use their bicycles.
Vendors might rent roller skates. I rented these in college on the KU campus, and it was fun. Other things could be rented too, even paddle boats on the Little Arkansas River, as in the old days.
A private park might offer nanny service, so parents could drop off their young children for a session of supervised play.
A private park would probably provide security services so that its patrons feel safe. Would people be willing to pay for that?
A private park might sell advertising or sponsorship. Philanthropy could play a role, too.
So there could be many ways in which private parks could operate.
While the goal of private park owners would usually be to attract many people to patronize their parks, private owners would be able to exclude people from the park. Advocates for the present parks workers say that the workers clean the public parks of needles and syringes. This indicates that at present, the parks are used for activities that most people, especially families, don’t want to be around. Would a private owner of a park have an incentive to keep his park free of illegal drug users? Absolutely — and much more so than it appears the Wichita police do. And being privately owned, the owner would have the right to exclude drug users, noisemakers, smokers, beer drinkers, panhandlers, fornicators, proselytizers, sidewalk preachers, politicians, and others from his park. He could even impose a dress code.
(Which reminds me of a joke: A conservative said, “I am distressed by the idea of fornication in public parks.” The libertarian replied, “I am distressed by the idea of public parks.” )
Privately-owned parks would bring benefits, the nature of which we really can’t foresee and predict. Entrepreneurs are highly motivated to discover and meet consumer wishes and demands. They can experiment to see what works. The costs of their failures are born only by them. When public officials take risks and fail, they’re criticized for wasting public funds. This is a reason why little innovation comes from government.
By unleashing entrepreneurial creativity, there might be a tremendous diversity of parks springing up with features we can’t even dream of now.
Entrepreneurs don’t have to go through plodding approval of long-range plans as Wichita recently did with its Parks, Recreation, and Open Space (PROS) plan. This plan, according to its brochure, took 18 months to develop. How will it be funded? According to a memo accompanying the plan, “Present funding levels are insufficient to adequately cover the costs of the Department’s current facilities and programs.” I don’t sense much groundswell of support for raising revenue to increase this funding. So are we left to conclude that the method of public funding of the parks is failing? It seems so.
Back to my post from the other day: Another commenter wrote that the views I hold are those of “free-market extremists.” To which I reply: thank you for noticing.
This writer also wrote: “Hence, if there is no market or capitalistic value for parks, then why have them at all.”
This is my point. If people don’t value parks enough to pay for them as they use them (or let private owners profit in ways that I described above, or in other ways), then we’re faced with the situation we have today: First the government taxes everyone. Then politicians, bureaucrats, and a small group of enthusiasts decide how much recreation the people should have, and where and in what form.
I ask you: could anything be more extreme — not to mention counterproductive — than this?
At yesterday’s public hearing regarding the City of Wichita budget, the attitude of Wichita’s public employee union became clear: more tax revenue is needed.
Speaking to the council, Harold Schlechtweg, business representative of Service Employees International Union Local 513 suggested that the city consider raising taxes by raising the mill levy (property taxes). “We don’t believe taxes are too high in the City of Wichita,” he said.
This illustrates a fundamental problem of government: in order for the employees in Schlechtweg’s union to be paid anything at all — much less to receive a raise in pay — the city must levy taxes. (The city collects some revenue in fees, but most revenue is taxes.)
Furthermore, if the city is to levy taxes in order to provide services such as public parks, the city must figure out how many parks to provide, where those parks should be located, and what features those parks should have.
Even a simple matter such as the level of parks maintenance is a difficult question. Presently the city is considering replacing all or most of the workers with contract workers by outsourcing the work to a private-sector contractor.
Schlechtweg, who represents parks workers through the union, expressed concerns with “[the] accountability of contractors, quality of work that can be expected, and whether contract labor can efficiently do all the work expected of city employees.”
He and other advocates for parks workers believe that the present workers provide services that contract workers will not. The claim is that the present workers provide, as I termed it yesterday, a gold-plated level of service to the people of Wichita.
The problem the city faces, as do all governments, is that it really has no idea how many parks (and related details of those parks) the people of Wichita would like, and it has no way to answer this question.
That’s because the decisions about parks are made in the realm of politics. The politicians and bureaucrats making the decisions aren’t spending their own money, except for the very small portion of their own taxes that go to the parks.
The people who take the time to get involved and testify before boards and commissions are a small group of enthusiasts. They’re quite happy for taxpayers across the city to pay for something they themselves make great use of, but the average taxpayer uses only infrequently.
The parks workers and their union, of course, depend on a high level of parks spending for the livelihoods.
This illustrates the nature of many government programs that I mentioned in yesterday’s hearing: Many government programs have a small number of beneficiaries, but the cost is dispersed across a large number of people. To the large number, it’s just a few cents here, a few dollars there. But to the small group that benefits, it’s a job or a nice park near their home with gold-plated maintenance.
If the small group — the special interest — works hard enough, they can get what they want. Many times no one else notices what’s going on.
So how can the city learn the number of parks (and details about these parks) that people really want? How does the city figure out how many McDonald’s restaurants or movie theaters are needed in Wichita? And what movies would these theaters show? The answer is that it doesn’t. It leaves decisions about these matters to markets.
The city could do this with its parks, too. It could let people and entrepreneurs decide how many parks are needed, where they should be, and what features the parks should have. Through the market process, we’d then know that we have the types of parks that people really want.
