TIF allows developers to freeze taxes and invest any increase in property tax value that otherwise would go toward taxes into property development instead. Essentially, TIF costs taxing districts property tax revenue. For entities that do not rely heavily on property taxes, such as cities, TIF is not a big deal. But for taxing entities that rely heavily on property taxes, such as schools, TIF can be quite detrimental. If the TIF project in Kansas City moves forward, it could drive another vote for a property tax increase, and next time, the tax increase might not be rejected.

The post Taxes And TIF In The Liberty School District appeared first on Show-Me Institute.

Blight is not benign. It can lead to eminent domain abuse. As long as it is this easy to blight a property, no home or business is safe. This is the fear of CiViC, the citizen group that has arisen in Columbia, Mo., to resist the EEZ being considered there. The group fears the city’s blight declaration will lead to eminent domain abuse.

Consider: the definition of blight for the purpose of establishing an EEZ is exactly the same as the definition of blight for statutes explicitly granting eminent domain privileges. The implication is it can be just as easy to declare blight for eminent domain as it has been to declare enhanced enterprise zones in more than a third of the state.

Clearly, it is time to reform the definition of blight and separate it from the use of eminent domain. This separation has been granted to farmland, and it should be extended to all types of property.

The post More Than A Third Of Missouri Is Blighted appeared first on Show-Me Institute.

The issue is not going away forever. The supporters are continuing their effort to cap interest rates. I admire the desire to protect borrowers from abusive lending, but there is a better way than capping interest rates.

Interest rate caps at this rate will not only prevent high interest rates; they will eliminate payday loan shops in the state. Consequently, payday borrowers will probably not be able to acquire credit.  A better way to help borrowers is to make cheaper credit available. Do something similar to what this group is doing, and donate money to banks to offset losses from high-risk, short-term loans — thereby bringing down the interest rate.

For an excellent, succinct analysis of payday loan shops and regulations, click here. For more detailed commentary on the topic, see here and here.

The post Short-Term Lending Regulations Can Do More Harm Than Good appeared first on Show-Me Institute.

More than 40 years ago, Saint Louis City set up a land bank in response to the exodus of its residents, and the vacant property they left behind. When the land bank was created, the hope was that it could return vacant property back to private, productive use.

Instead, the land bank has adopted policies which have compounded the vacancy crises. Most troubling is the land bank’s policy of giving area aldermen an inordinate amount of influence over whether someone can purchase property. Offers from residents are rejected simply because their local alderman does not express his approval of the sale.

Offers to buy vacant land bank property are often from neighborhood residents. The properties are generally in a state of disrepair, and the bidder is planning to repair the property in an attempt to make his or her neighborhood a better place to live. If the resident does not have the blessing of his local alderman, the offer is typically rejected.

Consider the case of 2925 Union, a rundown, 1-story brick building in Saint Louis that received offers from four different buyers. The Saint Louis land bank said no to all four offers. When the area alderman showed up at a land bank meeting and told the land bank to sell the property to another buyer, it did.

Tragically, this policy of deferring to area officials will be written into law if Philadelphia’s land bank ordinance is adopted. In its current form, Philadelphia’s ordinance forbids the land bank from entering into a transaction if the district council person expresses disapproval. This policy will almost certainly thwart development byresidents who do not have their councilman’s approval, even if the resident plans to put the property to productive use.

Our fear is not unfounded. This happens frequently in Saint Louis. The former deputy mayor for development told us that “the sort of working arrangement we have with the aldermen is that if they don’t want to do something, we don’t want to do it.”

In order to quickly get land back into private, productive use, a land bank should accept reasonable purchase offers, even if politicians oppose them.

Philadelphia should also heed Saint Louis’s failed attempts to hold property for future development. Show-Me Institute research revealed that between 2003 and 2010, the Saint Louis land bank rejected nearly half of all purchase offers. The most common reason for rejection was that the property was being held for future development. Unfortunately, the hoped-for future developments rarely materialize.

