In Kansas, Real and Wonky

From the office of Kansas Governor Sam Brownback.

Fellow Kansans,

It’s time to get real and wonky about taxes. There is plenty of myth, rumor, and misinformation about the tax plan floating through this election-charged atmosphere. Foremost amongst them? The Kansas tax plan is failing.

  • According to the U.S. Census Bureau, the number of Missourians moving to Kansas tripled after the tax cuts.
  • According to the Department of Revenue, during the first two years of the tax plan alone, 18,000 brand new small businesses sprouted up under the  pro-growth tax plan. (A recent report also dispels the myth that that these businesses merely restructured to take advantage of new tax laws)
  • According to the IRS, Kansas reversed nineteen years of financial losses to Missouri in the first year of the tax plan alone, with further gains in 2014.
  • According to the U.S. Labor Department, Kansas has a near record number of private sector jobs.

With a growing number of people moving to Kansas, new small business growth, increased money coming into the state, and near record employment levels, where does this tax myth originate? Most folks pin this myth on revenue numbers, so let’s start there.

While the state is bringing in more (of your) money this year than last year, that amount is still under the projected revenue amount. Holding the Kansas tax plan against actual revenues we see something interesting: Corporate taxes, which weren’t touched, are down in Kansas as they are nationally; Sales taxes, which the legislature raised, are down; but individual income taxes, which were cut, were up. You read that right. The increased revenues came from the taxes that Governor Brownback cut.

The discrepancy between projected revenue and actual revenue is largely due to the rural recession that most of Western Kansas is experiencing. Because of national headwinds, oil prices have dropped precipitously, with crop prices dropping 40-60%, and cattle prices dropping 23%. With farmers and ranchers receiving far less for their crops and cattle, they in turn aren’t purchasing new equipment, making upgrades, or hiring new farm hands.

So what is driving all the positive data bullet-pointed above? With agriculture and oil constituting a large share of the Kansas economy, how are we bringing more people and new money to the state? The answer is simple—the Kansas tax plan.

Melika Willoughby
Deputy Communications Director
Office of Governor Sam Brownback

ACU Foundation Announces Ratings for the 2016 meeting of the Kansas Legislature

October 13, 2016
WASHINGTON DC – The American Conservative Union Foundation (ACU) released its 2016 ratings of the Kansas Legislature.  In our third year of rating the state, ACU found that Republican legislators tended to vote more conservatively compared to last year, with the overall Republican average increasing by 4.5 points– from 70 out of 100 in 2015, to 74.5 out of 100 in 2016.

“Kansas led the way on a number of significant issues that advanced conservative principles in 2016,” said ACU Chairman Matt Schlapp, who has deep roots in the Sunflower State.  “The House completed action on a Senate-passed bill from 2015 protecting the religious freedom of student associations, and both houses gave large majorities to a bill directing family planning funds away from Planned Parenthood and repealing renewable energy subsidies.  Unfortunately, both houses endorsed a bill allowing local governments to confiscate property designated as ‘blighted’ without compensation to the owner.  Thankfully, Governor Brownback’s veto kept the bill from becoming law.”

A detailed scorecard has been produced for all 50 state legislative bodies across the full spectrum of conservative issues, with scores for over 8,000 individual legislators.  ACU is the only organization in the nation to do this.  Like our Congressional ratings that have been published for 45 consecutive years, ACU’s state ratings reflect how elected officials view the role of government in an individual’s life.  Kansas legislators with the strongest scores consistently voted with the ideals articulated in the U.S. Constitution.

New in this year’s ratings are references to how legislation impacts families based on the ACU Foundation’s new Family Prosperity Index.  Also highlighted are issues ACU Foundation’s policy centers and Senior Fellows focus on.

To view our Kansas ratings guide, visit and click on Kansas.

ACU researches and selects a wide range of bills that reflect a member’s adherence to conservative principles, whether they be economic, social, cultural, or government integrity.  Legislators who score above 80% in each state receive awards for their commitment to conservative principles.  As President Ronald Reagan stated, “The person who agrees with you 80% of the time is an ally.”

