Voice For Liberty

Tag: Wichita city government

  • In Wichita, the surveillance state expands again

    In Wichita, the surveillance state expands again

    In Wichita, we see another example of how once government starts a surveillance program, it probably won’t produce the promised results, yet will be expanded.

    This week the Wichita City Council will consider adding more surveillance cameras to Old Town. City documents don’t specify how many video cameras will be installed as part of the $618,261 program (for one-time installation costs only), except that it may be “as many as 100.” The city is also asking council members to pass an ordinance with bonding authority of up to $750,000 to pay for this project. In other words, the city is borrowing to pay for this system.1

    This proposed expansion of camera surveillance is another expansion of police powers in Wichita at the loss of civil liberties.2 In 2014 the city designated Old Town an “entertainment district,” giving the city increased powers to attempt to control crime.3 Critics are concerned that the extra enforcement measures granted to entertainment districts are discriminatory to certain minority groups.4

    This proposed expansion of cameras is not likely to be the last. Wichita’s police chief is seeking to add more surveillance and cameras.5

    Across the county, those concerned with the loss of civil liberties and privacy are concerned about the expansion of the surveillance state. Adding irony to this debate are the remarks of Wichita City Council Member Janet Miller (district 6, north central Wichita). She called the addition of the new cameras “huge” and “exciting,” adding that she is “very, very happy” at their addition.6 The irony is that she would insist that she is a protector of civil rights.

    Why are civil rights important in this matter? Discussing this matter on Facebook, one local political activist wondered, “How long before someone is being blackmailed with footage from a police surveillance cam, for stumbling down the road, or some other harmless but embarrassing scenario?”

    In response, I added, “Or blackmailed for marital infidelity, or entering a gay bar, a marijuana dispensary, a church, an STD clinic, an abortion doctor’s office, or maybe being spotted dropping off an anonymous tip to the newspaper.” (Well, we don’t have marijuana dispensaries, but we do have complimentary stores.) (There are two newspapers in Old Town. Well, one is across the street from Old Town, but is moving into Old Town.)

    We have to wonder whether the cameras work as advertised. The website You Are Being Watched, a project of the American Civil Liberties Union, comes to this conclusion: “An increasing number of American cities and towns are investing millions of taxpayer dollars in surveillance camera systems. But few are closely examining the costs and benefits of those investments, or creating mechanisms for measuring those costs and benefits over time. There is extensive academic literature on the subject — studies carried out over many years — and that research demonstrates that video surveillance has no statistically significant effect on crime rates. Several studies on video surveillance have been conducted in the UK, where surveillance cameras are pervasive. The two main meta-analyses conducted for the British Home Office (equivalent to the US departments of Justice and Homeland Security) show that video surveillance has no impact on crime whatsoever. If it did, then there would be little crime in London, a city estimated to have about 500,000 cameras.”

    An irony is that law enforcement likes recording citizens, but not the other way around. As John Stossel has noted, police don’t like to be recorded. In some states its a crime to tape a police officer making an arrest. A video excerpt from Stossel’s television shows the attitudes of police towards being recorded. At Reason Radley Balko details the problem, writing “As citizens increase their scrutiny of law enforcement officials through technologies such as cell phones, miniature cameras, and devices that wirelessly connect to video-sharing sites such as YouTube and LiveLeak, the cops are increasingly fighting back with force and even jail time—and not just in Illinois. Police across the country are using decades-old wiretapping statutes that did not anticipate iPhones or Droids, combined with broadly written laws against obstructing or interfering with law enforcement, to arrest people who point microphones or video cameras at them. Even in the wake of gross injustices, state legislatures have largely neglected the issue.”

    Writing for Cato Institute, Julian Sanchez noted:

    It is also unlikely that cameras will be especially helpful in deterring such attacks. Even when it comes to ordinary crime — where the perpetrators are generally motivated by the desire to make a quick buck without getting caught — studies have been mixed and inconclusive about the value of CCTV cameras as a crime deterrent.

    Some show significant declines in crime in some regions of cities with camera networks, which may be attributable to the cameras — but many show no discernible effect at all.

    Of note, one country with a government that really likes surveillance cameras is China.

    —
    Notes

    1. Wichita City Council agenda for February 14, 2017. ↩
    2. Weeks, Bob. Surveillance state arrives in Wichita. https://wichitaliberty.org/liberty/surveillance-state-arrives-in-wichita/. ↩
    3. Weeks, Bob. Wichita seeks to form entertainment district. https://wichitaliberty.org/wichita-government/wichita-seeks-form-entertainment-district/. ↩
    4. Class-action lawsuit alleges racial discrimination at Power & Light. Kansas City Star, March 10, 2014. http://www.kansascity.com/news/local/article341880/Class-action-lawsuit-alleges-racial-discrimination-at-Power–Light.html. ↩
    5. Finger, Stan. Police seek answers, reversal as aggravated assaults surge. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/local/crime/article132071799.html. ↩
    6. Lefler, Dion. Wichita working to bring Old Town under camera surveillance. Wichita Eagle, February 10, 2017. http://www.kansas.com/news/politics-government/article131952109.html. ↩
  • Greater Wichita Partnership

    Greater Wichita Partnership

    Greater Wichita Partnership features untruthful information on its website, which casts doubt on the reliability of the organization and the City of Wichita.

