Voice For Liberty

Tag: Wichita city government

  • Wichita TIF Developer’s Ownership Restructuring not Very Reassuring

    Recent reporting by the Wichita Eagle uncovered troubling facts from the past of a developer the city is considering partnering with. (See the Wichita Eagle story 35 suits in developer’s past and my blog post Wichita’s Faulty Due Diligence.)

    Referring to the C.O.R.E. Redevelopment District project, Wichita Eagle reporter Dion Lefler said this on the KPTS television public affairs program Kansas Week yesterday: “This is a project the city has been working on for years, and it was absolutely astonishing to me that in a relatively short period of time I was able to come up with something — I mean, they have a development department, they have a legal department, they have a police department, they have two ex-investigative reporters on staff. So why this came to light literally on the day of the vote was just astonishing to me.”

    So now that it’s been reported that this potential city business partner has some problems in his past. What to do? Here’s some material from the agenda report for the December 16, 2008 Wichita city council meeting:

    “ICDC, LLC was formed by Grant Gaudreau and Joel Associates, LLC several years ago to undertake real estate development projects. Joel Associates, LLC is wholly owned by Joseph L. Cramer and Len Marotte. Due to recent developments, ICDC has been reorganized to vest sole ownership of ICDC in Joel Associates. To eliminate any possibility that former ownership interests could adversely impact the viability of the development project, Joseph L. Cramer and Len Marotte have formed a new entity to act as developer of the project. The new entity is Renaissance Square, LLC (the “Developer”), whose sole member is Joel Associates, LLC.”

    So in less than two weeks, the person that Wichita economic development director Allen Bell referred to as “principal developer” is now thrown under the bus so that the project can proceed. I would submit, however, that a little shuffling of the ownership structure of the project is hardly assurance to Wichitans that this project is on the up-and-up.

    (There’s some confusion as to the spelling of the name “Cramer.” On the document he is to sign, his name is spelled “Kramer.”)

    Here’s some unanswered questions:

    • Did Allen Bell and city staff know everything about the background of Grant Gaudreau that the Wichita Eagle was able to uncover in a day and a half of reporting? If no, then why not, given the resources the city has at its disposal?
    • If they knew these things, what should we make of Allen Bell and city staff’s judgment, in that they thought these things weren’t a problem?
    • How much did Joel Associates, LLC pay Grant Gaudreau for his ownership interest in ICDC, LLC?
    • And finally, the most important question: when did Wichita Mayor Carl Brewer and city council members learn of these problems?

    Until we get some definitive answers to these questions, approval of this TIF development should be not be considered.

  • No Diligence in Wichita City Hall

    Rhonda Holman’s Wichita Eagle editorial today (Need vetting of City Hall partners) correctly states that city staff “missed the mark in vetting negotiator Grant Gaudreau.” Or is the proper title “principal developer,” as stated by Wichita’s director of urban development Allen Bell? (See Wichita’s Faulty Due Diligence for video.)

    There’s a lot of confusion over this matter, and times like this let us get a closer look at what’s going on in city hall. We can also learn a lot about the attitudes of government officials and city staff. For example, a Wichita Eagle news story reported this:

    “Grant was never a big money player in this,” Fearey said. “He’s always just been the person who had time to come to the city and work through things and also knew a lot about who to go to in the city and how to work the system.”

    First, note the disparity between Allen Bell’s “principal developer” and Wichita city council member Sharon Fearey’s “never a big money player.” But what’s really troubling is that Fearey acknowledges that there’s a “system” at city hall that someone knows “how to work.” This doesn’t say a lot for openness and transparency in Wichita city government. It also perpetuates the realization that there’s a network of insiders who know how to milk the halls of government power for their own benefit.

    Then, the Eagle news story contains this: “[Wichita Mayor Carl] Brewer said he wants to ensure that developers can complete the project in a reasonable time and that there are no other problems.” If our mayor can figure out some way to eliminate the risks that entrepreneurs take, more power to him. If successful, I might consider voting for him, should he decide to run for re-election.