In Philadelphia, the land bank proposal establishes goals that may undermine efforts to return the land to productive use. The goals include otherwise laudable priorities, such as encouraging “affordable or mixed-income housing that is accessible or visitable” and “community facilities that provide needed services and enrichment opportunities; side- and rear-yards; urban agriculture; and community open space.” These goals may have the unintended consequence of providing a reason for the land bank to reject purchase offers that do not fit the land bank’s vision. Again, our fears are grounded in experience – this public policy failure has occurred repeatedly in Saint Louis.

To be clear, Saint Louis’s adverse policies are not written into law, and can be suspended at any time. Indeed, it appears that in response to the Show-Me Institute’s research the land bank bank’s rejection rate was cut nearly in half. But in Philadelphia, these poor policies will be written into law.

Bruce Stahl is a research assistant and Audrey Spalding is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Don’t Bank on It: When it Comes to Vacant Property, Learn from Saint Louis’ Failures appeared first on Show-Me Institute.

This program sounds great for property developers, but what about everyone else? Shouldn’t Saint Louis concern itself with rejuvenating the entire city, not just a few old properties? Here is an idea: eliminate the earnings tax. It would be like a tax credit for everyone. It might even attract more businesses to the city, bringing economic growth.

For Show-Me Institute material on eliminating the earnings tax, click here and here.

The post We Need Historic Tax Cuts, Not Tax Credits appeared first on Show-Me Institute.

But wait, there is more. This tax credit has the potential for $6 million in new tax credits each year, which means that Missouri revenue could fall by as much. An amount of $6 million might sound insignificant, but this year, Missouri’s 60-plus tax credit programs are expected to dig an $835 million hole in state revenue. That $6 million figure is just less than half the average redemptions per tax credit program. Combined, these programs add up. Could this tax credit be the proverbial straw that breaks the Missouri budget?

The post Does Missouri Really Need Another Tax Credit Program? appeared first on Show-Me Institute.

Last week, the Columbia City Council attempted to assuage fears of eminent domain. An advisory board:

recommended an ordinance that would safeguard against the use of eminent domain as part of the program by preventing the EEZ-related blight designation from being used to meet blight requirements for other laws.

Unfortunately, the recommendation does not provide full protection for Columbia residents. Other definitions of blight are exactly the same as the one the board used to blight half the city. What is to stop the city from blighting areas using statutes that expressly permit eminent domain?

The real problem Columbia residents face is the unconstrained use of blight. As long as the definitions of blight remain so broad, any property can be blighted and seized (except farmland). No residential or commercial property is safe. The definition of blight must be reformed.

The post What Cannot Be Blighted? appeared first on Show-Me Institute.

However, if the state is going to spend more on higher education, then it is going to have to take it from taxpayers. Taking is the opposite of giving. The state is not learning anything from charitable donors if it uses tax revenue, its primary source of funding, to increase spending on higher education. Spending other people’s money is not charity.

Let’s give credit where it is due; the editorial nicely honors those who have donated money toward the cause of helping others. For instance, it praises the generosity of folks like the late Lorene Thompson Brooks, who donated $4 million toward the “need-based scholarship program Corps of Opportunity and two athletic scholarships.” And it (rightfully) lauds the donors who gave $14.4 million in donations towards a university’s capital campaign – $4.4 million more than the hoped-for $10 million. I cannot help but wonder if these individuals would have been able to be so charitable if the state had taken more of their money.

The argument that the state should mimic the example of private donors, taken to its logical conclusion, undermines real charity. When the state spends more, taxpayers have less money to donate.

Let’s hope the state remains an environment of less taking and more giving.

The post Don’t Mistake Taking For Giving appeared first on Show-Me Institute.

“It was clear that not enough assurances could be provided to ensure the protection of the City’s residents or the City employees who were proposed to join American Water,” [Arnold Mayor Ron] Counts said in a news release on Friday afternoon.