The following Representatives and Senators will receive a 2016 ACU Ratings Award:



With your help, ACU hopes to present the 2016 awards to those Representatives and Senators who scored above 80% in the near future.  For more information contact Amanda Bunning at (202) 347-9388 or by email at[email protected].

EdChoice releases 2016 “Schooling in America” national polling results

EdChoice releases 2016 “Schooling in America” national polling results

INDIANAPOLIS — EdChoice, formerly the Friedman Foundation for Educational Choice, has released the results from its 2016 “Schooling in America” survey, the fifth year it has conducted a national poll on the state of K-12 education and opinions about school choice policies.

In addition to a statistically representative national sample of Americans over age 18, EdChoice included an oversample of Millennials to find out how their views on educational choice align with other generations.


EdChoice also added a series of brand-new questions to this year’s survey to determine the reasons parents have switched their children’s schools and the lengths to which they’ve gone for their children’s education.

“We wanted to look not just at the national trend lines on school choice over the past five years, but also at how Millennials think about these issues and what types of activities families are undertaking to access K-12 schooling options,” said EdChoice President and CEO Robert Enlow. “From moving residences to taking another job to transporting their own kids, we found out that parents will go to great lengths to get their kids the education they need.”

Enlow noted that, as in past years, the majority of Americans believe K-12 education is on the wrong track, and the types of schooling parents want doesn’t match up with what they’re actually accessing.

“Today, 83 percent of students attend public district schools, but only 28 percent of parents told us that’s their preference,” Enlow said. “These data once again make the case for more educational choices across the board — and more flexibility to customize those choices for each student.”

EdChoice Vice President of Research Paul DiPerna, one of the survey authors, said the Millennial generation’s outlook on educational choice is particularly important because their children, if they have them, are beginning to enter K-12 schooling.

“Millennials clearly support various types of educational choice policies, such as education savings accounts, school vouchers, charter schools, and tax-credit scholarships. The margins of support are positive and large, and not only for Millennials. That applies to Gen Xers and—to a relatively lesser extent—Baby Boomers,” DiPerna said. “Whether or not these snapshot results are static and mostly reflect one’s life stage, or are dynamic and persist over time, remains to be seen and is worthy of continued survey research.”

DiPerna joined a panel of school choice and polling experts last week to discuss the new findings. Watch the video of that event:


  • The majority of Americans (62 percent) think K–12 education is on the “wrong track.” Only 24 percent said they think education is headed in the “right direction.”
  • Most American school parents are not accessing the educational options they say they prefer for their children. When asked their preferred school type, 41 percent of school parents prefer a private school; 28 percent, a public district school; 17 percent, a charter school; 11 percent, home school. In reality, 83 percent of students currently attend public district schools and only 17 percent attend other types of schools.
  • Americans are nearly twice as likely to be supportive of education savings accounts than oppose them (49 percent favor vs. 27 percent oppose). ESAs are the newest, most flexible form of school choice; EdChoice estimates that nearly one in four Americans are still unaware of them.
  • American parents often take inconvenient, often life-altering, steps to secure the best education for their children’s needs. For example, nearly two-fifths of American parents have changed their children’s school over the summer or during the school year, and the majority (85 percent) made the choice to change schools for reasons other than their children transitioning from elementary to middle or middle to high school.


  • Millennials are more likely than other generations to support ESAs (57 percent to 21 percent). Millennials’ top reported reasons for favoring ESAs are “more freedom and flexibility for parents” and “access to schools providing more individual attention.”
  • Many Millennial parents have made great sacrifices to support their children’s schooling. They have changed jobs (18 percent vs. national average 14 percent), moved closer to school (26 percent vs. national average 17 percent) and taken other jobs for additional income (32 percent vs. national average 21 percent) specifically to support their children’s K–12 education. Millennials are also more likely than the national average to rely on family or friends to look after their children after school (58 percent vs. 49 percent) or to transport their children (55 percent vs. 47 percent). Notably, Millennials are twice as likely to pay for their children’s transportation to school than the national average (30 percent vs. 15 percent).
  • Most Millennials (87 percent) estimate incorrectly or don’t know how much we spend on K–12 education, and without any additional information they are slightly more likely than the national average to say we don’t spend enough (55 percent vs. 52 percent, respectively). However, when Millennials are told how much we spend per pupil on average ($10,763 in SY 2012–13), the percentage of Millennials who say we don’t spend enough on K–12 education drops significantly (by 18 percentage points) — more so than any other generation.