    The fact is, however, that real estate development is a tremendously risky endeavor. Entrepreneurs — people with their own money at stake, with their ears to the ground every day and the experience, power, and discretion to alter plans as the situation dictates — are the people best suited to assume and negotiate this risk. Politicians operate in a different environment with a different set of incentives.

  • Wichita’s Faulty Due Diligence

    In the Wichita city council meeting on December 2, 2008, council member Jim Skelton questioned Allen Bell, Wichita’s director of urban development, about developers the city is considering working with on a TIF district. Specifically, Skelton asked if there was anything in the backgound of the developers that the council should be concerned about. Bell referred specifically to Grant Gaudreau, naming him as the “principal developer.” He said that the matters in Gaudreau’s past had been “resolved,” and had “no bearing” on this project. Video is available below.

    According to Wichita Eagle reporting in the story 35 suits in developer’s past, Gaudreau’s past problems include bankruptcy and lawsuits regarding bounced checks and nonpaid bills. The bankruptcy is not troubling to me, as many entrepreneurs suffer through this as part of their acceptance of risk. Bounced checks at the grocery store and pet clinic, plus a recent auto repossession, are troubling. If someone won’t make good the checks they write at the grocery store, that’s a problem. The city should not partner with such a person.

    Further, the Eagle story reports that the developer has an outstanding warrant for unpaid taxes in a neighboring county. That would contradict Mr. Bell’s claim that matters have been resolved.

    Here’s the problem I have, and I think many citizens share this concern: Either Allen Bell and city staff didn’t know of all these things in Gaudreau’s past, or they knew about them but didn’t think they were a problem. The first case tells us that Mr. Bell’s office is not doing a thorough job. The second case tells us that Mr. Bell’s judgment does not reflect the concerns of the citizens of Wichita. In either case, there’s a problem at city hall.

  • Wichita and Sedgwick County Agenda Deadlines Are Too Short

    Both the City of Wichita and Sedgwick County have policies that limit citizens’ ability to address these bodies on timely matters. Each body requires, effectively, at least one week notice to appear on the public agenda. That’s the part of the meeting where citizens can speak about any topic, not just those matters that are being considered that day.

    Here’s an example of how these restrictive deadlines work against citizens. On December 2, John Todd and I spoke at the Wichita city council meeting, as part of a public hearing. As shown in the posts Wichita TIF Public Hearing Was Bait and Switch and Randy Brown: Reopen Downtown Wichita Arena TIF Public Hearing, the public hearing was defective. Further, there’s a time factor involved, in that the city council set in motion a process that must be resolved within 30 days. With the upcoming holidays, time is tight.

    So John called the Wichita city clerk, but we can’t get on the agenda for the next city council meeting. By the time we can get on the agenda, it’s nearly too late for the council to take the action we’d like to ask of them.

    A reasonable policy is this: When something happens in a meeting one week, there should be time for citizens to get on the public agenda for the next meeting.

    The policy of the Wichita City Council is “Members of the public desiring to present matters to the council on the public agenda must submit a request in writing to the office of the city manager prior to twelve noon on the Tuesday preceding the council meeting.”

    For Sedgwick County, I wasn’t able to find a policy on its website, but while watching today’s commission meeting on television, chairman Winters asked the public to contact the county manager’s office “at least a week or ten days before our meeting” if they wanted to address the commission.

    Note: when an item is on the agenda, citizens usually get to speak about the item. The public agenda is where citizens can speak about items that may or may not be on the meeting’s agenda.

  • Jeff Fluhr’s Decision

    At the December 2, 2008 meeting of the Wichita City Council, Jeff Fluhr, the new president of the Wichita Downtown Development Corporation, spoke on behalf of the expansion of the Center City South Redevelopment District, commonly known as the downtown Wichita arena TIF district.

