Voice For Liberty

Tag: Wichita city government

  • Wichita Tax Swap Has Dangers

    The City of Wichita is thinking about raising its sales tax and using the proceeds to lower property taxes (“City starts talks on 1-cent hike in sales tax”, May 14, 2008 Wichita Eagle).

    While some debate the relative merits of sales taxes vs. property taxes, there is one thing I am certain of: if Wichita reduces its property taxes, politicians in overlapping jurisdictions will see this as an opportunity to raise the property taxes they levy.

    Wichita city council member and vice-mayor Sue Schlapp recognizes this threat, as evidenced by reporting in the Wichita Eagle article: “But council member Sue Schlapp said the city must consider that other taxing entities, such as Sedgwick County and the Wichita school district, could see the reduction of the city’s share of taxes as an opening to raise property taxes, which would mean an overall increase for residents.”

    If Wichita goes through with this plan, I would urge all other local governmental bodies to adopt resolutions requiring voter approval of tax increases. As it is, many of the taxes we pay have a built-in escalator. This is the case with sales and property taxes. As prices rise, people spend more, and sales tax receipts rise. As the tax assessor raises the valuations in property, people and businesses pay more property tax.

  • Wichita city manager’s warning is too late

    On Tuesday June 16, 2008, the Wichita City Council agreed to lend the Old Town Warren Theatre’s owners $6 million so they could keep the theater open. (City agrees to loan Warren $6 million June 18, Wichita Eagle).

    Wichita Interim City Manager Ed Flentje issued this warning to the council: “There are in this community much larger businesses with much larger employment who may see this opening as something that will open a door for those businesses to come and say, ‘You’ve done it before, you can do it for us.’”

    Dr. Flentje, I hate to break the news to you, but the door is already wide open. Not so much for loans directly from the city to business entities, but for all sorts of TIF districts and tax abatements. These arrangements generally let developers use the property taxes they pay — taxes that would normally go to fund the operations of the city and other governments — to pay for the development itself. Developers who don’t receive tax favors have to pay property taxes, and also must pay for the types of things that TIF districts funds pay for.

    These special tax favors are now dispensed freely by the Wichita City Council. As I stated at a public hearing before that body not long ago: “It is now apparent that TIF districts and tax abatements are entitlements that developers in politically-favored areas of town can count on receiving, while everyone else pays.” See Tax Abatements in Wichita.

    Whether a developer receives a low-interest loan, or an outright gift, or the privilege of having your property taxes returned right back to you, these special favors serve to distort the free allocation of capital according to what people really want. Instead, capital, in the form of tax dollars, is allocated according to the desires of politicians.

    Bill Warren and the theater’s other owners know very well the benefits that TIF districts can bring to a development. The theater in question benefited from a TIF district established in 1999. That district is, according to the article, the only tax district in Wichita that doesn’t generate enough tax revenue to pay for the bonds issued for it.

    The problems with this TIF district benefiting the Warren Theater are not new. The Wichita Eagle reported on November 14, 2004 (“Old Town tax district misses goals: Plaza falls short”) that “A special tax district set up to pay for millions of dollars of public spending in the Old Town Cinema Plaza is generating less than half the revenue it’s supposed to — and taxpayers citywide will have to pick up the tab.”

    Also see Warren bailout poses dilemma.

  • Wichita School District Economic Impact

    In February 2008, Janet Harrah of the Center for Economic Development and Business Research at Wichita State University produced a report titled “Wichita Public Schools: Impact Analysis Operations Impact, Bond Impact and Success Measures.” This report painted a glowing picture of the USD 259 (Wichita, Kansas public school district) bond issue in 2000. The district uses it to promote the success of the 2000 issue, and to promote the proposed bond issue that may be voted on sometime in 2008. The study may be viewed at the CEDBR website here.

    The author of the study told me that the Wichita school district paid $1,500 for this study. Usually, research such as this that is purchased by the customer is treated as just that: something bought because it suits the customer’s needs. Since the customer controls what is done with the product, it is certain that if this study had produced a result that didn’t show a fantastically positive benefit for Wichita school district spending, the school board would not have released it to the public. But as we shall see, the way this study is structured guarantees a positive result. Also, the price of $1,500 is astonishingly low for a study of some 28 pages with three authors.