EdChoice is a nonprofit, nonpartisan organization dedicated to advancing full and unencumbered educational choice as the best pathway to successful lives and a stronger society. EdChoice believes that families, not bureaucrats, are best equipped to make K-12 schooling decisions for their children. The organization works at the state level to educate diverse audiences, train advocates and engage policymakers on the benefits of high-quality school choice programs. EdChoice is the intellectual legacy of Milton and Rose D. Friedman, who founded the organization in 1996 as the Friedman Foundation for Educational Choice.

Kansas Consensus Revenue Estimating Working Group releases recommendations

From the office of Kansas Governor Sam Brownback.

For more information: Eileen Hawley, 785-368-7138

Consensus Revenue Estimating Working Group releases recommendations

Topeka – The seven-member Consensus Revenue Estimating (CRE) Working Group today issued its final recommendations to improve the CRE estimates that, per statute, are used as the base for developing the State’s budget.  The working group was created in June in response to a request from Governor Sam Brownback to conduct a comprehensive review of the CRE process.

Sam Williams, Chair of the working group, was joined by Budget Director Shawn Sullivan and Revenue Secretary Nick Jordan in unveiling the findings and recommendations. The group met four times to study the process and analyze data related to CRE estimates, fiscal notes and state tax policy.

“The inability of the consensus revenue estimating group, of which I am a part, to develop accurate forecasts makes it very difficult to develop and maintain a stable budget,” said Budget Director Shawn Sullivan. “We built our budget for fiscal year 2016 and 2017 on estimates completed after tax legislation passed in 2015. The actuals for fiscal year 2016 were $464.7 million, or 7.5 percent less, than those estimates.”

The working group also researched whether major tax policy passed in 2012 and adjusted in the 2013 and 2015 legislative sessions created an environment in which some businesses changed their tax filing status, making accurate revenue estimates more difficult. After analyzing the data, the working group determined there is no evidence of a large number of C-Corporations changing their filing status to LLCs, S-Corporations or Sole Proprietorships. A review of data from 2007 through 2014 shows the decline in C-Corporations remained consistent with the range of decline prior to the tax policy. Data also showed that the growth in the number of pass-through entities in Kansas is consistent with growth prior to state tax policy changes.

Key recommendations from the group include:

  • Utilizing more industry experts from various sectors including representatives from Kansas CPAs and bankers to provide a more diverse and forward-looking economic outlook.
  • Investing in new economic and revenue modeling software and reports necessary to track tax collections and forecast tax receipts.
  • Changing the composition of the CRE group by issuing an RFP for one economist experienced with macro-economic and revenue forecasting.
  • Working with the Legislature to provide the CRE Group flexibility to push the April CRE to May 1 in order to provide the group with more information on state tax filing deadline collections.

“It is our intent to move forward with implementing these recommendations as quickly as we can,” Sullivan said. “The existing review process is more than 30 years old and does not take into account the dynamics of the current state, regional and national economies. We look forward to working with the Kansas Legislative Research Department, and with the Legislature when they return in January, for any recommendations that require their agreement.”

The members of the working group included: Chair, Sam Williams, retired managing partner/CFO of Sullivan, Higdon and Sink; ; Gary Allerheiligen, retired managing partner for Grant Thornton; Gerald Capps, senior vice president for state and local tax services and private equity team leader at Allen, Gibbs and Houlik (AGH); Gary Cloud, senior vice president and co-chief investment officer for FCI Advisors; DeAnn Hill, State of Kansas CFO and owner of a CPA firm; Kurt Knutson, founder and CEO of Freedom Bank, chairman of the Kansas State Banking Board; and Brad Palen, principal at KCOE ISOM.

A copy of the working group report may be found at:

KU institute publishes 50th edition of Kansas Statistical Abstract

From Institute for Policy & Social Research at the University of Kansas.

LAWRENCE — For a half-century, one report has provided invaluable social and economic data that has aided Kansans in promoting and governing their communities.