    Greater Wichita Partnership uses the url of its predecessor, the Greater Wichita Economic Development Coalition, or GWEDC. GWP is in charge of efforts to develop the economy in the greater Wichita area. It describes itself as “a driving force in building a remarkable city and region.”1

    Greater Wichita Partnership website, featuring unreliable information. Click for larger.
    But there is a problem. Based on the information GWP makes available on the front page of its website, I don’t have much confidence in the organization’s efforts. And that’s too bad.

    In the past I’ve observed how GWEDC — that’s the predecessor to GWP — was derelict in keeping its information current. In 2014, I noticed that GWEDC credited itself with recruiting a company named InfoNXX to Wichita.2 But GWEDC did not update its website to reflect current conditions. When I looked at GWEDC’s website in October 2013, I found this on a page titled Office Operations:

    Wichita hosts over a dozen customer service and processing centers — including a USPS Remote Encoding Center (985 employees), InfoNXX (950), T-Mobile (900), Royal Caribbean (700), Convergys (600), Protection One (540), Bank of America (315) and Cox Communications (230.)

    The problem was this: At the time I looked at the GWEDC website in October 2013, InfoNXX had closed its Wichita operations in 2012.3 Still, the official Wichita-area economic development agency touted the existence of a company that no longer existed in Wichita, and claimed a job count that the company never achieved. (Also, at that time the USPS facility was in the process of closing and eliminating all Wichita jobs.)

    Now, the Greater Wichita Partnership website trumpets — on its front page — the expansion of a company that has actually contracted its operations in Wichita.

    The company is NetApp, a maker of computer server storage systems. It’s the type of high tech company all cities are recruiting, and for which cities and states will open the economic development incentives pocketbook. Locally, Wichita and the State of Kansas announced expansion plans for NetApp operations in Wichita in 2012. But by the end of 2015, NetApp was not meeting its job goals in Wichita, according to information from Sedgwick County. Since then, NetApp announced two rounds of job cuts, with the cuts in Wichita unspecified.4 5

    NetApp has not met the lofty expectations Wichita and Kansas officials promoted. That’s unfortunate, and perhaps the situation will improve and NetApp will grow.

    Relevant to public policy is that NetApp was slated to receive a lot of incentives from many levels of government, up to $35 million.6 It is likely impossible to determine how much of these incentives were actually paid to NetApp. We do know that both the City of Wichita and Sedgwick County stopped paying incentives to NetApp, as these incentives were predicated on achieving certain levels of job counts, and NetApp has not met them.

    But the lesson to learn today is that the Greater Wichita Partnership, the agency in charge of economic development in the area, still advertises NetApp as a success.

    The problem is not only the blatant lie that GWP promotes prominently: “NetApp doubles its Wichita footprint.” It’s a serious problem that GWP has not updated its website to reflect reality. What if a company considering Wichita for expansion or location checks the NetApp story? How would such a company reconcile reality with what GWP promotes? What does this say about the reputation and reliability of GWP?

    I don’t expect GWP to highlight its failures. But we ought to expect GWP to care enough about the truth to remove false information from such a prominent presentation.

    Wichita’s history

    Presentation by James Chung. Click for larger.
    Presentation by James Chung. Click for larger.
    Presentation by James Chung. Click for larger. See text for problems with this presentation.
    In September 2015 James Chung delivered several lectures on the Wichita-area economy and its outlook.7 In the event I attended, Chung showed examples of web pages from the Des Moines and Omaha chambers, and contrasted them to a similar page from the Wichita chamber. Chung got it wrong, as the page he showed to illustrate the Wichita chamber was a print version of the page, which — intentionally — is a simplified version of the page designed for viewing in a web browser.8 The print version of the page, however, is what appears in Google, and most people will not investigate beyond that.

    Still, the Wichita chamber page was stale compared to the others. And Chung’s point was, and is, relevant: First impressions matter.

    The Wichita chamber’s site is better now. But someone at the Greater Wichita Partnership didn’t get the message. Content — reliable content — counts.

    __
    Notes

    1. Greater Wichita Partnership. About us. http://www.gwedc.org/about_us/about_us. ↩
    2. Weeks, Bob. Wichita economic development not being managed. https://wichitaliberty.org/wichita-government/wichita-economic-development-managed/. ↩
    3. Siebenmark, Jerry. KGB to close Wichita call center by end of January. Wichita Eagle. Decenber 7, 2011. http://www.kansas.com/news/business/article1081923.html. ↩
    4. Horwath, Bryan. NetApp cuts employees in Wichita. Wichita Eagle. March 2, 2016. http://www.kansas.com/news/business/article63559417.html. ↩
    5. Rengers, Carrie. NetApp restructures, announces layoffs. Wichita Eagle. November 3, 2016. http://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article112339362.html. ↩
    6. Weeks, Bob. NetApp economic development incentives: all of them. https://wichitaliberty.org/wichita-government/netapp-economic-development-incentives-all-of-them/. ↩
    7. Wenzl, Roy. Analyst presents sobering view of Wichita economy, community. Wichita Eagle, September 22, 2015. http://www.kansas.com/news/business/article36236142.html. ↩
    8. For a view of the page as it looked on April 5, 2015, see http://web.archive.org/web/20150405131957/http://wichitachamber.org/news_room-wichita_accolades.php. ↩
  • Activate Wichita, an embarrassment

    Activate Wichita, an embarrassment

    A communications initiative of the City of Wichita brings embarrassment to our city.

