Voice For Liberty

Tag: Wichita city government

  • KenMar Shopping Center, Funded by Righteousness

    Can the Lord’s work be funded by taxation? If you’re Reverend Kevass Harding, the answer is sure, why not? He might even think it’s his calling.

    Never mind that at its fundamental level, taxation takes money from one person against their will and gives it to another.

    Sure, some people will argue that taxes are “the price we pay for civilization” or something like that. Or they will say that since we all benefit from, say, police and fire protection, we all have to pay taxes.

    Even if true, these rationalizations are a long way from using taxation to support private real estate development. At least these arguments don’t invoke the name of Jesus. But Harding does in order to accomplish through government, in the form of tax increment financing, what he couldn’t through voluntary action. Is this what Jesus would do?

    The Wichita Eagle story KenMar part of pastor’s work in neighborhood tells us of Harding’s belief that “he is doing the Lord’s work, in part, in renovating the run-down KenMar Shopping Center at 13th and Oliver.”

    The story also states “The project is a private, for-profit venture, he said, but it springs in part from his spiritual vocation.”

    This taking of money, shrouded in morality and spirituality, is even more egregious than most. High atop his moral high horse, Harding believes he is doing good for the community. For the entire city, I’m sure he believes.

    Here’s something from another man of religion, C.S. Lewis, reminding us about moral busybodies: “Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”

  • Wichita election watch parties

    There isn’t a whole lot of interest in today’s primary elections in Wichita. None of the school board races had enough candidates to require a primary. Two of the three city council races did, but probably the only district where’s there’s any doubt as to the outcome (at least as far as who will advance to the general election) is district 6, which features Janet Miller, Bob Aldrich, Ken Thomas, and Damon Isaacs. Here’s information about two election night parties that I know of:

    Bob Aldrich: Tuesday, March 3rd at the Wichita Area Builders Association building 730 North Main Street (parking in rear), starting at 6:00PM. Link to Google map.

    Ken Thomas: Tuesday, March 3rd, starting at 6:00PM at Caffe Moderne, 300 N. Mead, Suite 108, Old Town Square Wichita (Behind Rock Paper Scissors). Link to Google map.

    You can get more information about these candidates by clicking on Wichita City and School District Candidate Websites and News Coverage.

  • Wichita Eagle’s GWEDC board membership in perspective

    What is the role in public affairs of a newspaper like the Wichita Eagle? Can it wear more than one hat — making news as well as covering it?

    This is not a hypothetical question.

    Consider that Pam Siddall, president and publisher of the Wichita Eagle is a member of the steering council of the Greater Wichita Economic Development Coalition, an important, partially tax-funded board, that plays a significant role in Wichita.

    Should this make any difference to you?

    When the Eagle’s editorial board grants the president of the Greater Wichita Economic Development Coalition space on its pages, should readers be aware of this connection? (Vicki Pratt Gerbino: Invest in recruiting, preserving area jobs, February 15, 2009 Wichita Eagle)

    When the Eagle’s editorial blog writes a fawning post titled GWEDC crucial to attracting, retaining jobs, should readers be aware of this connection?

    When Eagle reporters write a story that can be characterized as critical of anyone who questions the need for the GWEDC — the story starts with “The hard-won balance between the city, county and business leaders over economic development is wobbling a bit after some comments last week.” — should readers be aware of this connection? (See Sedgwick County commissioners question economic development funding, February 17, 2009 Wichita Eagle.)

    The nature of the connection is that the Eagle is an “Investor” in the GWEDC, which means they contributed at least $5,000, at least some in the form of advertising. The Wichita Business Journal is also in the Investor class.

    I asked the heads of the two organizations involved — Vicki Pratt Gerbino, president of the GWEDC, and Pam Siddall, publisher of the Wichita Eagle — if they thought there was potential for conflict of interest when a news organization covers an entity it has made contributions to. Ms. Gerbino said no, there’s no conflict of interest. Ms. Siddall said the same, citing the separate news and business functions at the Eagle.

    In conversations I’ve had in the past with a few Eagle reporters, they’ve cited the “wall of separation” between the main functions of a newspaper, which are news, editorial, and the business of the newspaper.

    But this wall may not be as tall and wide as it seems. In an excerpt from Knightfall: Knight Ridder and How the Erosion of Newspaper Journalism Is Putting Democracy At Risk, Davis Merritt, former editor of the Eagle writes “The notion of strict separation between the business and journalism functions of newspapers is relatively recent in terms of the whole of American newspaper history, and judging by current practice, it may be only a passing phase.”

    It is difficult for an outsider to be able to know if the Eagle’s news and editorial judgments are influenced by its relationship with the GWEDC. That’s why people and organizations are often advised to avoid even the appearance of a conflict of interest.