The Institute for Policy & Social Research at the University of Kansas in September published the 50th edition of the Kansas Statistical Abstract, which contains a wide variety of statistical data broken down by state, county and city.

“It is a real service to the state that KU has been providing for 50 years and even before then,” said Genna Hurd, IPSR associate researcher and KSA editor. “We hear all the time from people across the state about how they use the data in their own communities.”

The 50th edition includes statistics through July 2016 on topics ranging from population, vital statistics and health, housing, education, business, exports, employment, finance, state and local governments, crime, recreation, and energy and natural resources.

Data are especially useful to policymakers at the state and local levels as they weigh various issues, apply for grant funding or conduct other business, said Xanthippe Wedel, an IPSR senior research data engineer who leads collection of the data from various state and national sources.

“In a more globalized economy, many communities are trying to look at Kansas and how it compares with our peers,” Wedel said. “Being able to have all these different sets of data in one place has also become essential.”

KU published the first edition, the 1965 edition, in 1966 through the Center for Regional Studies, IPSR’s predecessor.

“For 50 years, first in print and now online, the KSA has provided the people of Kansas accessible social, economic and demographic data,” said Steven Maynard-Moody, director of IPSR and professor in the KU School of Public Affairs & Administration. “This kind of data was relevant in 1966, is essential in 2016 and will prove invaluable in 2066.”

A foreword to the edition by David Huff, the center’s director, notes the volume was meant to present in a concise and convenient format important social and economic data pertaining to the state. The edition was 47 pages. More recent editions approach 600 pages.

Many things technologically have changed over 50 years, but the core mission of the abstract remains the same, IPSR staff said. The abstract is now published as a PDF file on the IPSR website for free, and staff have scanned pages to make available all editions, even the ones printed originally as books.

Laura Kriegstrom Stull, who retired from IPSR in 2015 after 34 years, was involved with more than half of the KSA editions, including initially as a KU student. As a cartographer, Kriegstrom Stull had to initially use pen and ink and photograph layers to print maps for publication, Wedel said. Modern GIS technology simplified that process, she said.

“We are a filter of big data,” Wedel said. “We filter many things down and try to give what is appropriate to the people of Kansas in a meaningful way, whether that is maps, graphs, charts or tables.”

Staff members said it was fitting the 50th edition contains data that coincided with the year in which KU celebrated its 150th anniversary.

“We’ve managed to figure out a way to keep providing this service because we know that this is important to communities who have looked to us long-term for this type of information,” Hurd said. “We like to think people, such as community leaders, are using this to help them make good decisions in their own processes.”

The link to the IPSR website is

Exchange Place still not good for Wichita, others

From September 2013.

Wichita city hall logoTomorrow the Wichita City Council will consider a redevelopment plan for the Exchange Place project in downtown Wichita. Despite having shed the problems with the former owners, the project has become an even worse deal for the taxpayers of Wichita, Kansas, and the nation. Those looking for jobs and for investment capital to meet consumer demands are worse off, too.

Here’s what the city council agenda packet gives as the sources of financing for this project.

HUD Loan Amount         $29,087,700
Private Equity            5,652,254
Tax Credit Equity        19,370,395
TIF Proceeds             12,500,000
Total Sources of Funds  $66,610,349

Consider each of these sources of funding. TIF, or tax increment financing, diverts future increased tax revenues away from their normal uses and diverts them back to the project. In this case, the city will borrow $12,500,000 by selling bonds. It will give this money to the developer. Then, TIF proceeds will be used to repay these bonds.

It sounds innocent, even beneficient and desirable. But if this project was not built within a TIF district, it would add $12,500,000 in tax revenues to the city, county, and school district. This is called “building up the tax base,” something politicians and bureaucrats say is an important goal. Downtown Wichita, however, has not done well in this regard, despite the claim of hundreds of millions in investment.

City leaders will tell us that tax increment financing is needed for economic development. Regarding the effect of tax increment financing districts on economic development, economists Richard F. Dye and David F. Merriman have studied tax increment financing extensively. Their paper The Effects of Tax Increment Financing on Economic Development bluntly states the overall impact of TIF: “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not.”

