Wichita City Manager Robert Layton held a discussion titled “What are Wichita’s Strengths and Weaknesses: A Conversation for a Positive Community and City Agenda” at the February 26, 2016 luncheon of the Wichita Pachyderm Club. Notes were taken by an assistant and can be viewed here.
View below, or click here to view in high definition at YouTube. Videography and production by Paul Soutar.
Two economic development items on tap in Wichita this week illustrate failures or shortcomings of the regime.
Update: Both items passed by seven to zero votes at the March 1, 2016 council meeting.
This week the Wichita City Council will consider two economic development items.
The first item concerns a company named Epic Sports. In 2012 this company received property tax abatements from the City of Wichita in exchange for a 100 percent property tax exemption. The measure passed by a vote of six to one, with former council member Michael O’Donnell voting no.
Now Epic Sports has found greener pastures, it seems. Well, it didn’t just find them, it sought them, according to city documents: “The company approached economic development professionals in Butler County regarding incentives.” The same documents note “[Butler County] professionals did not target Epic Sports as a prospect for relocation.” With the new focus on regionalism, we can’t have one county poaching companies from another, it seems.
The city has negotiated that Epic Sports will repay 55 percent of the forgiven property taxes.
Here’s what is notable about this incident. Epic Sports has 110 employees and says it has outgrown its Wichita facility. City documents state the company has “searched for new facilities or land in the Wichita area but could not find a suitable property.” That is remarkable, if true. Wichita does not have any warehouse space suitable for a company of 110 employees? What, may I ask, have Wichita’s many economic development professionals been doing if we have no space for such a modestly-sized company? (On the other hand, with the focus on regionalism, and with Wichita and Butler County in the same region, why should we care?)
The second item the council will consider concerns a company that received a property tax exemption based on a commitment to invest a certain amount of capital and create a certain number of jobs. While the capital investment was made, the company has not met the jobs goal. In this case the city is invoking a portion of its economic development policy which allows modification of an incentive agreement based on poor economic conditions. If the Current Conditions Index, a product of the Center for Economic Development and Business Research at Wichita State University, drops by five or more points during the term of an incentive agreement, the city can make a modification. Based on this, the city is extending the deadline for the company to meet the jobs goal. Repayment of forgiven property taxes could be required if the company does not meet the deadline.
The proposed massage therapist regulations in Wichita are likely to be ineffective, but will limit economic opportunity and harm consumers.
Kansas already has many burdensome occupational licensure requirements that limit economic opportunity and protect entrenched interests. Nearby is a chart of the number of days training or experience required to obtain a license if various fields, according to Institute for Justice in 2012. 1 I’ve added the proposed Wichita massage therapist requirements. As you can see, it will require more than twice as much education to become a massage therapist as is required to become an emergency medical technician. How does that make sense?
Comparing the proposed Wichita requirements to the nation, we find that the Wichita standard is quite lax. 39 states license massage therapists, with the average education or training requirement being 139 days, with the range being from 117 days to 327 days2. Wichita is proposing 83 days, which might inspire one to ask this question: If the Wichita City Council is truly concerned about protecting Wichitans from getting a bad massage, why is it proposing such minimal requirements, compared to other states?
In reality, the high barriers to becoming a massage therapist in many states is testimony to the massage industry’s success in erecting barriers to entry. By making it difficult to become a massage therapist, the supply is lower than it could be, and prices are higher. Consumers lose.
As has been observed by myself: “City officials note that the existing local massage industry requested this regulation. That’s not surprising. The purpose of nearly all occupational licensure laws is to restrict entry to the industry so that existing practitioners can charge higher rates. That is a scam, especially against low-income people that need a masseuse or a plumber. It is also a burden to people who want to become plumbers, barbers, massage therapists, or one of the many other licensed occupations.” 3
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Notes
A research project by The Brookings Institution illustrates the poor performance of the Wichita-area economy.
Metro Monitor from The Brookings Institution rates metropolitan areas on a number of indicators.
On the map of metropolitan areas, blue means faster growth, and orange means slowest. You can see that Wichita has the economic growth of a typical rust belt city. (Click charts for larger versions.)
The table showing changes in indicators over the past decade shows Wichita almost always below the middle.
The charts of trends over time shows Wichita falling behind the nation, then catching up in 2007 and 2008, but falling behind since then. As time goes on, the gap between the nation and Wichita widens, not narrows.
These unfortunate facts about the Wichita economy are old news, if we’ve been paying attention. See, for example Employment by metropolitan area, Wichita’s growth in gross domestic product, and Wichita per capita income not moving in a good direction.
The response of Wichita political, bureaucratic, and civic leaders is, by any measure, new paint on an old barn, or just keeping pace with other cities. The Greater Wichita Partnership is just a new name for the same old collection of institutions and people who have been responsible for the dismal performance shown in Brooking’s Metro Monitor. In fact, if you visit greaterwichitapartnership.org and click on “Economic Development” you’re taken to the same old page for Greater Wichita Economic Development Coalition, although with a new logo. Same old barn; new paint.
While we have to hope that the Wichita State University Innovation Campus works as advertised, we also must realize that dozens and dozens of major and minor universities across the country already have similar initiatives up and running.
The Wichita City Council is likely to create a new regulatory regime for massage businesses in response to a problem that is already addressed by strict laws.
