First, I’d like to thank my campaign leadership team and all the volunteers. Many started working in October by carrying the petition and gathering signatures, sometimes in cold and windy winter weather. My job as campaign chair was made much easier through the efforts of dedicated people like Susan Estes, John Todd, Derrick Sontag, and the many others who helped.

Usually, winning an election is a happy time. In most elections the winning side is happy because they elected a candidate to office who they feel has the better ideas.

I’m glad we won. But my happiness is tempered by the realization that we simply prevented something bad from happening in Wichita.

I’m proud that the electorate responded positively to our accurate and truthful campaign. When citizens have the facts, they make the right decision.

Going forward, I’d like to remind Wichitans that the Ambassador Hotel is receiving assistance from eight taxpayer-funded government programs with costs of $15.4 million up-front and several hundred thousand annually. None of these were affected by the election. Wichita city hall and its allies are ready, willing, and able to use these incentive programs in the future for other hotels and businesses.

So to the extent that these economic development programs actually help Wichita, they are still available, and will likely be used.

But we feel these programs are not wise. Often, we’ve found that they’re not needed. And when used, they direct public investment to where politicians and bureaucrats want it, not where people want it.

The best way to create jobs is to get government out of the way. Instead of entrepreneurs spending resources applying for grants, finding government programs and taking handouts, we would be much better off if they could directly invest those resources in job creation. That is what the voters said tonight.

We need to reform our economic development efforts. Our present methods, which are just about the same as most other cities, are not working. We need to realize that there are several long-serving politicians and bureaucrats that have presided over this failure.

These people have presided over the system of political cronyism that passes for economic development in Wichita. Politicians like Mayor Carl Brewer and most members of the Wichita City Council pocket thousands in campaign contributions from opportunists like David Burk and David Wells, who are partners in the Ambassador Hotel project. These people make contributions to those they know are in a position to vote to give them money.

This is such a foul system that we need pay-to-play laws to reform it. I’m suggesting that Kansas pass such a law, and name it “Davids’ Law.”

I hope that Wichita City Hall, the economic development machinery in our city, and the Wichita Eagle editorial board will be more receptive to the message of economic freedom, free markets, and limited government that was expressed in the results of this election.

Now that the Wichita Eagle has published its fact checking article (Fact-checking claims on the Ambassador Hotel vote), I can say that this goal has been met. While the Eagle took issue with one of my claims, upon closer examination, there really is no issue at all.

But the same can’t be said for the claims made by the “Vote Yes” side. That side of the issue is championed by a group named “Moving Wichita Forward,” managed by Sheila Tigert. While the Eagle article said there were “three instances where semantic liberties have been taken with the facts surrounding the development,” the article finds four problems.

Specifically, the jobs claim made by Moving Wichita forward “is a stretch,” according to the director of the Wichita State University Center for Economic Development and Business Research. The number claimed is grossly exaggerated.

Second, Moving Wichita Forward’s claim of “No new taxes” is refuted by the two cents per dollar Community Improvement District tax created for the hotel’s exclusive benefit.

Third, Moving Wichita Forward ignores the economic impact of the $7.3 million in tax credits the hotel is receiving. Taxpayers across Kansas ($3.8 million) and the entire country ($3.5 million) have to make up the missing tax revenue that was diverted to the hotel developer.

Fourth, Moving Wichita Forward “incorrectly frames the project’s return on investment for the city of Wichita.”

The Eagle took issue with my claim that Wichita’s Tourism and Convention fund is losing $2 million this year, and therefore needs revenue from hotel guest taxes.

The Eagle consulted Wichita assistant finance director Rob Raine, who disputed the claim of the loss. But to believe what Raine contends, you would have to suspend belief in the economic reality of events. You would also have to come to the realization that Wichita city budget documents can’t be taken at face value.

Dave Trabert, who is president of Kansas Policy Institute and has experience with accounting, left a comment to the Eagle article that explains. He wrote:

A little fact-checking of the city’s claims about its budget might be in order. Page 328 of Wichita’s 2012/2013 Annual Budget shows the following for the Tourism and Convention Fund:

2012 Adopted:
Budgeted Revenues            $5,977,210
Budgeted Expenses            $7,983,130
Budgeted Loss               ($2,005,919)

2012 Beginning Fund Balance  $2,400,664
2012 Budgeted Loss          ($2,005,919)
2012 Ending Fund Balance       $394,745

The City also budgeted for a $379,042 loss in 2013, which would bring the fund balance down to just $15,703.

The Vote No group is not misreading the budget as claimed by the city. If anything, the city is attempting to misguide the Eagle reporter. If the city isn’t going to lose money this year and next as budgeted, they should openly explain what costs are being eliminated or revenues added to make up the difference. Until then, citizens must reasonably conclude that the budget is accurate.