Later in the same paper the authors conclude: “These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

What about the effect of tax increment financing on job creation, that being another goal mentioned by politicians and bureaucrats? One person who has looked at the effect of TIF on jobs is Paul F. Byrne of Washburn University. He authored a recent report titled Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth. In its abstract we find this conclusion regarding the impact of TIF on jobs: “Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment.” This project is a retail project, and can be expected to have a negative effect on employment.

Another bad aspect of this project for citizens is what city documents describe as “tax credit equity.” The amount is $19,370,395. This is understatement at its finest. Tax credits are a direct transfer from taxpayers to the project developers, with very few strings attached.

A tax credit is an appropriation of money made through the tax system and economically equivalent to a direct grant of money. Recently some have started to use the word “tax appropriations” or “tax expenditures” to describe tax credits in recognition of this. These expenditures don’t go through the normal legislative process as do most appropriations. If the Kansas Legislature and United States Congress are not comfortable with writing this developer a check for over $19,000,000, they should not make a roundabout contribution through the tax system that has the same economic impact on the state’s and nation’s finances.

Citizens will be told that the tax credits are needed because rehabbing historic buildings is expensive. We should let politicians and bureaucrats know that living or working in a historic building is a premium amenity that one chooses, just like one might choose granite counter tops in their kitchen. We shouldn’t expect others to pay for these voluntary choices.

Then, there’s a “HUD Loan Amount,” which is actually a loan guarantee of $29,087,700. U.S. taxpayers are liable for this amount of money should the project not meet its projections.

The subsides to this project have real costs. This development will require services from the city, county, and school district, yet it won’t be contributing its full share of property taxes. So someone else has to pay.

The tax credits represent money that has to be made up by taxpayers across Kansas and the nation. Again, someone else has to pay. Since Kansas applies sales tax to food, even poor people buying groceries will be contributing to the cost of the grants given to this project through state tax credits.

We’ll be told that there’s a “funding gap” that taxpayers must step forward to fill. Why does that gap exist? It’s simple: Markets have decided that this project is not worth what it costs. If it was worth what it’s going to cost, and if the developer is reputable (as we’ve been promised), markets would be willing to fund the project. This happens every day all across the country, even during recessions.

What the city is proposing to do is to take risks with the taxpayers’ money that no one is willing to take with their own. Further, the spending and credit that is diverted from markets to this project wastes capital. There is less capital available for projects that people value, because it is diverted to projects that politicians and bureaucrats value.

The difficulty is that it’s easy to see the new project. The groundbreaking and ribbon cutting ceremonies that commemorate government intervention will be covered by television and newspapers. Politicians and bureaucrats are drawn to these events and will spend taxpayer funds to make sure you’re aware of them.

It’s more difficult to see that the harm that government intervention causes. That harm is dispersed and more difficult to spot. But the harm is real. If it is not, then we need to ask why our governments don’t do more of this type of development.

Driving by a development in a TIF district and noticing a building or people working at jobs does not tell the entire story. Recognizing the existence of a building, or the payment of taxes, or jobs created, is “stage one” thinking, and no more than that.

It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. It also requires thinking of the long term effects of a policy, not just the immediate. But over and over again we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

In Sedgwick County, expectation of government entitlements

From August 2015.

In Sedgwick County, we see that once companies are accustomed to government entitlements, any reduction is met with resistance.

When an executive of Spirit Aerosystems accused the Sedgwick County Commission of “working against us,” the company may have forgotten the assistance and special treatment the company has received from local governments and taxpayers. This assistance has amounted to hundreds of millions of dollars over several decades, when we consider both Spirit and its predecessor, Boeing.

Now, Spirit objects to a proposed reduction in funding to Wichita Area Technical College, and also cuts to local attractions such as the zoo. The proposed cut to WATC is less than the cut made the year before, although part of that cut was rescinded, making the proposed cut equal to last year’s cut. These cuts follow a trajectory recommended by the former county manager, who was widely praised as understanding and accommodating the needs of area business firms.

So when Spirit accuses county taxpayers as working against the company, it’s a little hard to stomach. Residents of Sedgwick County pay higher taxes so that Spirit can pay less.