    Could the GWEDC survive without the publisher of the Eagle on its steering committee and without the Eagle’s financial contribution? I think they could. Then, without this connection, readers of the Eagle wouldn’t have to worry so much about the Eagle’s news and editorial independence.

  • Articles of Interest

    Kansas Senate scraps higher fines for speeders along perilous roads (Jeanine Koranda, Wichita Eagle). In a defeat for Wichita Mayor Carl Brewer, the Kansas senate decides to skip his plan for higher traffic fines along Wichita’s main east-west highway. Perhaps he’ll do better with entertainment zones.

    Upside-Down Economics (Michael Kinsley, Washington Post). In this column, Kinlsey firmly buys the entire Keynesian package deal, including this: “By now we all know about the ‘paradox of thrift.’” (Sorry, Mr. Kinsley, I’ll decide for myself if it applies.) And he really buys it big: “And can we rely on the government to spend enough? … The answer is, apparently not. We’re going to need a second stimulus package, probably a third chapter of the bank bailout, more for the auto industry and others. It’s all going to cost at least two or three trillion. If it works, it will be money well spent. If it doesn’t work, that means we should have spent more.” Then, he raises the idea of how to pay for the stimulus: “But even if the stimulus is a magnificent success, the money still has to be paid back. The plan of record apparently is that we keep borrowing, spending and stimulating, faster and faster, until suddenly, on some signal from heaven or Timothy Geithner, we all stop spending and start saving in record-breaking amounts. Oh sure, that will work.” Then he raises the specter of inflation. And why does he find it necessary to refer to Suze Orman as the “blonde” financial adviser?

    Our Greatest National Shame (Nicholas D. Kristof, New York Times) The Times’ Kristof has now decided that our education system has replaced health care as our greatest national shame. “But we do know that the existing national school system is broken, and that we’re not trying hard enough to fix it.” He recognizes that teachers are the most important factor, but our methods of determining who are the good teachers doesn’t work. He calls for a package which includes extra pay for teachers who teach in “bad” schools, something that has been rejected in Wichita.

  • Proposition K and TIF Districts Collide

    A recent story in the Wichita Eagle by Dion Lefler (Tax plan could leave city with TIF debt) illustrates the some of the problems that can happen with complex economic development efforts.

    The problem in this case lies in the interaction of Proposition K, an effort to reform property tax appraisals in Kansas, and tax increment financing, or TIF districts.

    The idea behind TIF districts is that as property is developed, its value will rise enough that the increased property taxes will pay off bonds that the city issued to benefit the developer.

    Proposition K, however, alters the way that appraised values rise. According to the Eagle’s analysis of the TIF district benefiting the Ken-Mar shopping center, under Proposition K this district will generate $4.3 million less than what is needed to pay off the bonds.

    So what would the city do if faced with this shortfall? The Eagle article suggests “The city could cut spending elsewhere or raise the mill levy to fill the gap.”

    That would be a huge windfall to the developer of this project, which is Wichita school board member and Methodist minister Kevass Harding.

    But not so fast. The city requires beneficiaries of TIF financing to make up any difference between tax revenues and what’s needed to pay off the bonds. So it appears that the taxpayers may not be on the hook, after all.

    The difference, I believe, is that the debt owed to the city would simply be an obligation of Harding and his ownership team. It’s only as good as their ability and willingness to pay. Without Proposition K, the monies needed to pay the bonds would be in the form of property taxes, and the city could take various measures to collect that wouldn’t be available otherwise.

    Isn’t this a fine mess? Last summer when this TIF district was being considered, I wondered out loud to the city council “Why don’t we strip away all the confusion and obfuscation surrounding TIF districts and just give the developers $2.5 million?” (See Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways.)

    I didn’t know then that the confusion and obfuscation would get worse.

  • In Wichita, let’s have economic development for all

    GWEDC crucial to attracting, retaining jobs, says a post by Phillip Brownlee on the Wichita Eagle Editorial Blog. (GWEDC is the Greater Wichita Economic Development Coalition.)

    There’s probably little doubt that offering incentives to companies to move to Wichita results in some that do. And, as we’ve seen, some Wichita companies are adept at inciting rumors they might move or locate new facilities somewhere else in order to gain some advantage or incentive from local or state (or sometimes both) government.

    Whether these economic development policies are wise is far from settled. Last year the Kansas Legislative Division of Post Audit released a study examining economic develompent efforts at the state level. This report may be read at Economic Development: Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties Executive Summary.

    Some conclusions of interest are these:

    First: “There are a number of problems in trying to assess the effectiveness of economic development programs and activities.” The document elaborates, but the important thing is that when organizations like the GWEDC make grandiose claims, realize that many are only crude estimates formulated to produce the best possible numbers,.

