Wichita Liberty

At a recent meeting of the Wichita City Council, Mayor Carl Brewer delivered remarks that I found … well, I’m still trying to find the words that fully describe my astonishment. See Wichita Mayor Carl Brewer Saves Us From Covered Wagons.

I’m tempted to ask this rhetorical question: Why don’t we strip away all the confusion and obfuscation surrounding TIF districts and just give the developers $2.5 million? See Reverend Kevass Harding’s Wichita TIF District: A Bad Deal in Several Ways

Confusion over who is in charge of formulating the Wichita school bond issue plan and running the campaign harms the district’s reputation. There is a solution that would give the pro-bond group needed transparency and leadership. The full article is How to Pass the Wichita School Bond Issue.

A Wichita minister and school board member seeks a large benefit for his real estate development, but will not answer questions posed by a constituent. See Questions Wichita Reverend Kevass Harding Will Not Answer.

An article in the June 19, 2008 Wichita Eagle (Many businesses owners say they carry too much of local tax burden) provides an example of the frequently-expressed bias against individuality and markets, and in favor of government and its institutions.

The full article is at http://wichitaliberty.org/node/712

Taxation without information. I wish I could take credit for inventing this phrase that I recently heard someone use. It captures very well the key characteristic of USD 259, the Wichita public school district, and its campaign for the proposed 2008 bond issue.

The full article is here: http://wichitaliberty.org/node/711

The fact that government spends money does not mean it is spent wisely in ways that create wealth and makes people better off. Does a study the Wichita, Kansas school district relies on have an opinion about the wisdom of school district spending?
 
The full story is here: http://wichitaliberty.org/node/707.

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

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

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

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

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

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

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

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

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

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

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

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

By James Barfield

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

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

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

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

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

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

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