As government extends its reach into more areas of the economy, it’s getting harder to find examples where markets are free to work. The movie theater example above: there’s not really a free market for movie theaters in Wichita. The city council has decided to subsidize a movie theater in Old Town, thereby intervening and overriding the decision the marketplace made.
As the City of Wichita struggles to make its budget work, one proposal is to reduce the number of parks workers, replacing them with contract workers. The city believes it could save $1 million per year. Parks workers and the union officials that represent them are opposed to this plan. Taxpayers, however, should be relieved that the city is considering this action, and should be asking why this wasn’t done last year.
There’s a lot of misconceptions surrounding this issue. At a public hearing held on July 1, a speaker said that the private sector lays off workers because there’s no demand, and that’s not the case with the city’s parks.
That’s not entirely true. Sometimes companies reduce employment levels because of the need to reduce costs. The same amount of work — sometimes even more — must be done.
This speaker went on to say that layoffs won’t save taxpayers money because the workers will need to pay for health care, retirement, food, rent, and mortgages. “Dumping these people on the street,” therefore, means that the taxpayer pays for these things in other ways. This is false. While taxpayers may pay for unemployment benefits and some social services, they’re not going to pay for things like retirement plans for laid off workers.
It seems as though this speaker — and a few others — view the city as a magical moneymaking machine. Pour in a few tax dollars, some work gets done, and the money spent on salaries magically creates wealth in our community.
This is exemplified by another speaker’s remarks on the effect of the parks workers on the local economy: “For every one dollar we earn, it has a 10 to 15 dollar effect to the positive.”
This is absurd. If such a statement were in fact true, we should pay the parks workers — all city workers, for that matter — more. And we should hire as many as we can find.
We must remember that it is taxpayers who pay the wages and other costs of city employees. If allowed to keep more of their money instead of sending it to the government in the form of taxes, taxpayers will spend and invest that money in ways that generate economic activity and jobs. There’s nothing magic about government spending in this regard.
In fact, government spending produces less benefit than private spending. One of the seven principles of sound public policy as defined by Lawrence W. Reed is “Nobody spends somebody else’s money as carefully as he spends his own.”
While the parks workers have spoken and their union representatives have written op-eds in the newspaper, few have spoken for the beleaguered taxpayer. And in a time of reduced employment in our community, it’s important to keep the cost of government as low as possible.
The city has a responsibility to its citizens to operate as efficiently as possible. If it is possible to have work such as park maintenance done less expensively, the city should do so. It should have done so long ago.
Sunday’s Wichita Eagle carried an op-ed piece written by Doug Stanley, vice chairman of the Greater Wichita Economic Development Coalition. As we might expect, he calls for more government involvement and management of economic development.
Stanley makes the point that economic development organizations like GWEDC have customers, going so far as to cite the saying “the customer is king.”
The idea of a customer, however, implies willing and voluntary participants on both sides of the transaction. While the companies that receive benefits from the taxpayer are willing participants, the taxpayers are not.
Reading Stanley’s op-ed, you might conclude that Wichita has no industrial sites available. Conversations will several local developers indicate that the opposite is true: there are many industrial sites — some complete with existing buildings — available for immediate occupancy. It may be true that we don’t have the 800 acre site that Sedgwick County wants in an industrial park, but we have many sites that even very large companies could use.
And it’s a rare company that could use even a small fraction of 800 acres.
Critics might say that these sites, owned by private interests, won’t be as responsive to the needs of companies making site selections. But who do you trust to be more proactive and responsive: entrepreneurs looking for survival and profit, or government bureaucrats like those working for GWEDC?
The problem, of course, is that private entrepreneurs don’t have government largess funded by taxpayers to offer.
That leads to something that Stanlely doesn’t mention: Chasing jobs through economic development is expensive. A 1996 PBS report stated “The strategy of offering cheap land, cheap labor, and sizeable tax breaks has worked well for the southern and southeastern states, but it is getting expensive. In 1980, landing a new Nissan plant cost Tennessee $11,000 per job created. In 1985, recruiting the Saturn Corporation cost the state $26,000 per job. In 1992, it cost South Carolina more than $68,000 per job to bring in a BMW plant, and the estimates range from $150,000 to $200,000 per job for the Mercedes Benz plant in Alabama.”
This arms race among states needs to stop. Last year Cessna used the fact of an offer from other states to extract subsidy from Kansas, Sedgwick County, and the City of Wichita. But how else could political leaders in Kansas react? It would have been political suicide to let one of Kansas’ most famous companies escape.
Not that Cessna was planning to leave Wichita altogether. Instead, the decision was where to build a plant to produce a new airplane model. Since last year, Cessna has scrapped plans for the new plane. To its credit, Cessna is returning or not using the subsidies. But this is an indication of the risk that government assumes when engaging in economic development.
Government has a dismal record of picking winners and losers. Instead of making decisions based on economic factors, decisions are made for political reasons. Those reasons often have little to do with sound economic prospects and more to do with the next campaign for re-election.
Action at the federal level is needed to stop this wasteful competition between states. Then, all states can disband their economic development organizations and let business be business.
Those who advocate greater government planning and spending in downtown Wichita often cite Oklahoma City’s Bricktown area as a model of success. Wichita’s cable television channel broadcasts a spot about it over and over.
An article in the The Journal Record discusses Bricktown, and mentions an official has heard “concerns about underutilized, sometimes dilapidated retail space along the 10-year-old canal and the practicality of extending the waterway.”
Perhaps a trip to Oklahoma City to investigate is in order.