    Perhaps the primary problem with this study is that it treats the cost of the bond issue as though it doesn’t exist. The study presents evidence of the benefits of school district spending, but mentions only in passing school district taxation:

    An opportunity cost exists for the use of public funds for education. If public funds were not used to provide public education, they would be available for alternative use. Estimating the potential economic impact of alternative uses of these opportunity costs was beyond the scope of this analysis. (Page 6)

    It is the lack of analysis of these “alternative uses” that is most important. Actually, not much analysis is required. All that is needed is to recognize that when money is paid to the Wichita public schools, that money is not available for other spending. It means that when a construction worker is hired to build a Wichita school, that construction worker isn’t working on something else in Wichita. It cannot be any other way. As Henry Hazlitt explained in his classic work Economics in One Lesson:

    Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

    The study also uses the technique of the “multiplier,” which is to say that spending by the school district causes other spending to happen, and other jobs are therefore created. But the construction worker, whether working on a school building or a shopping mall, is paid the same and spends his wages in the same way. The multiplier effect is the same.

    This study also analyzes the impact of the bond issue (and ongoing operations) on local governments such as the City of Wichita and Sedgwick County. From page 6: “These measures view the taxing entities’ expenditures as a public investment. Public benefits are measured by tax collections. If public benefits exceed public costs then the rate of return is greater than 100 percent and the benefit-cost ratio is greater than 1.”

    These rates of return can be fantastic. For Wichita and Sedgwick County, their rate of return for the 2000 bond issue is over 1,000%! By way of explanation the study states: “These ROI percentages for the city and county are relatively high since these jurisdictions derive significant benefits from increased sales tax collections as a result of the District’s payroll, while incurring very few costs.”

    The problems with this analysis are these: First, the taxing entities’ investment is raised by taxing their residents. Second, the public benefits, as explained above, are the taxes that the government collects. It is as though we tax ourselves so that we can pay even more taxes, all this to feed the machinery of government. And if you believe in limited government and personal liberty, it is not a benefit to pay more taxes.

    While it is true that the City of Wichita derives benefits from Wichita school district spending, the city’s benefits are funded by taxes paid to the school district. It is only by considering these local governmental entities to be separate from each other that this fantastic rate of return on “investment” is possible. If the total cost of government is considered, the picture is different.

    These defects and omissions — not realizing that tax funds could be spent elsewhere if not sent to government, not realizing that benefits that government receives are the taxes that people pay, and separating government into compartments that play off each other to create artificial returns — need to recognized as we read this report.

  • Wichita City Manager Search: Look Before You Leap

    By James Barfield

    In the business world, there’s an old adage that says “look before you leap.” So, upon hearing that the Wichita city council was going to hire the only city manager candidate interviewed, I decided to do some looking. What I have seen thus far, has not been all that pretty to me. One of the reasons for the “rush,” we were told, is Pat Salerno is a finalist for the same position in Durham, North Carolina. What we were not told was that he was a finalist in Durham in 2001, and was not selected. Also, this candidate was passed over in recent months by two cities in Florida, Naples and Fort Meyers. Both took a pass after initially interviewing Pat Salerno for a city manager position.

    In talking with people in Sunrise, Florida, I found several people who gave Pat Salerno glowing comments regarding his economic development achievements. However, I could find no one who said they would hire him again. They listed several reasons as to why not. Chief among them were the following:

    • Pat Salerno likes to run a “one man show.”
    • City commissioners in Sunrise were not allowed email privileges.
    • Also not allowed were city issued cell phones.
    • In his 18 years of service, he constantly refused to provide information to city commission members and staff.
    • He refused to hire an assistant city manager, even though there was a line item in the budget authorizing him to do so.
    • He refused to hire a deputy fire chief, or a deputy police chief for 18 years.
    • He has hired not a single minority department head in his 18 years of service.
    • He is not considered by any to be a “people person.”
    • He does not embrace the idea of “open government.”

    And last but certainly not least, Pat Salerno administered a $270,000,000 city fund that was used in part to invest in sub prime real estate, without the knowledge of commission members. Commission members found out about this fund by reading a newspaper article in the Miami Herald newspaper. The fund was later frozen.

    One Sunrise commissioner was quoted as saying “When you’ve got Pat Salerno doing everything, what’s the use in having a commission.” The same commissioner accused Salerno of “acting without the advice and consent of elected leaders.”

    I would like to ask the citizens of Wichita, is this not the same kind of feedback that preceded the hiring of one George Kolb? Furthermore, is this what you want in a new city manager? I certainly don’t.

    I for one, don’t find the need to rush justified. We seem to have a very good interim manager in place. Did we not learn anything from the hiring of George Kolb? As a business man, I like the idea of “look before you leap.”

