Mayor: Chinese investors interested in Wichita

12/18/2013 4:52 PM

08/06/2014 11:42 AM

Chinese investors stand ready to plow money into Wichita, Mayor Carl Brewer told The Eagle on Wednesday: investing in commercial real estate, aviation businesses and – much to the mayor’s surprise – city projects like the Century II renovation or rebuild, water and sewer improvements, libraries and a new water source.

Sometime in 2014, two groups of potential Chinese investors – aviation investors and private partners with the city – will be in Wichita to examine opportunities. Then, a reciprocal trip of Wichita business people will be organized, said Brewer and Karyn Page, president of Kansas Global Trade Services.

City officials recently have been talking about the possibility of a public vote on a city sales tax next year to finance needed city projects.

Brewer offered no endorsement of the privatization idea, just surprise at the Chinese interest. He said he “has absolutely no idea whatsoever” how Wichita taxpayers would view such a move.

“I’d be very interested in seeing how your readers react to the idea,” the mayor said.

Limited early returns on the Chinese public-private partnership trial balloon weren’t positive in Wichita, and even drew a joking reference from a conservative Sedgwick County commissioner.

“I told you it was a Communist plot,” said Commissioner Richard Ranzau in jest. He has opposed county involvement in a federal sustainability grant in the past.

He said he didn’t know enough about the Chinese proposal to comment further.

“I can’t imagine that the people I represent would want to sell Wichita assets, assets that signify the city itself, to the Chinese,” council member Jeff Longwell said. “I’d be worried about when the debt comes due and losing control of the assets.”

The Chinese interest in Wichita came out of a summit attended last week by Brewer in Beijing: the U.S.-China Eco-Cities Mayoral Exchange, an energy-related sustainability summit including mayors from several American cities. The summit was originally arranged in 2008 by President George W. Bush and Chinese officials, Brewer said, and was endorsed by President Barack Obama.

They attended the summit along with Karl Zhou, the chief representative in Wichita’s Beijing aviation office. The partnership offers are proof that Wichita’s branding efforts in China – which is expanding aviation beginning in 2015 – are producing a variety of unexpected business opportunities, Page said.

City Council members said last month that the idea of a long-term sales tax increase to finance city projects was on the table, pending more public input.

The details of any prospective sales tax vote next year are unclear: There’s no consensus yet about the size of the sales tax, what it should build, how much it should raise or how long it should last before expiring. But several council members say that it is time to take the public’s temperature on the idea and the projects it could produce.

There is precedent in America for such public-foreign investor partnerships, depending on the financial form they take, said Ken Kriz, regents distinguished professor and director of the Kansas Public Finance Center at Wichita State University.

In the late 1990s, Japanese investors bought up municipal bonds to help finance prison expansions in Kentucky, Kriz said, which was a very successful partnership for the state. Such a deal carried tax breaks for investors, lessening the importance of the profit and loss statement, he said.

More recently, in 2009, the city of Chicago leased its parking meter operation to J.P. Morgan for $1.2 billion. According to Internet accounts, parking rates immediately spiraled to as high as $7 for two hours, or 28 quarters.

What would be rare, Kriz said, would be the sale of an “equity position,” or actual ownership, of city buildings or infrastructure to outside investors.

“Typically, what’s in it for cities is an infusion of capital,” he said. “Chicago shored up its budget with this.

“But the thing that makes this different is you’re talking some pretty fundamental city services. Indianapolis privatized their wastewater treatment operations, and there are companies that will run operations like that, but I haven’t heard of anything like this with drinking water systems.”

Like Longwell, Kriz said such a move raises control – and potentially security – issues, including water access at McConnell if the United States and China faced off militarily.

Contributing: Deb Gruver of the Eagle

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