    At one time Activate Wichita was touted by Wichita city officials as an “online conversation about the future of the Greater Wichita metropolitan area.”

    It’s described on its companion Facebook page as: “Activate Wichita is an innovative new way to be heard on the issues you’re passionate about. Whether your passion is local arts, the environment, or employment creation, you can log on and voice your opinion and local leaders will respond. Together communities come up with solutions and vote on the best course.”

    For a system designed to be an interactive conversation, there aren’t many people talking. And maybe I didn’t look diligently enough, but I didn’t see local leaders responding.

    At one time Activate Wichita had some activity. Then it changed. There was a different design. All the old content was gone. There was very little new content.

    In December 2015 I inquired to the city and was told that My Sidewalk, the company that provides the software that runs Activate Wichita, made changes to improve the system. I was also told: “While the City has not used Activate Wichita as extensively in 2015 as in previous years, our staff has been working with the My Sidewalk support team to learn how to best make effective use of the new design as part of City engagement initiatives. The Library has a series of engagement conversations in planning for 2016. We expect increased use from several other departments as well.”

    Whatever plans the city had for Activate Wichita in 2016, it doesn’t look like they materialized. As of today, there is only one active item on Activate Wichita, from March 2016. Or it could be March 2015; it doesn’t say. The companion Facebook page for Activate Wichita has only three posts since the middle of 2016, with the most recent from August.

    The harm of Activate Wichita

    This lack of attention to these communication initiatives might not be very important except that the city prominently features Activate Wichita. An inviting graphic appears prominently on nearly every page at wichita.gov, the city’s website.

    The banner on almost all City of Wichita web pages, showing activate Wichita link.
    If someone using the wichita.gov city website happens to click on the Activate Wichita logo, they would see something that can be described — charitably — as pathetic. Think of someone considering moving to Wichita, or a company planning to locate or expand in Wichita. Think of people already in Wichita. Is Activate Wichita the impression the city wants to make?

    Remember, Activate Wichita is prominent on the city’s website. The city devotes precious web space to promoting it. I can understand that reviving Activate Wichita into something useful is time-consuming.

    But minimizing the damage should be a snap. Just remove the Activate Wichita link from the city’s website. When Activate Wichita is revived, restore the link.

    By the way, did you know the city increased the size of its communication staff by hiring a Strategic Communications Director? He’s been at work almost two years.

  • Wichita check register

    Wichita check register

    A records request to the City of Wichita results in data as well as insight into the city’s attitude towards empowering citizens with data.

    As part of an ongoing transparency project, I asked the City of Wichita for check register data. I’ve made the data available in a visualization using Tableau Public. Click here to access the visualization.

    Analyzing this data requires a bit of local knowledge. For example, there is a vendor named “Visit Wichita” that started to receive monthly payments in March 2015. What about payments for January and February? Those were made to a vendor named “Go Wichita,” which changed its name to “Visit Wichita.”

    Similarly, there are payments made to both “Westar Energy” and “Westar Energy — EDI.” These are the same entities, just as “Visit Wichita” and “Go Wichita” are the same entity. To the city’s credit, the matching pairs have the same vendor number, which is good. But resolving this requires a different level of analysis.

    There are interesting entries. For example, the city had been spending a few hundred dollars per month to the Kansas Turnpike Authority. Then in July 2015, the city paid $3.7 million to KTA. A quick search of city council agenda packets didn’t reveal any reason for this.

    Of note, it looks like there were 1,475 checks issued in amounts $20 or less over a period of nearly two years. Bank of America has estimated that the total cost of sending a business check ranges from $4 to $20.

    The records request

    Wichita spending data from 2013.
    Wichita spending data from 2013.
    The city supplied this data in an Excel spreadsheet, in an arrangement that can easily be analyzed in Excel or loaded into other programs. This is a step forward. Three years ago, Wichita could supply data of limited utility. What was supplied to me was data in pdf form, and as images, not text. It would be difficult to translate the image data into machine-readable text, and even more difficult to reorganize it to a useful arrangement or format for analysis.

    Denver open checkbook.
    Denver open checkbook.
    In 2015 had to pay $24.00 to the city for this data. That’s a problem. It is by now routine for governmental agencies to post spending data like this, but not at the City of Wichita. Upon inquiry, city officials told me that the present financial management system “does not include many modern system features such as an ‘open checkbook.’” An “open checkbook” refers to a modern web interface where citizens can query for specific data and perhaps perform other analysis. An example is Denver’s open checkbook.