  • The smoking ban in Wichita

    Some commentary regarding Wichita’s half-passed smoking ban that I received.

    University of Kansas School of Medicine professor Dr. Rick Kellerman is on the front page of the May 30 Wichita Eagle. Kellerman is upset that a complete ban on smoking is not expected to be adopted by the city council at their June 3 meeting.

    Who appointed Dr. Kellerman to be Wichita’s doctor? The doctor’s elitist and authoritarian statement in today’s Wichita Eagle indicates that he is either trying to become the 21st century version of the Prohibition era’s Carrie Nation or the 20th century’s version of the infamous Nurse Ratched (see Ken Kesey’s classic One Flew Over the Cuckoo’s Nest) for improper behavior. The arguments that Kellerman uses could also be used to ban everything from firearms, cars, risky behaviors from hang gliding to bungee jumping, and a host of activities that free people exercising their freedom in a responsible way may decide to engage in performing.

    While it is a common leftist trait to call their political opponents “fascists” it is a historical fact that the most famous anti-tobacco and anti-smoking advocate in the first half of the 20th century was Adolf Hitler, who was happy to use his tyrannical powers to impose his will upon his subjects. This was (and is) part of the authoritarian elitism that underlies all totalitarian ideologies.

    Dr. Kellerman’s desire to follow in these footsteps here in Wichita as part of his campaign to destroy individual liberty, property rights for individuals and business owners, as well as broadly restrict human freedom. Dr. Kellerman knows better than the peasants what is good for us.

    Obviously this arrogant professor has never read Thomas Sowell’s the Vision of the Anointed, a book that describes Kellerman’s ideology and elitist arrogance perfectly. The same issue of The Wichita Eagle has a small story about how California’s state senate has passed a ban on smoking within one’s own apartment. Friendly fascism of the nanny state elitists like Dr. Kellerman are active all across this country.

  • Sedgwick County trash franchising: on the road to economic perdition

    I received this letter to Sedgwick County (Kansas) Commissioner David Unruh “over the transom” and I thought it merited reading by the general public. The author speaks of the “road to economic perdition.” I had to use the dictionary to refresh my memory of the exact meaning of the word “perdition.” While that term seems at first to be a little strong, I believe that trash franchising, like a ban on smoking, is just the first step in the plans of our local government officials. If politicians and newspaper editorialists can convince us that we require the force of government to take care of something as simple as picking up the trash — something that works very well already – it’s an easy jump to the next level of control. So perdition seems appropriate.

    The May 21 Wichita Eagle reported that you and a number of other commissioners want to impose some sort of franchise on trash collection by cities operating in the area where Sedgwick County is responsible for trash disposal with state authorities. The Eagle quotes you as supporting a government franchise monopoly by haulers in specific areas as well as uniform terms for collection of residential refuse.

    Before joining the commission I know that you were a businessman in the car repair business. Since government monopolies and uniformity in service is apparently preferable to free markets and open competition I hope that you will want to extend government into providing uniform monopoly in car repair as well as other private sector businesses. If the county’s goal is ending duplication of services and allegedly “wasteful” competition what basis do you have for only limiting franchising to trash hauling?

    It is very clear to even the most casual consumer that there is significant variations in pricing among the folks repairing automobiles just like there are in the trash hauling business. There is a lack of uniformity in people getting their cars repaired too.

    I must also note that an Unruh repair shop near 13th St. W. and Maize Rd. is only a short distance away from Westlink Auto Service. Having two firms competing for customers is obviously as duplicative and excessive as multiple trash firms going down the same street to collect refuse.

    We have a similar situation nearby where two instances of two separate firms selling groceries are located on adjacent corners at 21st W and Maize Rd. (Walmart and Dillons) as well as Maize Rd. and W. Central (Aldi and Dillons).

    Government monopolies have also a proven track record of performance. There is a name for this when university students study 20th century governments where these types of restrictions are commonplace.

    Look how Wichita water and sewer rates have performed in the last few years and how it now appears likely that the city will be once again raising these rates significantly soon. Municipal power plants that dot many small Kansas towns also have a similar track record of costly performance for the citizens who have to pay the rates.

    The City of Wichita got out of the trash hauling business in the late 1970’s for a reason. Establishing private/public franchise monopolies is a power that should be exercised very cautiously and carefully and has failed in the past. However, if you are going to expand local government’s roles in establishing ways of eliminating duplication of services and wasteful competition, you should fully understand where this road to economic perdition leads.