Especially glaring is when companies ask for forgiveness of paying sales tax, as Spirit routinely does. In Kansas, low-income families must pay sales tax on their groceries, and at a rate that is among the highest in the country. Even more difficult to fathom are the companies that campaigned for a higher sales tax in Wichita, but engage in financial maneuvers designed to avoid paying any sales tax. Sometimes companies campaign for higher property taxes, especially school bonds, but then ask for exemption from paying those taxes. 1 2 3

Following, a discussion of a Spirit Aerosystems tax abatement request from 2014.

This week the Wichita City Council will hold a public hearing concerning the issuance of Industrial Revenue Bonds to Spirit AeroSystems, Inc. The purpose of the bonds is to 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. Additionally, Spirit will not pay sales taxes on the purchased property.

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

City: $81,272
State: $3,750
County: $73,442
USD 259: $143,038

No value is supplied for the amount of sales tax that may be avoided. The listing of USD 259, the Wichita public school district, is likely an oversight by the city, as the Spirit properties lie in the Derby school district. This is evident when the benefit-cost ratios are listed:

City of Wichita: 1.98 to one
General Fund: 1.78 to one
Debt Service: 2.34 to one
Sedgwick County: 1.54 to one
U.S.D. 260: 1.00 to one (Derby school district)
State of Kansas: 28.23 to one

The City of Wichita has a policy where economic development incentives should have a benefit cost ratio of 1.3 to one or greater for the city to participate, although there are many loopholes the city regularly uses to approve projects with smaller ratios. Note that the ratio for the Derby school district is 1.00 to one, far below what the city requires for projects it considers for participation. That is, unless it uses one of the many available loopholes.

We have to wonder why the City of Wichita imposes upon the Derby school district an economic development incentive that costs the Derby schools $143,038 per year, with no payoff? Generally the cost of economic development incentives are shouldered because there is the lure of a return, be it real or imaginary. But this is not the case for the Derby school district. This is especially relevant because the school district bears, by far, the largest share of the cost of the tax abatement.

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.

The city’s past experience

Wichita Mayor Carl Brewer Facebook 2012-01-04Spirit Aerosystems is a spin-off from Boeing and has benefited from many tax abatements over the years. In a written statement in January 2012 at the time of Boeing’s announcement that it was leaving Wichita, Mayor Carl Brewer wrote “Our disappointment in Boeing’s decision to abandon its 80-year relationship with Wichita and the State of Kansas will not diminish any time soon. The City of Wichita, Sedgwick County and the State of Kansas have invested far too many taxpayer dollars in the past development of the Boeing Company to take this announcement lightly.”

Along with the mayor’s statement the city released a compilation of the industrial revenue bonds authorized for Boeing starting in 1979. The purpose of the IRBs is to allow Boeing to escape paying property taxes, and in many cases, sales taxes. According to the city’s compilation, Boeing was granted property tax relief totaling $657,992,250 from 1980 to 2017. No estimate for the amount of sales tax exemption is available. I’ve prepared a chart showing the value of property tax abatements in favor of Boeing each year, based on city documents. There were several years where the value of forgiven tax was over $40 million.

Boeing Wichita tax abatements, annual value, from City of Wichita.
Boeing Wichita tax abatements, annual value, from City of Wichita.
Kansas Representative Jim Ward, who at the time was Chair of the South Central Kansas Legislative Delegation, issued this statement regarding Boeing and incentives:

Boeing is the poster child for corporate tax incentives. This company has benefited from property tax incentives, sales tax exemptions, infrastructure investments and other tax breaks at every level of government. These incentives were provided in an effort to retain and create thousands of Kansas jobs. We will be less trusting in the future of corporate promises.

Not all the Boeing incentives started with Wichita city government action. But the biggest benefit to Boeing, which is the property tax abatements through industrial revenue bonds, starts with Wichita city council action. By authorizing IRBs, the city council cancels property taxes not only for the city, but also for the county, state, and school district.

In Wichita, an incomplete economic development analysis

From August 2015.

The Wichita City Council will consider an economic development incentive based on an analysis that is nowhere near complete.