Any city should consider the costs of a decision, and I am glad that Arnold took the time to analyze those costs before making a decision. However, I believe there are benefits which may outweigh the costs. Should the city ever again be presented with the opportunity to sell its sewers, I hope city officials will fully consider the advantages of privatization. Here are a few examples from an op-ed that I wrote on the topic, untimely published five days after the decision not to sell (untimely due to bad luck, not a lack of effort):

1. Arnold’s sewers are in dire straits. The city would face less of a financial difficulty if it relied on private capital to fund renovations and repairs.
2. Private ownership leads to more efficient uses of labor and capital. Privatization can produce savings relative to bureaucratic management.
3. The city of Arnold would obtain monetary benefits from the sale. When Florissant sold its water utility in 2002, it was able to establish a $10 million reserve fund. Arnold could use the revenue to establish its own reserve fund, pay down debt, or lower taxes.

For more Show-Me Institute commentary on privatization, click here.

The post Clutching the Sewers: The Foul Smell of a Missed Opportunity appeared first on Show-Me Institute.

First, the city could raise a large amount of money through the sale of its sewer system — possibly millions of dollars. This could be used to pay down debt, invest in needed public services, or lower taxes. The city of Florissant used the revenue from the 2002 sale of its water utility to finance several public improvements and establish a $10 million reserve fund.

Second, privatization would turn the sewers into a taxable asset. This means additional revenue for the municipality, possibly easing the tax burden on existing residents and businesses.

Third, privatization often results in lower costs, higher efficiency, and better service. For instance, Oklahoma City partnered with Veolia Water for wastewater treatment in 1984, and by 2001 had reduced treatment plant costs from $14 million to $11 million dollars. As long as efficiency gains such as those in Oklahoma City are passed on to consumers, lower costs can lead to customer savings. And although government regulations tend to erode efficiency gains over time, the immediate benefits should not be ignored. 

Make no mistake: Arnold’s wastewater system is aged and in need of extensive overhaul and repair. Privatization will not change that. Over the next few years, a significant portion of the sewer system will reach the end of its usable life. When this happens, significant costs will be incurred to renovate the system. These costs will occur whether or not the sewer system is privatized, but privatization could help keep renovation costs as low as possible. Sewer user-fees have gone up twice in the last three years – and that is with government ownership of the system. 

Private utility ownership is common throughout Missouri. In neighboring Saint Louis County, almost every resident purchases water, gas, and electricity from private companies. Although sewer privatization is less common, it is not unheard of; Missouri American Water, for instance, has several thousand sewer system customers throughout the state. 

The possibility of public repossession of the sewer system is an important option to remember. In the sale contract, Arnold can reserve the right to take the sewers back if certain standards are not met. Such a provision can protect residents from the danger of quality degradation and monopolistic fees. Another protection is the Missouri Public Service Commission, which regulates fees charged by private utility companies.

Arnold’s privatization option appears to be an opportunity for comparatively lower sewer rates and additional city revenue. The city will have more money, sewer costs will be handled more efficiently, and any concern about the quality and price of service can be addressed in the sale contract. Selling the sewers appears to be a situation where both the government and the people it serves can benefit.

Bruce Stahl is a research assistant at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Selling the Sewers: The Sweet Smell of Success appeared first on Show-Me Institute.

Central Bank has agreed to make old-fashioned signature loans (that means no collateral from the borrower) of $300 to $2,500. That’s also what payday and installment lenders do. Except Fair Community Credit will lend money for slightly longer durations and at a double-digit interest rate, not a triple-digit one. That way borrowers will have a better shot at paying off their loans, rather than defaulting.

What makes that possible is Fair Community Credit’s promise to cover any loan losses from a $200,000-plus loan guarantee pool donated by foundations and individual donors.

The market is creating relatively cheap short-term credit alternatives to payday loan shops. It is incredible to watch society tackle perceived problems through voluntary interaction without the forceful hand of the state. It will be intriguing to see the results of this venture.

A hat tip to John Combest for the link.

The post Can The Market Provide Cheaper Short-Term Loans? appeared first on Show-Me Institute.