    While the next-generation Wichita financial system will probably have such a feature, there’s no reason why citizens can’t experience some of the benefits now. The spreadsheet of spending data like that I paid for could easily be posted on the city’s website on a monthly basis. People like myself will take that data and make it more useful, as I did. There is no reason why this should not be happening.

    Fees

    When I learned of the fee for these records in 2015, I asked for a waiver, sending this to the city’s records official:

    I’d like to ask for a waiver of the requested fee. I ask this because check register data is an example of records that many governmental agencies make freely available on their websites. The Wichita Public School District and Sedgwick County are two local examples.

    I’d like to also call attention to the U.S. Freedom of Information Act, which allows for fee waivers in some circumstances: “…fee waivers are limited to situations in which a requester can show that the disclosure of the requested information is in the public interest because it is likely to contribute significantly to public understanding of the operations and activities of the government and is not primarily in the commercial interest of the requester.”

    I suggest that the records I am requesting will indeed “contribute significantly to public understanding of the operations and activities of the government,” and that it is in the public interest of the people of Wichita that these records be freely available.

    I received an answer:

    Mr. Weeks,

    Your request for waiver of fees is denied. KORA allows fees to be collected prior to finding and producing the document you seek. KSA 45-218(f). The extensive statute setting out how fees are to be determined, KSA 45-219, does not contain any provision for waiver in the manner you suggest.

    The City will provide the document to you upon payment as invoiced.

    Sincerely,
    Jay C. Hinkel,
    Deputy City Attorney

    Mr. Hinkel is absolutely correct. Governmental agencies in Kansas have the right to charge for records, and the Kansas statutes do not mention the waiving of fees as do the federal statutes. But the Kansas Open Records Act does not require cities to charge for providing records, especially for records that the city should already be providing. Especially when citizens are willing to take that data and make it better, at no charge to the city.

    (For the most recent records request, the city waived its intended fee of $24.00, noting this waiver is for the current request only. The city acknowledges that it temporarily misplaced my request, and as a result, was late in responding. I believe that is the reason for the fee waiver.)

    Wichita’s attitutude, from top down

    Hinkel provided a lawyer’s answer. Here, however, is the public policy the city promotes, from a Wichita city news release from 2013:

    “The City Council has stressed the importance of transparency for this organization,” City Manager Robert Layton said. “We’re honored to receive a Sunny Award and we will continue to empower and engage citizens by providing information necessary to keep them informed on the actions their government is taking on their behalf.”

    The importance of transparency. The city wants to empower and engage citizens by providing information. Well. I offered to “contribute significantly to public understanding of the operations and activities of the government,” but had to pay to do so.

    When I asked city officials for clarification of why I had to pay to receive these records, communications staff told me: “I should note that the City has won multiple awards for openness and citizen participation, but City leaders recognize this work is never done. They strive each and every day to become more open and transparent and will continue to do so.”

    I must disagree. This is not “open and transparent.” This is not how to “empower and engage” the people of Wichita. Not even close.

    The city lags far behind comparable agencies in providing access to data. It’s been almost two years since the city expanded its staff by adding a Strategic Communications Director. It doesn’t seem that this has helped to provide information to citizens.

  • Employment by MSA and industry

    Employment by MSA and industry

    An interactive visualization of employment in metropolitan areas.

    Employment data from the Bureau of Economic Analysis, an agency of the United States Department of Commerce, is available for all metropolitan areas and major industries. I present this data in an interactive visualization using Tableau Public. In this visualization you may access several different presentations of the data. You may filter for specific areas, industries, and time periods. The data is available in a table of employment numbers, or in series presented as the percentage change since the first value. This illustrates relative growth, rather than magnitude, of employment. This is annual data from BEA table CA25N1 through 2015, the last year available at this time.

    In the nearby example from the visualization we can see that Wichita has performed poorly compared to some peers of interest.

    You may use the visualization yourself by clicking here.

    Of note, the definitions of MSAs change from time to time.2

    Employment by MSA and Industry example. Click for larger.

    —
    Notes

    1. Bureau of Economic Analysis. Regional Economic Accounts. https://www.bea.gov/regional/. ↩
    2. Broomfield County, CO, was created from parts of Adams, Boulder, Jefferson, and Weld counties effective November 15, 2001. Estimates for Broomfield county begin with 2002.
      Estimates from 2008 forward separate Skagway-Hoonah-Angoon Census Area into Skagway Municipality and Hoonah-Angoon Census Area. Estimates from 2009 forward separate Wrangell-Petersburg Census Area into Petersburg Census Area and Wrangell City and Borough. In addition, a part of the Prince of Wales-Outer Ketchikan Census Area was annexed by Ketchikan Gateway Borough and part (Meyers Chuck Area) was included in the new Wrangell City and Borough. The remainder of the Prince of Wales-Outer Ketchikan Census Area was renamed Prince of Wales-Hyder Census Area. Petersburg Borough was created from part of former Petersburg Census Area and part of Hoonah-Angoon Census Area for 2013 forward. Prince of Wales-Hyder Census Area added part of the former Petersburg Census Area beginning in 2013. For years 2009-2012, Petersburg Borough reflects the geographic boundaries of the former Petersburg Census Area. Wade Hampton Census Area was renamed Kusilvak Census Area on July 1, 2015.
      Virginia combination areas consist of one or two independent cities with 1980 populations of less than 100,000 combined with an adjacent county. The county name appears first, followed by the city name(s). Separate estimates for the jurisdictions making up the combination area are not available. Bedford County, VA includes the independent city of Bedford for all years.
      Shannon County, SD was renamed to Oglala Lakota County, SD on May 1, 2015.
      Nonmetropolitan portion includes micropolitan counties. ↩
  • In Wichita, converting a hotel into street repairs