Tomorrow the Wichita City Council will consider granting a sales tax exemption for a real estate development in northeast Wichita. (For background, see In Wichita, benefitting from your sales taxes, but not paying their own.)

As evidence of the goodness of the project and why the city should forego collecting sales tax, the council has been presented with these benefit-cost figures:

City of Wichita General Fund: 44.67 to 1
City of Wichita Debt Service Fund: NA
Sedgwick County: 100.23 to 1
USD 375: NA
State of Kansas: 65.28 to 1

Undoubtedly council members will congratulate themselves on their wisdom and foresight for being able to invest $1.00 and get back $44.67 in return. And look at what a favor the council is doing for the county and state! For an investment of $1.00, they’ll get back $100.23 and $65.28.

If only these numbers were a true and accurate representation.

The source of these numbers is that the city is giving up a relatively small amount of sales tax revenue, but gaining a lot of property tax (and other tax) revenue in the future. This is true, as far as we can predict these things.

The problem is that one of the numbers used to calculate the benefit-cost ratio is incomplete, and far from being complete. (Click here to view the analysis prepared for the city.)

The source of the calculation starts with the city giving up $16,227 of its share of sales tax revenue, based on the action the council will likely approve on August 11. This is the city’s cost, according to city documents. Then, future tax revenues are estimated, discounted to present value, and compared to the cost. The result is the benefit-cost ratio.

This calculation could make sense if the city included all costs in the calculation. But it hasn’t done that. First, the project benefits from STAR bonds. These bonds carry a sales tax exemption on goods purchased with bond proceeds, which means that the city (and other jurisdictions) are forgoing the collection of other sales tax revenue in addition to the sales tax used in the present calculation. This foregone revenue is of precisely the same nature as other foregone sales tax revenue that the city includes in its calculation.

Additionally, the project benefits from up to $7,525,000 in STAR bonds financing. These bonds will be repaid by sales tax collections from the project and surrounding merchants. This represents more sales tax revenue that the city and other jurisdictions will not be able to spend on anything except paying principle and interest in these bonds.

If these costs were included in the benefit-cost ratio calculation, I don’t know what the result would be, except that it would be different, and probably a great deal lower. It might even be below the city’s threshold for projects.

No matter your opinion on the wisdom of the city investing in public-private partnerships, the city council ought to insist on complete information. That hasn’t happened in this case. The city is using only part of its costs, but pretending that these costs are responsible for producing all revenues.

Who do we hold accountable for this? The benefit-cost ratios are computed by the Center for Economic Development and Business Research (CEDBR) at Wichita State University. It uses figures provided by the city. In the past, when results like these have been questioned, the city has cited the economists at CEDBR as evidence that the figures are valid and reliable. By splitting the responsibility for these calculations, accountability is avoided.

Wichita CID illustrates pitfalls of government intervention

From August 2015.

A proposed special tax district in Wichita holds the potential to harm consumers, the city’s reputation, and the business prospects of competitors. Besides, we shouldn’t let private parties use a government function for their exclusive benefit.

This week the Wichita City Council will consider the formation of a Community Improvement Districts to benefit a proposed hotel in west Wichita.

CIDs are a relatively recent creation of the Kansas Legislature. In a CID, merchants may charge additional sales tax, up to an extra two cents per dollar. For more about their mechanism, see Community improvement districts in Kansas. In the present case, the developer proposes to charge hotel guests an extra two cents per dollar in tax. If retail stores are developed, their customers will pay the CID tax too. This extra sales tax, minus a handling fee, will be periodically remitted to the developer.

From Google Earth, a view of the restaurant and hotel on the subject property. If a house this blighted had been owned by a poor inner-city resident, the city would have long ago condemned and demolished the building, at the homeowner's expense.
From Google Earth, a view of the restaurant and hotel on the subject property. If a house this blighted had been owned by a poor inner-city resident, the city would have long ago condemned and demolished the building, at the homeowner’s expense.
One reason to oppose the formation of this CID is it contributes to Wichita’s reputation as a city of high taxes. The nearby table gives an example of what a hotel bill will look like. There’s the existing guest tax of 6 percent. The city started collecting the 2.75 percent “tourism fee” this year. 1 (How many cities charge visitors a fee for visiting?) There’s the combined state and county sales tax of 7.5 percent, and then the CID tax of 2 percent. The total of these taxes is 18.25 percent.