    Second: “Most studies of economic development incentives suggest these incentives don’t have a significant impact on economic growth. The literature we reviewed concluded that, thus far, negative and inconclusive findings are far more numerous than positive findings. Most reviews of economic development assistance find few results are achieved — a theme that audits in Kansas and other states commonly find, as well. Findings of ineffectiveness include promised jobs weren’t created, return on investment is low or negative, and incentives offered weren’t a determining factor.”

    This paragraph hardly requires comment, except to note that professionals in the field of economic development, politicians, and government bureaucrats don’t believe this.

    Third: “The literature also suggests that economic development incentives must be offered to remain competitive with other states.”

    Because the parties identified above believe that incentives work, they want to offer them and will continue to do so. This is true, I believe, in all states.

    So it’s a terrible situation to be in. We have expensive programs that don’t produce their intended goal, but because some very self-interested parties believe they do, we’re stuck with it.

    If Kansas and Wichita wanted to really do something to get noticed, let’s lower taxes for everyone, not just those companies who seek political favor and happen to fit into a situation where they are eligible for one or more of the various incentive plans we have. If we could do this, all companies would benefit.

    Consider the case of Steve Compton, owner of the Eaton Steakhouse in downtown Wichita, as described in my post (with video) At Wichita City Council, Why Are Some Doors Open, and Others Closed?

    Here we have an established Wichita company that is, apparently, facing tough economic conditions. What could help this company? Lower taxes would, without a doubt.

    There would be no need for an organization like GWEDC to tell us this. We wouldn’t need an army of bureaucrats to administer a program to deliver the benefit. There would be no need for Mr. Compton to make campaign contributions to the right politicians. There would be no need to have a debate in city council chambers over the merit of incentives offered to individual firms, one at a time.

    Let’s have a simple policy of lower taxes, and, of course, lower government spending. This will provide immense economic development benefits to everyone.

  • Can Wichita government investment create jobs?

    Recently the president of the Greater Wichita Economic Development Coalition wrote an op-ed that engaged in a large measure of self-congratulation, while at the same time asking for even more resources. (Vicki Pratt Gerbino: Invest in recruiting, preserving area jobs, February 15, 2009 Wichita Eagle)

    We need to examine whether activities of groups like the GWEDC are really needed and desirable.

    First, Ms. Gerbino states “To date, our public investments have returned more than $2 for each public dollar invested.” Reading this, it sounds like a great deal — local taxpayers put up $1 and get $2 back. But it doesn’t quite work out that way.

    If you read a document at the GWEDC website titled GWEDC Economic Development Activity and Performance Evaluation 1st Half 2008, you’ll learn who really wins: local governments. Here’s what this document says: “To measure public benefit, the GWEDC evaluation model estimates the streams of tax revenues …”

    That’s right. More tax revenue flows to local governments. Somehow this is supposed to be viewed as “return on investment” for the taxpayers. If government were to reduce taxes in response to this increase of revenue, that might be a good return. But that doesn’t happen.

    Some of these programs don’t recognize the cost of providing the benefit. Consider Industrial Revenue Bonds (IRB). The purpose of these bonds is tax abatement, usually property tax, but sometime sales tax too. The company that receives the abatements benefits. But unless the city reduces spending by the amount of the abatement, taxes rise for other taxpayers. This leads to a loss of economic activity — and jobs — somewhere else.

    There are 12 different types of incentive programs listed on the GWEDC’s website. Each has its own set of criteria that companies must meet. It’s likely that each of these programs has administrative overhead that must be paid for, and companies undergo costs when they apply for these programs.

    This has the result of creating two classes of companies: those that are able to take advantage of these incentives, and those who, for whatever reason, can’t use them.

    A better strategy would be to eliminate economic development incentives and the distortions that accompany them. Instead, work to reduce taxes for all companies. People across the country will notice this without an expensive advertising campaign that get lost in the noise created by all the other cities and states competing with taxpayer dollars.

    Besides, for all this economic development to make sense, you have to believe that government is the best judge as to where investment capital should be directed. There’s not much evidence to support this.

  • Wichita Center City TIF Missed Linkage Between “Unrelated” Developers

    A missed linkage between developers involved in a Wichita tax increment financing (TIF) project means progress should be stopped until all facts are known.

    In July, 2007, the City of Wichita considered a development plan (the Center City South Redevelopment District) for a tax increment financing (TIF) district in downtown Wichita. The beneficiary of the TIF financing is Real Development, whose principals are commonly known as the “Minnesota Guys.”

    The report from the City Manager’s office to the council from July 17, 2007 states: “The City will acquire the property within the Project Area from DGL, LLC, an unrelated third party, for a cost not-to-exceed $1,975,000, and convey property to Lofts at Exchange Place, LLC.” (Page 164. The information for this item starts on page 131.)