In a later comment Trabert added: “The city is also falsely claiming that reserves are ‘appropriated,’ implying that reserves are part of the $8 million in expenditures. Page 328 of the budget very clearly identifies the $8 million in budgeted expenditures and reserves are not part of that total. The budgeted $2 million net loss is deducted from beginning reserves as explained in my earlier post.”

The tourism and convention budget may be viewed on page 328 of this document: Wichita Adopted Supplemental Budget 2012-2013. An excerpt from the budget of the relevant page may be viewed at Wichita Tourism and Convention Fund Budget 2012 – 2013.

Wichita voters should not be mislead by Moving Wichita Forward, a campaign that is now shown to have little concern for being truthful.

More information about the election and its issues are at Wichita Ambassador Hotel information sheet and Fact checking the Wichita Ambassador Hotel campaign.

Wichita Ambassador Hotel 60 second spot

What’s the real cost of the Ambassador Hotel? The out-of state developer building this project received over $3.3 million in tax increment financing, diverting money from Wichita police and fire departments. They received more than $4.2 million from the city to fund parking. The State of Kansas gave them $3.8 million in tax credits. And they got another $3.5 million in tax credits from the federal government. Now they want to keep 75% percent of the guest tax that promotes tourism in Wichita, including improvements to Century II. Why should an out-of-state developer receive sweetheart tax treatment when local taxpayers and businesses have to make up the difference? Maybe a better question is … When will it end? Vote no on February 28th to promote fairness. Vote no to protect Century II. Vote no to protect local businesses from unfair competition. If you’re tired of back-room political deals, vote no on February 28th. Get the facts at dtwichita.com. That’s dtwichita.com. Paid for by Tax Fairness for All Wichitans.

Wichita Ambassador Hotel 30 second spot

What’s the real cost of the Ambassador Hotel? The out-of state developer building this project has received over 15 million dollars in tax credits and incentives. Now they want to keep 75% percent of the guest tax that promotes tourism and improvements to Century II. When will the sweetheart deals end? Vote no on February 28th to protect Century II. Vote no on February 28th to protect local businesses. Get the facts at dtwichita.com. Paid for by Tax Fairness for All Wichitans.

As the February 28th special election in Wichita nears, members of Tax Fairness for All Wichitans would like citizens to have the full range of facts available as they decide how to cast their ballots.

Most importantly, Wichitans should know that the Ambassador Hotel developer has said that renovation work will proceed and the hotel will open regardless of the outcome of the election. So whatever the impact of the hotel on jobs and downtown — all this will happen even if citizens vote no.

That the hotel will open even if the guest tax rebate fails to pass is recognition of the large taxpayer subsidy that the hotel is receiving. The Ambassador Hotel will benefit from at least eight government programs, all of which cost the taxpayer. Voting No on February 28th simply prevents a ninth layer of taxpayer subsidy from taking effect. The other eight layers of generous taxpayer subsidies are not affected by the election.

Regarding specifically the guest tax rebate that is the subject of the election: Supporters claim that this tax is paid by visitors to Wichita, and therefore is not a new tax that costs Wichitans.

On the surface, this seems logical. But according to the Wichita State University study that hotel developers use, 50 percent of the Ambassador Hotel’s business is diverted away from existing hotels. These hotels — with two exceptions — pay their full share of guest tax to Wichita’s Tourism and Convention Fund. As business shifts from these hotels to the Ambassador Hotel, we can expect revenue to that fund to decline.

The Tourism and Convention Fund is used to fund the city’s tourism promotion, but also for debt service, maintenance, and updates to Century II. The fund is running a loss of $2 million this year, and next year its balance will be near zero. As there are plans for increased spending at Century II, taxpayers across Wichita will likely have to make up for the Ambassador Hotel’s missing tax revenue.

By the way, there are no restrictions on what the hotel owners may do with the diverted guest tax revenue. It is likely to be a source of profit for them at the expense of Wichita taxpayers.

There are also problems with the use of the WSU study regarding the hotel, explained in more detail at dtwichita.com. As an example, supporters cite only the positive impact to one city fund while ignoring the larger negative impact the study found for the entire city. The study also fails to include the cost to taxpayers of all the eight government subsidy programs the hotel is receiving.

Hotel boosters also say it’s important not to oppose the city council’s economic development efforts and send a negative message to future investors. This argument ignores the eight generous subsidy programs the hotel is receiving, at a cost of over $15 million. Remember, the election concerns only a ninth program.

Finally, Voting No helps protect the principle that taxation should be for public purposes, not for private gain.

More information may be found at dtwichita.com.

Specifically, a page on the city’s website states: “Developers would be allowed to collect the rebate for 15 years for costs associated with redeveloping the hotel.”

An informational sheet also on the city’s website says much the same, claiming that the purpose of the guest tax rebate is to “reimburse them for costs associated with redeveloping the hotel.”