A sample hotel bill in Wichita.
A sample hotel bill in Wichita.
The mayor and city council members note that these taxes are paid by people from out of town. They think it’s a smart strategy. But some significant fraction of these taxes are paid by Wichitans, particularly the many companies that have their scattered employees travel to Wichita. And, has anyone ever paid a hotel bill for visiting friends and relatives?

Welcome to Wichita Tourism Fee billboardBesides this, do we really want to punish our guests with these taxes? A city tourism fee? Welcome to Wichita, indeed.

Another important public policy issue regarding CIDs is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? We can easily see their rationalization: It’s better for us that unwitting customers pay higher sales taxes rather than higher prices. We can blame government for the taxes, but we get the money. 2

There is the competitive effect on other hotels in the area to consider. Some hotel owners feel the ability of one hotel to collect the CID tax for its own benefit gives an unfair competitive advantage.

Customers of merchants in CIDS ought to know in advance that an extra tax is charged. Some have recommended warning signage that protects customers from unknowingly shopping in stores, restaurants, and hotels that will be adding extra sales tax to purchases. Developers who want to benefit from CID money say that merchants object to signage, fearing it will drive away customers.

State law is silent on this. The City of Wichita requires a sign indicating that CID financing made the project possible, with no hint that customers will pay additional tax. The city also maintains a website showing CIDs. This form of notification is so weak as to be meaningless, but this was the decision the city council made. 3

CIDs allow property owners to establish their own private taxing district for their exclusive benefit. This goes against the grain of the way taxes are usually thought of. Generally, we use taxation as a way to pay for services that everyone benefits from, and from which we can’t exclude people. An example would be police protection. Everyone benefits from being safe, and we can’t exclude people from participating in — benefiting from — police protection.

But CIDs allow taxes to be collected for the benefit of one specific entity. This goes against the principle of broad-based taxation to pay for an array of services for everyone. But in this case, the people who benefit from the CID are quite easy to identify: the property owners in the district. We shouldn’t let private parties use a government function for their exclusive benefit.

  1. Weeks, B. (2014). Wichita seeks to add more tax to hotel bills. Online. Voice For Liberty in Wichita. Available at: Accessed 31 Aug. 2015.
  2. The premise of this question is not accurate, as it is not the merchants who receive CID funds. Landlords do. The more accurate question is why don’t landlords raise their rents?
  3. Weeks, B. (2014). Wichita City Council fails to support informing the taxed. Online. Voice For Liberty in Wichita. Available at: Accessed 31 Aug. 2015.

Pompeo questions cash transfer to Iran

Americans deserve to know if their country used their taxes to pay a ransom, writes Congressman Mike Pompeo of Wichita.

August 17, 2016

Pompeo Demands Treasury Department Explain $400 Million Cash Shipment to Iran

WICHITA, KS – Congressman Mike Pompeo (R-KS), released the following statement regarding his letter to Treasury Secretary Jack Lew seeking answers regarding the lawfulness of the United States’ $400 million cash transfer to Iran, which occurred as American hostages were released.

“Since January, I and many others in Congress have been trying to get details about the $1.7 billion President Obama announced he was paying Iran.  As the Obama administration stays silent on the matter, news reports have given us quite a bit of frightening information — specifically that the U.S. sent $400 million in pallets of cash to the world’s largest state sponsor of terrorism.

“Yet again, we are pounding the Obama administration for information.  My letter asks the Treasury Department how and why it circumvented, or broke, U.S. law.  The American people deserve to know the truth about how their taxpayer dollars are being used and if our country paid a ransom.”

You can find Pompeo’s past statement on the $400 million cash transfer to Iran here.  In January, Pompeo inquired with the State Department when the $1.7 billion payment was announced, see more about his work here.

You can read the full letter here.

Washington, D.C.: T.W. Arrighi

(202) 225-6216 (Office)

(202) 590-0609 (Mobile)


Wichita, KS: Sean Robinson

(316) 262-8992 (Office)

(316) 644-0832 (Mobile)