    In Wichita, converting a hotel into street repairs

    In Wichita, it turns out we have to sell a hotel in order to fix our streets.

    Update: The Council approved these projects.

    In September the Wichita City Council decided to sell the Hyatt Regency hotel in downtown Wichita for $20 million. Now the council will consider two proposals for spending this money.

    One proposal is to spend $10 million on street repair, called “one-time pavement maintenance projects” in city documents.1

    A second proposal is to spend $4 million on transit over the next four years. This is pitched as sort of a “bridge to sustainability.” That is, if the Wichita transit system can make it through the next four years, it can — somehow — become sustainable. The plan contains idea like this: “Extensive public education will be used to build ridership. Transit information will be available to a wider audience. Potential users will be engaged in more one-on-one manner.”2

    Whatever the merits of these spending programs, Wichita is taking a capital asset and using it to fund current spending. In particular, street maintenance needs to be performed continuously. Here, the city has not been taking care of streets that taxpayers paid for and entrusted to the city for care. It turns out we have to sell a hotel in order to fix our streets. But street maintenance is something that needs to be performed — and paid for — every year. We shouldn’t have to rely on a sale of a capital asset to fund daily needs.

    Following, from October, what the city should do with the Hyatt proceeds.

    Wichita, give back the Hyatt proceeds

    Instead of spending the proceeds of the Hyatt hotel sale, the city should honor those who paid for the hotel — the city’s taxpayers.

    The City of Wichita has sold the Hyatt Regency Hotel for $20 million. Now, what should the city do with these funds? In a workshop this week, the city manager and council recognized that these funds should not be used for operating purposes. This is important. The Hyatt Hotel was paid for with long-term debt, which the city says has been retired. The proceeds from this sale should be used in a similar way: For long-term capital investment, not day-to-day operating expenses. But the council heard two proposals that are decidedly more like operating expenses rather than capital investment.

    One proposal, presented by Public Works Director Alan King, is to spend $10 million on street repair over two years. Part of that expense is to purchase a new truck, which is a capital, not operating, expense. But King later revealed that the truck could be purchased out of the existing capital budget.

    Street maintenance, however, is an operating expense.

    A second proposal, from the Wichita Transit System, would use about $4 million to sustain and improve current bus service. It was presented to the council as a “bridge to a long term solution.”

    This, too, is an operating expense.

    As these proposals were presented in a workshop, no decision was made.

    These two proposed uses of the $20 million Hyatt sales proceeds are contrary to the goal of not using the funds for operating purposes. If the city decides to use the sales proceeds in this way, a capital investment will have been sold in order to pay for day-to-day expenses.

    Instead of spending on these two projects, the city should simply return the money to those who paid for the Hyatt in the first place. Those people are, of course, the taxpayers of Wichita. It would be difficult to give back the funds to individual taxpayers in proportion to the amount they supplied. So what the city should do is retire $20 million of the city’s long-term debt.

    If not that, then the city should use the Hyatt proceeds to pay for another long-lived asset, perhaps the new downtown library. Either of these alternatives respects the principles of sound financial practice, and also respects the taxpayers.

    —
    Notes

    1. City of Wichita. Agenda for December 20, 2016. Agenda Item No. IV-2. ↩
    2. City of Wichita. Agenda for December 20, 2016. Agenda Item No. IV-3. ↩
  • The Wichita economy, according to Milken Institute

    The Wichita economy, according to Milken Institute

    The performance of the Wichita-area economy, compared to other large cities, is on a downward trend.

    While good news for the Wichita metropolitan area economy is becoming more frequent, it’s important to compare how Wichita is doing relative to other cities. The Milken Institute produces ranking of cities based on their economic performance in its Best-Performing Cities project.

    The ranking are composed of a number of factors such as short-term and long-term job growth, short-term and long-term wage and salary growth, growth of high-tech industry, and high-tech location quotient.1 Milken also notes: “Best-Performing Cities is solely an outcomes-based index. It does not incorporate input measures (business costs, cost-of-living components, and quality-of-life conditions, such as commute times or crime rates). These measures, although important, are prone to wide variations and can be highly subjective.”2

    Ranking of the Wichita-area economy from 2003 to 2016, from Milken Institute.
    I’ve gathered data from the Milken project for Wichita. The data starts in 2003, the first year for which data is available. The data in the table is the rank for Wichita among 200 large metropolitan areas. The best rank is 1, while the worst is 200. In the line chart for each data series, I’ve inverted the data so that the best performance is at the top.