Many city programs, such as TIF and CID, have specified, allowable uses for the funds provided by these incentive programs. But this guest tax rebate program does not. When the city makes these claims regarding the use of the guest tax, it makes it sound almost benign. Voters might feel persuaded to vote in favor of the rebate program using a reason that doesn’t exist in fact or in contract.

The guest tax is mentioned on pages 22, 25, 27, 81, 82, 95, and 98 of the agenda packet for the September 13, 2001 city council meeting. The packet includes the actual agreement between the city and the Ambassador Hotel development team.

None of the references to the guest tax rebate say anything about how the money may be used.

I asked the city about this, as to whether the city was adding extra meaning to the guest tax rebate that was not specified in the contract between the city and the hotel developers.

A response from city attorney Gary Rebenstorf disagreed with my contention. Rebenstorf wrote “The explanation you question is a factual statement and accurately reflects the purpose of the rebated taxes to help with costs associated with redeveloping the hotel. The development agreement, which details the development project, provides for the incentive. The guest tax rebates will provide operating cost relief with added cash flow to increase the developer’s capacity to carry more private debt and/or equity and thus cover costs associated with redevelopment of the hotel.”

But you be the judge. Is the guest tax rebate necessary, and will it be used for the purposes mentioned in city attorney Rebenstorf’s statement?

There’s no contract that requires the hotel developers to do so.

Furthermore, the hotel developers have said the hotel will open even if the guest tax rebate measure does not pass in the February 28th election.

The guest tax measure is more properly viewed as a ninth potential layer of taxpayer-funded government subsidy provided for this hotel. Eight layers are already in place and will not be affected by the outcome of the election.

It is only the ninth layer that is in question — a ninth layer that is unnecessary, and that goes directly to the developer’s pockets, despite the claims of the city’s attorney.

I believe there’s a technical business and legal term for that: gravy.

At issue is a page at WDDC’s website at downtownwichita.org. The page encourages Wichitans to vote yes in the special February 28th city election regarding a guest tax rebate program for the Ambassador Hotel.

Besides encouraging a yes vote, the page holds a link to the campaign website that supports the “Vote Yes” side. The page also holds a link to that campaign’s television commercial on YouTube.

While the WDDC presents itself as a non-profit organization that is independent of the City of Wichita, it receives at least 95 percent of its revenue from city property taxes, according to its most recent IRS Form 990. While it appears Kansas has no statutes or court cases prohibiting the use of public funds for electioneering, there are at least two Kansas Attorney General opinions on this topic.

One, opinion 93-125, states in its synopsis: “The public purpose doctrine does not encompass the use of public funds to promote or advocate a governing body’s position on a matter which is before the electorate. However, public funds may be expended to educate and inform regarding issues to be voted upon by the electorate.”

The “governing body” in this case would be the Wichita City Council, which voted to pass the guest tax measure that is the subject of the election. The expenditure of public funds is through the WDDC.

While in the past some governing bodies have spent taxpayer funds to present information about ballot measures, this is not the case with the WDDC. It is explicitly campaigning in favor of the issue.

A more recent Kansas Attorney General opinion, 2001-13, holds this language: “While the Kansas appellate courts have not directly addressed the issue of whether public funds can be used to promote a position during an election, there are a number of cases from other jurisdictions that conclude that a public entity cannot do so.”

The opinion cites a court case: “Underlying this uniform judicial reluctance to sanction the use of public funds for election campaigns rests an implicit recognition that such expenditures raise potentially serious constitutional questions. A fundamental precept of this nation’s democratic electoral process is that the government may not ‘take sides’ in election contests or bestow an unfair advantage on one of several competing factions.”

The opinion reaffirms 93-125, stating: “In Attorney General Opinion No. 93-125, Attorney General Robert T. Stephan concluded that public funds may not be used to promote or advocate a city governing body’s position on a matter that is before the electorate.”

Bob Weeks, who is chair of a campaign group taking the “Vote No” side in the February 28th election, has asked WDDC to remove the campaign material. In the alternative, he has asked that the “Vote No” campaign be allowed to add material and links to the page.

Weeks also said that he suspects WDDC will contend that it is not spending public funds to campaign in favor of the “Vote Yes” side, despite the fact that over 95 percent of its revenue is derived from public taxation.

The subject of the election is a Wichita city charter ordinance that rebates 75 percent of the Ambassador Hotel’s guest tax collections back to the hotel’s owner. A yes vote means you agree with this allocation of the taxes the hotel collects. A no vote means you disagree, and would rather see the hotel’s guest tax collections handled in the usual manner — funding Wichita’s convention and tourism promotions, and debt service, maintenance, and updates of Century II.

Like the first mailer sent by Moving Wichita Forward, it pays to examine the claims carefully.