During a presentation to the Wichita City Council on February 23, 2016, police officials reported on a number of investigations and arrests. In 2015, there were 22 arrests for human trafficking and other violations. The presentation did not include what comprised “other violations,” nor did it contain any information about the disposition of these cases.
If the city is concerned about prostitution and child trafficking, the latter being a serious crime, we already have strong laws concerning this. As far as the two crimes being related: If you are a prostitute or promoter of such, you are already a criminal, according to the law. Committing more crimes, therefore, is just another step down the path you’ve already chosen.
A solution is to bring prostitution out of the shadows. Stop making consensual behavior between adults a crime. Then police can focus on actual and serious crime, like child trafficking.
But the zeal of the Wichita City Council for creating new regulatory regime is likely to overwhelm any rational thought about the problem. Now Wichita massage business owners and therapists are likely to be saddled with onerous licensing requirements. To become a newly-licensed therapist, you must possess one of several educational credentials, one of which is 500 hours of training. Existing therapists must meet similar requirements.
City officials note that the existing local massage industry requested this regulation. That’s not surprising. The purpose of nearly all occupational licensure laws is to restrict entry to the industry so that existing practitioners can charge higher rates. That is a scam, especially against low-income people that need a masseuse or a plumber. It is also a burden to people who want to become plumbers, barbers, massage therapists, or one of the many other licensed occupations.
It is both shocking and disappointing to realize that Wichita city bureaucrats and council members do not realize these economic realities. Another economic reality is that when licensing requirements are strict, the quality of service that many people receive declines. Investigating the demand for licensed plumbers, researchers found this:1
This proxy assumes that the more stringent are the barriers the higher will be the cost of licensed service and the smaller will be its quantity. These two effects increase the motivation of consumers to substitute their own services for those of trained professionals. This substitution process should show up in rising retail sales of plumbing supplies in more tightly restrictive states since licensed plumbers will generally purchase supplies wholesale. The implicit assumption is this causal chain is that self-service is on the average of lower quality than could be obtained from even a marginally trained journeyman plumber.
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How diligently will Wichita’s bureaucratic machinery investigate when presented with a fake diploma certificate and transcript? The city’s record is not good. After the city passed new taxicab regulations, somehow the regulation that prohibited convicted sex offenders from receiving licenses was not implemented effectively. The city granted a taxi driver license to a man who was on the state sex offender registry. He raped a passenger.
I urge the city council to reject these regulations and devote the city’s resources to protecting people from actual crime.
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Notes
In this excerpt from WichitaLiberty.TV: How does Tax Increment Financing (TIF) work in Kansas? Is is a good thing, or not? View below, or click here to view at YouTube. Originally broadcast June 7, 2015.
In this excerpt from WichitaLiberty.TV: Can we reform economic development in Wichita to give us the growth we need? View below, or click here to view at YouTube. Originally broadcast May 10, 2015.
In this excerpt from WichitaLiberty.TV: The Wichita City Manager says “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.” So what actually happens when you ask the city for data, including data that many governmental agencies make freely available? View below, or click here to view at YouTube. Originally broadcast December 13, 2015.
The Wichita ASR water project produced little water in December. There were 31 days when river flow was adequate.
An important part of Wichita’s water supply infrastructure is the Aquifer Storage and Recovery program, or ASR. This is a program whereby water is taken from the Little Arkansas River, treated, and injected in the Equus Beds aquifer. That water is then available in the future as is other Equus Beds water.
With a cost so far of $247 million, the city believes that ASR is a proven technology that will provide water and drought protection for many years. In 2014 the city recommended that voters approve $250 million for its expansion, to be paid for by a sales tax. Voters rejected the tax in the November 2014 election.
The ASR project is able to draw from the Little Arkansas River when the flow is above 30 cfs. As can be seen in the chart of the flow of the river, the flow was above this level every day. There were 31 days in December when there was adequate river flow for ASR to operate, counting only those days when the flow was above 30 cfs for the entire day.
According to city documents, the original capacity of the ASR phase II project to process water and pump it into the ground (the “recharge” process) was given as “Expected volume: 30 MGD for 120 days.” That translates to 3,600,000,000 (3.6 billion or 3,600 million) gallons per year. ASR phase II was completed in 2011.
Based on experience, the city has produced a revised estimate of ASR production capability. What has been the actual experience of ASR? The U.S. Geological Survey has ASR figures available here. I’ve gathered the data and performed an analysis. (Click charts for larger versions.)
On the chart of monthly production, the horizontal line represents the revised annual production projection expressed as a constant amount each month. This even rate of production is not likely, as river flow varies. In the three years that ASR phase II has been in production, that monthly target been exceeded in three months.
Two nearby charts give an idea of the efficiency of operation of the ASR project. (Click charts for larger versions.) For each month, I counted how many days had a river flow above 30 cfs at every measurement for the day. (The flow is measured several dozen times a day.) If a day had all measurements above 30 cfs, I counted that as a day of adequate river flow. I then calculated the number of days of work actually accomplished using the water produced each month, the number of days of adequate river flow for the month, and the ASR design capacity.
As can be seen in the charts, the ASR project is operating far below its design goal. So far the city has not been able to provide an explanation as to why this project is not meeting its goals.