  • Trash Franchising in Wichita and Sedgwick County

    Currently both Sedgwick County and Wichita are considering trash franchising.

    On the surface, “franchising” sounds like a good thing. It sounds like someone’s opening a new Subway sandwich shop.

    But what trash franchising does is to grant a monopoly to one (or sometimes a few) service providers for specific geographic areas. Under franchising, people living in an area will have either no choice, or perhaps limited choice, in choosing who picks up their trash. Rates will also be set by government.

    The effect of this is that the profit motive for trash haulers is dramatically modified. Under franchising, trash companies have guaranteed customers paying mandated rates. What is the likely effect of this? I refer to Walter E. Williams, who said this: “Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest.”

    The use of the term “franchising” glosses over the consequences of a government mandate of who customers may choose to do business with. Citizens need a better term that accurately describes what our government is considering. Unfortunately, I am having trouble coming up with such a term, so I am asking you for help.

    So far I have these terms: “mandatory service provider selection,” “choice elimination,” “enforced selection,” and “trash service reduction program.”

    As you see, none of these terms are very artful. So please help me. You may email your suggestions to bob.weeks@gmail.com, or leave them as a comment to this article. Comments may be anonymous.

  • Haze surrounds Wichita smoking ban

    Remarks delivered to Wichita City Council, May 6, 2008. Listen here.

    Smoking ban supporters claim that they have the right to go to bowling alleys, bars, and other such places without having to breath secondhand smoke. That’s false. No one has the right to be on someone else’s property on their own terms. The property owner controls those terms. If the bar owner lets the band play too loud (or maybe not loud enough), or the restaurant is too dimly lit, or the floor of the steakhouse covered with discarded peanut shells, do we want to regulate these things too?

    Some have compared a smoking section in a restaurant to a urinating section in a swimming pool. This comparison is ridiculous. You can’t tell upon entering a swimming pool if someone peed in it. You can tell, however, upon entering a bar or restaurant if there is smoking going on.

    Some make the argument that since we regulate businesses for health reasons already, why not regulate smoking? Without agreeing with the need for these regulations, the answer is this: First, these government regulations don’t necessarily accomplish their goal. People still become ill from food, for example. But there is some merit here. Just by entering a restaurant and inspecting the dining room and the menu, you can’t tell if the food is being stored at the proper temperature in the restaurant’s refrigerators. But you can easily tell if there’s smoking going on.

    A system of absolute respect for private property rights is the best way to handle smoking. The owners of bars and restaurants have, and should continue to have, the absolute right to permit or deny smoking on their property. Markets -– that is, people freely making decisions for themselves -– will let property owners know whether they want smoking or clean air.

    The problem with a smoking ban written into law rather than reliance on markets 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. That’s why we have 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.

    This is not a middle-ground position, as there really isn’t a middle ground here. Instead, this 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 someone said, will “tick off everybody.” Who benefits from a law that does that?

  • How to pay for special tax treatment in Wichita

    Remarks delivered to the Wichita City Council, April 15, 2008. Audio is available here.

    The company that this warehouse is being built for is Cessna. In the end, it is that company that benefits from the property tax relief asked for today.

    Mr. Mayor, members of the city council, I ask that you not vote to approve this request for a tax abatement, and that you cease this practice altogether. Alternatively, I ask that you adopt a practice that will help realize the costs of these actions.

    It is no doubt difficult to compete with other states when they offer huge gifts to companies in order to lure them to their state. That’s a problem that needs to be addressed at a different level of government.

    The matter before you now, however, is not the same. This company is not threatening, to my knowledge, to leave our area if the tax abatement is not granted. It appears they would build this facility even if the tax abatement is not granted.

    The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. While the tax abatement being considered at this moment is relatively small, many are large, and when companies appear before this body week after week asking for tax favors, it adds up.

    This same effect applies to the other governments that are affected: Sedgwick County, the Wichita public school district, and the State of Kansas. When one person does not pay, someone else has to pay more.

    These special tax favors expose an inconsistency: business and government leaders tell us all the time that we must “build up the tax base.” Granting these tax favors destroys that base.

    Now I don’t blame this company for asking for this tax favor. When councils, commissions, and legislatures indicate their willingness to grant these, businesses respond. So this company, of which I am a shareholder, by the way, is simply responding rationally to its environment.

    But some of these companies that are asking for tax favors have problems with consistency. The president of this company has testified in favor of higher taxes to pay for building a facility that his company will benefit from. Now his company asks for relief from paying the taxes he wants others to pay.

    As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.