The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune. . . . Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

Although Cleveland was talking about federal aid during a drought, the lesson is applicable to our current situation: Charity should be preferred over taxes. After all, taxes do not lend themselves to a “kindly sentiment.” And is charity such a radical option? Don’t universities already receive such donations? It seems that if the state believes citizens want to support universities, the government should let the people voluntarily display their support.

But suppose charity falls short – what then? Tuition increases should be considered. After all, let’s not forget that students are the ones choosing to attend college. When the price of education goes up, there is nothing wrong with charging a higher fee. And for those who cannot afford the higher fee, there are alternatives: scholarships and student loans. If both those options do not work, there is the alternative of a less costly education at a community college. Finally, if all else fails, college can be deferred. I have known several individuals who have put off college in order to accumulate savings for it. All options should be exhausted before reaching into the public purse.

The post Promote Kindness, Not Taxes appeared first on Show-Me Institute.

And why 2,500 feet? Who came up with that number? This article sites the possibility of crime and lower property values around clusters of these businesses, but half a mile seems a little excessive. I would hardly call it a cluster if the businesses located just one block from each other, but even one block is an arbitrary number.

As you may recall from the mantra “location, location, location,” the location of a business can drastically affect profitability. The proposed legislation may make it impossible for more than one loan shop to take advantage of a good location. Since when is that reasonable? Businesses locate in a particular area for a reason – and unfortunately for the affected businesses, the reason they locate to a particular area may be the county’s legislation dictating the available options.

Additionally, why is the government singling out pawnbrokers and short-term loan shops? What next? The proximity of ATMs? When will the regulations stop?

For more Show-Me Institute payday loan material, check out this and this, as well as this awesome video.

The post Musings On Payday Loans And Pawn Shops In Jackson County appeared first on Show-Me Institute.

Tuesday’s vote is a wake-up call: reform TIF.

The post We Need TIF Reform, Not Higher Taxes appeared first on Show-Me Institute.

There’s no doubt the governor grasps the notion that tax incentives can promote investment — but when will he realize that cutting taxes may have the same beneficial effects? Tax cuts may attract more investment to Missouri, promote job growth, and incentivize business expansions — three things for which Nixon already credits tax incentives. Tax cuts may even make business expansions easier; there won’t be all the red tape that goes along with obtaining government tax incentives.

It’s not as if tax incentives always work. Remember Mamtek? Hundreds of jobs were promised, but now all the state has to show for it are an SEC investigation and an unhappy legislature. Show-Me Institute Policy Analyst Audrey Spalding has already written on this and other tax incentive blunders. Because tax cuts won’t be tied to firm-specific investment and job creation, such government failures could become a thing of the past.

The governor needs to stop favoring focused tax incentives and start favoring broad tax cuts.

The post The Road To Prosperity Is Paved With . . . State Tax Incentives? appeared first on Show-Me Institute.

From the Liberty Tribune: “The tax rate the district considers necessary would be significantly lower if not for TIF,” Superintendent Mike Brewer said.

Frankly, I’m inclined to agree with him.

TIF allows developers to freeze taxes at a base level and invest any increase in property tax value that otherwise would go toward taxes into developing the property, for up to 23 years. Essentially, TIF allows newly-developed property to escape the higher taxes that higher property values normally entail. If a residential developer acquires approval of a TIF plan from the city, new homeowners can send their kids to public schools but the taxes collected will go towards paying off the debt for the development instead of financing their children’s education. A good deal if you can get away with it.

Missouri law governing the use of TIF underrepresents schools and grants cities a majority on commissions authorizing TIF use. Considering the 43-cent tax increase that Liberty School District officials have placed on the ballot, it seems schools are feeling financial pressure from TIF and that property owners are possibly facing higher taxes. For the sake of lower taxes and better education, TIF law should be revisited.

The post Unnecessary Taxes appeared first on Show-Me Institute.