    As the charts show, for overall ranking, Wichita has been declining for some time.

    Wichita employment compared to Kansas and the nation. Click for larger.
    This does not mean the Wichita-area economy is on the decline. But it means the relative performance of Wichita has not kept up with other cities. As can be seen in the chart of Wichita, Kansas, and U.S. non-farm employment, Wichita employment is rising. But it isn’t rising as fast as the nation, as can be seen in the widening gap between Wichita and the nation since 2010.

    Of note, Wichita economic development agencies rely on Milken data.3 4

    Data for Wichita from Milken Institute Best-Performing Cities. Click for larger.

    —
    Notes

    1. “High-tech location quotients (LQs), which measure the industry’s concentration in a particular metro relative to the national average, are included to gauge an area’s participation in the knowledge-based economy. We also measure the number of specific high-tech fields (out of a possible 19) whose concentrations in an MSA or MD are higher than the national average.” Milken Institute. 2015 Milken Institute Best-Performing Cities. http://www.best-cities.org/2015/best-performing-cities-report-2015.pdf. ↩
    2. ibid. ↩
    3. Greater Wichita Partnership. In Wichita, you will find the knowledge & skill base to get the job done well. http://www.gwedc.org/site_selectors/labor_data. ↩
    4. Greater Wichita Partnership. Air Capital of the World. http://www.gwedc.org/key_industries/aerospace_aviation. ↩
  • Economic development incentives at the margin

    Economic development incentives at the margin

    The evaluation of economic development incentives in Wichita and Kansas requires thinking at the margin, not the entirety.

    When considering the effect of economic development incentives, cities like Wichita use a benefit-cost analysis to determine whether the incentive is in the best interests of the city. The analysis usually also considers the county, state, and school districts (although these jurisdictions have no say over whether the incentive is granted, with a few exceptions). The idea is that by paying money now or forgiving future taxes, the city gains even more in increased tax collections. This is then pitched as a good deal for taxpayers: The city gets more jobs (usually) and a “profit,” too.

    Economic activity usually generates tax revenue that flows to governmental agencies. When people work, they pay income taxes. When they make purchases, they pay sales taxes. When they buy existing property or create new property, they pay property taxes. This happens whether or not the economic activity is a result of government incentives. This is a key point that deserves more exploration.

    Government often claims that without an incentive provided by government, a company would not have located in Wichita. Or, without the incentive, it would not have expanded in Wichita. Now, the city says incentives are necessary to persuade companies to consider remaining in Wichita rather than moving somewhere else.1

    But there are a few problems with the arguments that cities, states, and their economic development agencies promote. One is that the increase in tax revenue happens regardless of whether the company has received incentives. Therefore, the benefit-cost ratio calculations are valid only if incentives were absolutely necessary. Otherwise, government claims credit for something that was going to happen anyway. This is a big question that deserves exploration.

    For example, what about all the companies that locate to Wichita, or expand in Wichita, or simply remain in Wichita without receiving incentives? How do we calculate the benefit-cost ratio when a company receives no incentives? The answer is it can’t be calculated, as there is no government cost, so the divisor in the equation is zero. Instead, there is only benefit.

    Then, we don’t often ask why some companies need incentives, and others do not. Do the companies that receive incentives really need them? Is it really true that a business investment is not feasible without subsidy? Why do some companies receive incentives multiple times while others thrive without incentives?

    We may never know

    We may never know the answer to these questions. Here’s why. Suppose fictional company XYZ Enterprises, Inc. dangles the idea of moving from Wichita to some other city. XYZ cites incentive packages offered by other cities. Wichita and the state then come up with millions in incentives, and XYZ decides to remain in Wichita. Question: Were the incentives necessary? Was the threat to move genuine? If XYZ admits the threat was not real, then it has falsely held Wichita and Kansas hostage for incentives. If the city or state admits the threat was not real, then citizens wonder why government gave away so much.2

    So we’ll never really know. Everyone involved has incentive to maintain the fiction and avoid letting the truth leak out.

    A small lever moves big boulders, they say

    Related is that jurisdictions may grant relatively small incentives and then take credit for the entire deal. I’ve been told that when economic development agencies learn of a company moving to an area or expanding their Wichita operations, they swoop in with small incentives and take credit for the entire deal. The agency is then able to point to a small incentive and take credit for the entire deal. As you can imagine, it’s difficult to get the involved parties to speak on the record about this.

    Further, governments may not credit the contribution of other governments. In the past when the Wichita economic development office presented information about an incentive it proposed to offer to a company, it would sometimes list the incentives the company is receiving from other governments. As an example, when the city offered incentives to NetApp in 2012, the city’s contribution was given as a maximum of $418,000. The agenda material mentioned — obliquely — that the State of Kansas was involved in the incentive package. Inquiry to the Kansas Department of Commerce revealed that the state had promoted incentives worth $35,160,017 to NetApp.3 Wichita’s incentive contribution is just 1.2 percent of what the state offered, which makes us wonder if the Wichita incentive was truly needed. Nonetheless, Wichita city officials spoke as though the city alone was responsible for NetApp’s decision.