    The “DGL, LLC” referred to as an “unrelated third party” is actually “DGL Investments, LLC.” We can be sure of this for two reasons: First, there is no “DGL, LLC” registered in either Kansas or Minnesota, but there is “DGL Investments, LLC” registered in both states, although the registration is forfeited in Kansas. Second, the current owner of Exchange Place, according to Sedgwick County records, is DGL Investments, LLC.

    (You may be wondering why I looked for record of this company in Minnesota. Well, these are the “Minnesota Guys” after all.)

    So who are the people behind DGL Investments, LLC? Here’s two clues:

    On a registration form for the Kaufman Building on file at the Kansas State Historical Society, the owner of the building is identified as “DGL Investments, LLC (contact Michael Elzufon – Real Development).” This form is dated November 20, 2006.

    There’s also a lease agreement dated September 1, 2006 between the Kansas Department of Corrections and DGL Investments, LLC, where the contact person is given as “Michael Elzufon – Real Development.”

    (Michael Elzufon is CEO of Real Development, the company that is developing the buildings that are the subject of this TIF district redevelopment plan.)

    It’s true that DGL Investments, LLC is not the same legal entity as the group the city is granting TIF financing to. So what the City Manager’s report says is true — on a technical level.

    But in less than an hour, I was able to find documents that establish a positive linkage between two companies that the city says are unrelated. It’s possible that these documents weren’t available online in July 2007. But there are other ways to discover the linkage between these two companies.

    I don’t know why the city wasn’t aware of this relationship. Wichita’s public information office forwarded my inquiry to someone who could answer my questions, but I’ve not received a response.

    But it appears that one of several things happened. Perhaps city staff wasn’t aware of the connection between DGL Investments, LLC and Real Development. This could have happened though staff’s negligence, or by relying on information provided by Real Development. Or maybe city staff knew of the relationship, but wanted to hide it from the city council and the people of Wichita.

    There could be other possibilities, too. None of them are good.

    So what should the city council do? This matter dates from July 2007, but this TIF district’s development plan was modified in December 2008. To my knowledge, the property has not been transferred, and the city hasn’t sent money to these developers. There is time, and in my opinion, the necessity, to stop progress on this TIF district until this oversight by city staff can be corrected.

  • Wichita Residential Property Tax Relief Requested

    Following are remarks that Wichita businessman Craig Gabel delivered to the February 10, 2009 meeting of the Wichita city council. I think Gabel’s idea has some merit. One thing I don’t quite understand is his proposal for “a credit on each residential property owners’ tax statement.” I will ask him for clarification as to how this would work. More information about the Proposition K that Gabel refers to can be found here.

    After Gabel spoke, council member Paul Gray expressed the desire to start discussions on this matter now that the new city manager is in place. Mayor Carl Brewer expressed concern about the benefits and long-term impact of Proposition K. Gray pointed out to Brewer that some of the cities the mayor thinks Wichita should emulate have lower property taxes than we do, but at the cost of higher sales tax. In this exchange, it seems that the mayor realizes that higher taxes are bad for business — at least the aircraft business.

    Here are Gabel’s remarks and the video of his presentation:

    I come before you today to ask you to place a 1% sales tax ordinance, on the April City election Ballot, for city of Wichita residential property tax relief. I am not asking you to reduce mill levies or limit your ability to fund City budgets.

    I ask that we give voters an opportunity to vote on a 1% sales tax that would show as a credit on each residential property owners’ tax statement. In addition in your packet you can find an outline for a property tax relief known as Proposition K. It calls for a freeze on property values, and an annual increase of 2%, for our purposes we are only dealing with residential properties.

    The people of our great city are ready for this change. I have talked to literally thousands of people in Wichita and Sedgwick County and this subject is foremost on their minds. The reasons are many. Some are senior citizens that have seen virtually no income growth over the past decade. Most are working age adults that have seen a meager 30% increase in income while appraised values have increased 100% and property taxes have seen a 97% increase. All are ready to share the burden of the cost of local government.

    There are several other advantages that make this proposal extremely attractive.

    • With property values possibly decreasing due to the economic crisis, this would stabilize the City tax base.
    • The 2% annual increase would allow for limited budget growth and cost of living increases.
    • Homeowners would be more inclined to make home improvements, thus stimulating the local housing market and getting contractors back to work.
    • Laid-off workers would see some small relief on their home mortgages as a result.

    Finally in addition to asking you for this property tax relief I am scheduled to ask the Sedgwick County Commissioners for the same relief at the County level on Wed Feb. 18.

    Other news coverage can be found here:
    Wichita Council Wants To Discuss Sales Tax Verses Property Tax (KWCH Television)
    Wichita to discuss new sales tax to reduce property tax (Wichita Eagle)