    Attending the meeting with him were several members of that organization’s board of directors, headed by Joe Johnson of Schaefer Johnson Cox Frey Architecture. This board, emblematic of the “good ol’ boy” network, is stocked with those who seek to profit in the halls of government power rather than in the marketplace where consumers rule. It’s easier that way — no pesky consumers with their varied wants and desires.

    The problem Mr. Fluhr faces is that in order to lure developers to downtown Wichita, incentives must be offered. Now some on the Wichita city council act as though incentives come at no cost. The proceeds from TIF financing, they say, are used only for infrastructure, as though this is something the city is obliged to provide. But as I show in my post Many Wichita Developers Pay for Infrastructure, market-based developers pay for their infrastructure. The city doesn’t give away much to them.

    The TIF developers, they being the political entrepreneurs, are privileged to use their own property taxes to pay for their infrastructure, and for other things, too. This sets up a situation where the city, through its attempts at centralized planning, thwarts the will of the people by forcing Wichitans to subsidize developers who are lured — “incentivized,” as one city council member put it — to develop where politicians want them to.

    This sets up a tension. Citizens are starting to realize the reality of the transfer of wealth from taxpayers to the political entrepreneurs, and they don’t like it. They’re starting to realize that public/private partnerships mean the public takes the risk, and the “privates” earn the profits. This is far removed from capitalism, which is what we need to build the wealth of our city. “Crony capitalism” is a better term for the relationship between the TIF district developers and local government officials.

    Then there’s the defect in the process surrounding the public hearing before the Wichita city council. As Randy Brown wrote about this meeting: “Among other transgressions, we had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue.” Mr. Fluhr needs to decide if he’s on the side of open and transparent government, or whether he’s in favor of crony capitalism and the good ol’ boy network. If he would request that the City of Wichita withdraw this TIF district until a proper public hearing is held, we’d get a good indication of his thinking. Of course, if he doesn’t make such a request, we’ll know just as well.

    Finally, Mr. Fluhr stated in his presentation to the Wichita city council: “[The TIF district] will greatly contribute to Wichita’s development as a destination river city, which will in turn enhance the economic vitality of downtown and the community at large.” (emphasis added)

    I would ask that Mr. Fluhr and the citizens of Wichita familiarize themselves with the research to the contrary. A number of studies tell us that TIF districts, while good for the subsidized developers, are not a good deal for the city as a whole. As economists Dye and Merriman (see below) found out: “We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.”

    Kenneth A. Kriz: Tax Increment Financing: Its Effect on Local Government Finances
    Dye, Richard and David Merriman: Tax Increment Financing: A Tool for Local Economic Development
    Dye, Richard and David Merriman: The Effects of Tax Increment Financing on Economic Development
    Danny Santivasci: Tax Increment Financing: Private Investment at the Expense of Local Community

  • Wichita Penalizes Companies Through Taxation

    Five years ago, the City of Wichita granted Big Dog Motorcycles industrial revenue bonds (IRB). The benefit of these bonds is that the company escapes paying property tax (and often sales tax) on the property purchased with the proceeds from the bonds.

    At the December 2, 2008 meeting of the Wichita City Council, the council reviewed the tax abatement to see if the company had lived up to the projections and promises it made as part of its application for the IRBs. Unfortunately for this company, their fortunes have reversed, and while at one time their employment was above what they committed to, their present employment is less than half what it was five years ago.

    There are two illuminating things to take from this video clip. First, council member Jim Skelton wonders why the benefit-to-cost ratio for Sedgwick County is negative, but city staff still recommends approving the tax abatement. Allen Bell, Wichita’s director of urban development, didn’t know why. No council members except for Skelton seemed to be bothered by this.

    But what’s really troubling is this quote from Bell: “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 rolls at this time.”

    So is taxation by the City of Wichita equivalent to a penalty? That’s what Mr. Bell seems to be saying.