For example, the front of the mailer shows a sign reading “Going Out of Business” with a caption nearby reading “If you vote NO.” The implication is that a no vote is bad for business, and will cause businesses to close and jobs to be lost.

The reality, however, is quite different.

First, the Ambassador Hotel developer has said that even if the “Vote No” side prevails in the February 28th election, the hotel will open, and jobs will be created. So voting no, according to the hotel developer, will not prevent jobs from being created.

Beyond that, the WSU study that the “Vote Yes” campaign relies on contains some inconvenient facts that Moving Wichita Forward leaves out. An important fact in the WSU study is the estimation that 50 percent of the Ambassador Hotel’s business will be diverted away from other Wichita hotels. As these hotels experience a drop in business due to the Ambassador Hotel opening, they may become at risk of going out of business.

Even if they stay in business, lower levels of demand for hotel rooms means it is likely that jobs will be lost at other Wichita hotels.

Here’s another claim made in the mailer: “The Ambassador Hotel project will create a total of 1,102 direct and indirect jobs, including 978 for construction and 124 for ongoing operations.”

First, remember that the developer has said the hotel will open and jobs will be created, no matter the outcome of the election.

As to the claimed creation of 978 construction jobs, here’s what the author of the WSU study said about these jobs: “It is likely that these expenditures merely support existing construction jobs.”

Supporting existing jobs is important. But that’s a lot different from creating new jobs, as Moving Wichita Forward claims.

Also, there is a question as to how many local workers are being hired for the construction jobs. The Kansas Democratic party, in support of its “Hire Kansas First Act,” has specifically criticized the Ambassador Hotel for using large numbers of out-of-state workers.

For the jobs due to ongoing operations, remember the WSU study and the 50 percent substitution factor. As the hotel draws business away from other Wichita hotels, it is very likely that jobs will be lost at these hotels.

Another claim by Moving Wichita Forward is this: “Visitors will pay through the transient occupancy tax or bed tax. The bed tax cannot be used to fund city services — it can only be used to promote the city of Wichita.”

Tax Fairness for All Wichitans has never claimed that the bed or guest tax is used to fund city services.

Instead, the purpose of that tax is to provide revenue to the city’s Convention and Tourism fund. The purpose of that fund is to support the Go Wichita Convention and Visitors Bureau, and also to support debt service, maintenance, and upgrades to Century II.

A Yes vote will drain this fund of revenue. It’s losing $2 million this year, and its balance will soon be near zero. Remember that half the Ambassador Hotel’s business — according to the WSU study — is diverted away from other Wichita hotels that presently pay guest tax to the Convention and Tourism fund.

Voting Yes on February 28th diverts future revenue away from the Convention and Tourism fund and into the pockets of one hotel developer. It is likely that Wichitans across the city will have to make up the missing revenue. That’s an unfair burden to city taxpayers, and an important reason to vote No.

Voting No protects the city’s Convention and Tourism fund and an important source of revenue for Century II.

A previous fact check of a Moving Wichita Forward mailer is at Fact checking the Wichita Ambassador Hotel campaign.

You can download a printable pdf version of the information sheet by clicking on Tax Fairness for All Wichitans Information Sheet. Or, view the document below. (Hint: Click on “Fullscreen” at the bottom of the document for a larger view.)

Tax Fairness for All Wichitans Information Sheet

Your NO vote on February 28th leaves eight government subsidy programs in place. Only one is affected.

Here are the eight programs the hotel already has in place:

• $3,325,000 in tax increment financing. This diverts money from services like police, fire, and schools to provide benefits to the developers, in this case parking for the hotel.

• $4,245,000 in city funding under the capital improvement plan (CIP), to build parking for the hotel.
• $3,800,000 in tax credits from the State of Kansas. Taxpayers across Kansas have to make up this missing revenue.
• $3,500,000 in tax credits from the U.S. government. Taxpayers across the country have to make up this missing revenue.
• $537,075 in sales tax exemptions on purchases during the construction and furnishing of the hotel. That’s missing revenue that other Kansas taxpayers have to make up.
• $60,000 per year in community improvement district (CID) sales tax. The hotel charges an extra two cents per dollar sales tax, which the state returns to the hotel.
• $127,499 per year (estimated) in rental revenue to the developers from a sweetheart lease deal.
• Participation in Wichita’s facade improvement program, which provides special assessment financing that is repaid.

All told, this project will receive $15,407,075 in taxpayer funds to get started, with additional funds provided annually.

The election on February 28 concerns one additional government subsidy program: $134,000 per year in guest taxes. A special city charter ordinance would allow the hotel to keep 75 percent of the guest tax it collects, instead of that revenue going to the city’s convention and tourism fund. This is the ordinance that is the subject of the February 28th election.

A vote of No keeps eight government subsidy programs in place. These generous taxpayer-funded programs should be enough.