Did you know that since the year 2000, more than $167 million in economic development tax credits have been issued to those 15 blocks? Or that $17 million in state and federal funds have been spent there? Ignoring any other incentives that may have been awarded, it seems that nearly $185 million in public funds have been spent developing 15 city blocks. Was it all really worth that much?

The APA credits the Historic Rehabilitation tax credit, authorized in 1998, for giving Washington Avenue new life — but my colleague, Show-Me Institute Policy Analyst David Stokes, says the street was awesome before then. He should know; he lived there.

For $185 million, whatever urban planners have accomplished, they have accomplished at a very high cost to Missouri taxpayers — most of whom will never visit Washington Avenue. Perhaps urban planners should stop spending taxpayer money and let private businesses do the planning. After all, there are plenty of great, popular streets that the government never planned nor sponsored.

For more Show-Me Daily posts on Great Streets in America, click here and here.

The post A Hundred Million Here, a Hundred Million There… appeared first on Show-Me Institute.

Click picture to see Patrick Ishmael’s recent post on the DED and tax credits.

Every dot represents an address in Saint Louis that has been issued Missouri Department of Economic Development (DED) tax credits since 1999. The larger the dot, the greater the tax credit. Contrary to the misconception of many, these tax credits represent real taxpayer money: money that could have been used for other government functions, but wasn’t.

Let me give an example of how this all works with a quick story.

When I was growing up, I mowed my neighbors’ lawns for extra money. Economically speaking, this was a mutually beneficial exchange: I received $15, and my neighbor received a beautiful, cut lawn.

But now, let’s instead say my neighbor would not pay me more than $10, and I would not work for less than $15. I wouldn’t cut the lawn.

But what if the government promised me a transferable or refundable $5 tax credit for every lawn I cut – that is, a stipend against my taxes that I could redeem for cash or at near-face value to someone with a greater tax burden? I would cut the lawn because I’d effectively be receiving $15 for the work – $10 from the private sector and $5 from the government.

Yet how equitable is a system like that? Should the government give me tax credits to mow a neighbor’s lawn? If not, why not? The simplest response people have to this question is that in private transactions, parties negotiate for services. One way or another, the lawn gets cut; government distortion of the lawn-cutting market is unnecessary. Giving $5 to those who mow lawns is $5 less for roads, disaster relief, and other necessary government functions.

And yet, these market distortions nonetheless happen, even in generally no-nonsense places like the Show-Me State. More than $1 billion in tax credits have gone toward projects at about 2,200 Saint Louis City addresses, representing more than 45 percent of all the tax credits that the DED issued to the entire state. The problem? Saint Louis only makes up 5 percent of Missouri’s population.

A forthcoming case study will examine this issue further.

The post A Reminder: Tax Credits Are Not Free Money appeared first on Show-Me Institute.

If approved, the guidelines would require even a pickup truck driver hauling a single cow to a local sale barn to have a federal medical card certified by a physician, to keep a detailed maintenance log book and possibly to have a commercial driver’s license.

The only major difference I can see between you taking your pet to a check-up and a farmer taking his cow to a sales barn is the farmer intends to sell the cow. Why is the government considering such stringent regulations? From the same article:

Federal regulators argue that because the grain or livestock that farmers are hauling could eventually end up across state lines, the farmer’s intent is interstate commerce and therefore, for uniformity, they should be subject to commercial transit regulations.

The federal government wants to bring agricultural transport into the category of commercial transportation on the odd chance that agricultural products will cross state lines. Yet history has demonstrated that agricultural transport works quite fine as is.

This is a case of government growth with no benefit to the citizens. Missouri would be better off without it.

The post South of the Border appeared first on Show-Me Institute.

One of those investors also went a bit further and loaned us funds against a film incentive program from Missouri that allowed a 50% tax credit for every dime we spent in their State. It worked out quite well and I would love to do that again! Felt like winning the lottery!

The movie, Albino Farm, received over $193,000 in tax credits. Enjoy the trailer — your tax dollars helped pay for it.

The post “Felt Like Winning the Lottery!” appeared first on Show-Me Institute.