    The importance of marginal thinking

    When evaluating economic development incentives, we often fail to properly evaluate the marginal gains. Here’s an example of the importance of looking at marginal gains rather than the whole. In 2012, the City of Wichita developed a program called New HOME (New Home Ownership Made Easy). The crux of the program is to rebate Wichita city property taxes for five years to those who buy newly-built homes in certain neighborhoods under certain conditions.

    Wichita City HallThe important question is how much new activity this program will induce. Often government takes credit for all economic activity that takes place. This ignores the economic activity that was going to take place naturally — in this case, new homes that are going to be built even without this subsidy program. According to data compiled by Wichita Area Builders Association and the WSU Center for Economic Development and Business Research — this is the data that was current at the time the Wichita city council made its decision to authorize the program — in 2011 462 new homes were started in the City of Wichita. The HOME program contemplated subsidizing 1,000 homes in a period of 22 months. That’s a rate of 545 homes per year — not much more than the present rate of 462 per year. But, the city has to give up collecting property tax on all these homes — even the ones that would be built anyway.

    What we’re talking about is possibly inducing a small amount of additional activity over what would happen naturally and organically. But we have to subsidize a very large number of houses in order to achieve that. The lesson is that we need to evaluate the costs of this program based on the marginal activity it may induce, not all activity.

    For more, see Wichita new home tax rebate program: The analysis.

    —
    Notes

    1. “But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs, and the result diverts millions in limited taxpayer funds, primarily state income tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje, Edward. Brinkmanship with jobs. https://wichitaliberty.org/economics/brinkmanship-with-jobs/. ↩
    2. For more on this, see LeRoy, Greg. The Great American Jobs Scam. Especially chapter two, titled Site Location 101: How Companies Decide Where to Expand or Relocate. The entire book may be read online at http://www.greatamericanjobsscam.com/pages/preview-book.html. A relevant excerpt: “These prisoners’ dilemma games also enable companies to create fictions about cause and effect. These fictions can be used to create public versions of how deals happened that no one can credibly contradict, because the company’s real decision-making process will never be revealed. The most important fiction to maintain, of course, is that subsidies matter in deciding where a company expands or relocates. For example, being able to send secret signals to competing cities means companies can tell contradictory stories to different cities and have no fear of being exposed. If a company really has its heart set on City A, it can tell that city that it is in the hunt, but needs to do better. Meanwhile, it can send less urgent signals to Cities B and C, even if they offered bigger packages at first. Eventually, City A offers the biggest package, and the company announces its decision to go there.” ↩
    3. Weeks, Bob. NetApp economic development incentives: all of them. https://wichitaliberty.org/wichita-government/netapp-economic-development-incentives-all-of-them/. ↩
  • Wichita to grant property and sales tax relief

    Wichita to grant property and sales tax relief

    Several large employers in Wichita ask to avoid paying millions in taxes, which increases the cost of government for everyone else, including young companies struggling to break through.

    This week the Wichita City Council will hold public hearings concerning the issuance of Industrial Revenue Bonds to Spirit AeroSystems, Inc and other companies.1 In the IRB program, government is not lending money, and Wichita taxpayers are not at risk if the bonds are not repaid. In fact, in the case of Spirit, the applicant company plans to purchase the bonds itself, according to city documents. Instead, the purpose of the IRB process is to allow Spirit to escape paying property taxes and, often, sales taxes.

    These bonds will allow Spirit to avoid paying property taxes on taxable property purchased with bond proceeds for a period of five years. The abatement may then be extended for another five years. Usually these IRB issues also carry a sales tax exemption, but the agenda packet for this item does not mention such

    City documents state that the property tax abatement will be shared among the taxing jurisdictions in these estimated amounts:

    City: $424,918
    State: $19,500
    County: $381,979
    USD 259: $731,614

    The listing of USD 259, the Wichita public school district, is likely a mistake by the city, as the Spirit properties lie in the Derby school district. This is evident below.

    The forgiveness of taxes is justified by the city because it believes it will receive a return that is greater than the foregone taxes. This benefit-cost ratio is calculated by the Center for Economic Development and Business Research (CEDBR) at Wichita State University based on data supplied by the applicant company and the city. The rationale behind these calculations is a matter of debate. Even if valid, calculating the ratio with any degree of precision is folly, reminding us of the old saw “Economists use a decimal point to remind us they have a sense of humor.”

    City of Wichita: 5.38 to 1
    City General Fund: 2.60 to 1
    City Debt Service Fund: NA to 1
    Sedgwick County: 2.69 to 1
    U.S.D. 260: 1.16 to 1
    State of Kansas: 5.51 to 1

    These figures reveal that the City of Wichita is forcing a decision on a neighboring jurisdiction that it would not accept for itself, unless it uses one of many exceptions or loopholes. This adverse decision is forced upon the Derby School District. It faces a benefit-cost ratio of 1.16 to 1, which is below the city’s standard of 1.30 to 1, unless an exception is cited. 2 The Derby School District is not involved in this action and has no ability to influence the issuance of these bonds, should it desire to.