    Further, the fact that the council voted to extend the tax abatements because this company is going through lean times is tacit recognition that property taxes are bad for business. I wonder how many companies have gone out of business because Wichita’s taxes were too high? And how many companies are never formed, or have put off expansion plans because of Wichita’s taxes? Here’s an example of one: Wichita Taxes Cancel Development.

  • Letters to Wichita City Council and Sedgwick County Commission Regarding Downtown Wichita TIF District

    John Todd has prepared letters that we hope will influence local governments regarding the downtown Wichita TIF district. One, to the Wichita City Council, asks them to conduct a proper public hearing. A second letter to the Sedgwick County Commissioners asks them to not consider passing this TIF district until Wichita conducts a proper public hearing. A third is a letter to the Wichita Eagle explaining citizens’ concerns.

    If you’d like to sign these letters, please contact John Todd at john@johntodd.net. Here’s the one to the Wichita City Council:

    Mayor Carl Brewer
    Wichita City Council Members
    Wichita City Hall
    Wichita, Kansas

    Subject: Citizens request for a new and open City Council public hearing before implementing the Center City South Redevelopment TIF District, commonly known as the downtown Wichita arena TIF district.

    The December 2, 2008 public hearing as conducted by the Wichita City Council concerning the expansion of the Center City South Redevelopment TIF District was not a true and meaningful public hearing. Therefore, we ask that you withdraw the proposal until a proper public hearing can be held before the City Council. This issue needs to be sent to the District Advisory Boards (DAB) for their review. Wichita citizens in general and DAB boards both need all the details and a complete cost analysis for this TIF district scheme.

    Let me refer you to Randy Brown’s letter in the Eagle (see “Reopen TIF issue” Dec. 7), referring to Bob Weeks’ letter in the Eagle (see “TIF public hearing was bait and switch” Dec. 5) that hit the nail on the head by saying, “conducting the public’s business in secret causes citizens to lose respect for government officials and corrupts the process of democracy.” Brown further states, “… we (the people) had a mockery of the public hearing process rather than an open and transparent discussion of a contentious public issue. The Wichita officials involved should publicly apologize, and the issue should be reopened. And this time, the public should be properly notified.”

    The citizens of this community deserve open, honest, and transparent government. The Wichita City Council needs to hold a new and open public hearing on this issue before proceeding with the implementation of this project.

  • The Process Should Be Most Important

    Rhonda Holman’s editorial from yesterday’s Wichita Eagle (Parking plan finally coming together) contains this paragraph:

    A confusing move last week by the Wichita City Council didn’t help build public trust, unfortunately. Without time for public consideration, city leaders added up to $10 million for parking structures to the proposed tax-increment financing plan for the 16-block area around the arena; the council unanimously approved the plan Tuesday. There are good reasons for the council’s action, which simply puts parking in the mix of things that up to $10 million in TIF money can fund in the future along with street improvements, sidewalks, lighting, signage and other basics. But the last-minute handling left much of the public out of the public hearing, raising suspicions that the council sought to slide in the parking dollars under the radar.

    Look at the language here: “confusing move … didn’t help build public trust, unfortunately.” “left much of the public out of the public hearing,” “raising suspicions,” “under the radar.”

    This type of action is corrosive to the democratic process. I think that Ms. Holman realizes that, but she won’t call for the city council to take the proper action, which would be to hold a proper public hearing. No parking facility — indeed, nothing the city could ever build — is so important that it should be approved through this type of process.

  • Wichita Taxes Cancel Development

    Carrie Rengers’ Wichita Eagle column from yesterday (Warehouse plans near airport are called off) reports on two Wichita real estate developers who have canceled a project that would be a valuable addition to our city. The reason for canceling? Wichita’s property tax environment.

    In Wichita, we’re separating real estate development into two classes. There are those who listen to markets and consumers, and try to satisfy the needs that they sense. These are the market entrepreneurs.

    Then, there are the political entrepreneurs. These developers make use of devices such as tax increment financing (TIF districts) to offload large portions of the cost of their developments on the public. They do this by pleasing government officials and bureaucrats, not consumers.