    We have to wonder why the City of Wichita imposes upon the Derby school district an economic development incentive that costs the Derby schools $731,614 per year, with a substandard payoff?
    Of note, the Derby school district extends into Wichita, including parts of city council districts 2 and 3. These districts are represented by Pete Meitzner and James Clendenin, respectively.

    In a second agenda item, the city will consider IRBs for a building being developed by Air Capital Flight Line. The beneficiary, however, is Spirit, as city documents state: “The requested sales tax exemption and property tax abatement will be passed on as a benefit to Spirit.”

    The annual benefit in tax savings is given by the city as:

    City: $294,174
    State: $13,500
    County: $264,447
    USD 259: $506,502

    These values are offset by a Payment-In-Lieu-Of-Taxes (PILOT) estimated at $13,251 annually.

    For benefit-cost ratios, the city supplies these:

    City of Wichita: 3.65 to 1
    City of Wichita Gen Fund: 1.83 to 1
    City of Wichita Debt Serv: NA to 1
    Sedgwick County: 2.09 to 1
    USD 260: 1.00 to 1
    State of Kansas 2.48: to 1

    Here we see the same mistake with the Wichita and Derby school districts. We also see the Derby school district giving up $506,502 in tax revenue, with no positive return.

    Spirit is not the only company asking for tax relief through IRBs this week. Three other companies are making similar requests. In none of these cases is economic necessity cited as a reason for escaping taxes. None are threatening to leave Wichita if the relief is not granted.

    The problem with these actions

    Part of the cost of these companies’ investment, along with the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify which firms will be successful. So we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. The action the Wichita city council is considering this week works against entrepreneurial firms. (See Kansas economic growth policy should embrace dynamism and How to grow the Kansas economy.)

    A major reason why these tax abatements are harmful to the Wichita economy is its strangling effect on entrepreneurship and young companies. As these companies and others escape paying taxes, others have to pay. This increases the burden of the cost of government on everyone else — in particular on the companies we need to nurture.

    There’s plenty of evidence that entrepreneurship, in particular young business firms, are the key to economic growth. But Wichita’s economic development policies, as evidenced by these actions, are definitely stacked against the entrepreneur. As Wichita props up its established industries, it makes it more difficult for young firms to thrive. Wichita relies on targeted investment in our future. Our elected officials and bureaucrats believe they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by government that shapes the future direction of the Wichita economy.

    These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies receiving grants or escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form. Young entrepreneurial companies are particularly vulnerable.

    Embracing Dynamism: The Next Phase in Kansas Economic Development PolicyProfessor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

    In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

    In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

    (For a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view, see Research on economic development incentives. A sample finding is “General fiscal policy found to be mildly effective, while targeted incentives reduced economic performance (as measured by per capita income).”)

    There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates for everyone is an example of such a policy. Abating taxes for specific companies through programs like the Wichita city council is considering this week is an example of precisely the wrong policy.

    In explaining the importance of dynamism, Hall wrote: “Generally speaking, dynamism represents persistent, annual change in about one-third of Kansas jobs. Job creation may be a key goal of economic development policy but job creation is a residual economic outcome of business dynamism. The policy challenge centers on promoting dynamism by establishing a business environment that induces business birth and expansion without bias related to the size or type of business.”

    We need to move away from economic development based on this active investor approach, especially the policies that prop up our established companies to the detriment of dynamism. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

    Small business

    This year American City Business Journals presented the results of a study of small business vitality in cities. 3 Wichita ranked at number 104 out of 106 cities studied. Awarding incentives to large companies places small business at a disadvantage. Not only must small business pay for the cost of government that incentivized companies avoid, small companies must also compete with subsidized companies for inputs such as capital and labor.

    Pursuing large companies

    Research has found that the pursuit of large companies doesn’t produce the desired growth: “The results show that large firms fail to produce significant net benefits for their host communities, calling into question the high-stakes bidding war over jobs and investment.” 4

    This finding is counterintuitive. People can easily see the large companies. They are likely to know someone that works there. But it is the unseen effects that must be considered too, and that is rarely done.

    —
    Notes

    1. City of Wichita. City Council agenda packet for December 6, 2016. ↩
    2. Sedgwick County/City of Wichita Economic Development Policy. Available at www.wichita.gov/Government/Departments/Economic/EconomicDevelopmentDocuments/City%20of%20Wichita%20Economic%20Development%20Policy.pdf. ↩
    3. Wichita Business Journal. The State of Small Business: Wichita scores low in small biz vitality. Available at www.bizjournals.com/wichita/print-edition/2016/04/29/the-state-of-small-business-wichita-scores-low-in.html. ↩
    4. William F. Fox and Matthew N. Murray, “Do Economic Effects Justify the Use of Fiscal Incentives?” Southern Economic Journal, Vol. 71, No. 1, 2004, p. 79. ↩