The Post-Dispatch recently reported that the City of Maryland Heights is suing the St. Louis County TIF commission. Back in January, the TIF commission voted down a proposal to use upwards of $150 million in subsidies to help develop 2,000 acres in a floodplain in Maryland Heights. As Patrick Tuohey then noted, this was finally something to cheer about regarding economic development policy.

But the powers that be don’t appear to be happy with the common-sense decision that had been rendered. So in response, they’re filing suit because of a technicality: The state law dictating how the TIF commission could be set up no longer applies because it governs counties with at least one million people. St. Louis County no longer has a population over one million, so the city claims that the commission’s decision to decline the subsidy was illegal.

If you’re head is spinning, don’t be alarmed—you’re not the only one.

First off, the lawsuit seems petty. I mean, come on. I’m not saying the lawsuit is frivolous, or of no consequence—it clearly is—but that the city would resort to such a move on behalf of a developer is sad. Our government is supposed to be better than this.

Secondly, that the city would so brazenly cast aside the commission’s decision is especially disappointing. The commission’s job is to evaluate TIF plans and then approve or reject them based on the merits of a proposed development. In this case the commission had at least two good reasons to reject the development. First, the area is a floodplain, and so, developing it would cause significant environmental harm. Second, taxpayers shouldn’t be burdened with the costs of an especially risky development. How could city officials disagree with this? Why do they think developing in a floodplain with taxpayer money is a good idea? Why would they go through the trouble of a court battle to develop a floodplain?

The city will probably respond to these sorts of questions with promises of economic growth and boosted sales tax revenues for the city. But these supposed benefits of TIF rarely materialize. And when they do, they often come at the expense of other cities in the area.

Time will tell whether the commission was formed illegally or not, and whether its recommendation is valid. But even if the city wins in the courtroom, should the TIF proposal move ahead, city officials will have lost another battle: the battle for common sense and fiscal responsibility.

The post Government Sues Government over Government’s Common-Sense Decision appeared first on Show-Me Institute.

Skeptics of a massive taxpayer-subsidized redevelopment project in University City were right to trust their guts. While the City’s website says that “The City will not use eminent domain under the tax-increment financing (TIF) law to condemn owner-occupied residential property,” now it sounds as if that might be an option. In a recent interview, City Manager Gregory Rose said “there may be an option that the developer says ‘we understand what council’s position has been regarding the use of eminent domain but we’d like you to take a look at this’ . . . and so the council will end up making that decision at that time.”

Why might eminent domain be on the table now? Well, my gut is telling me this: City officials have a lot to gain (in terms of sales tax revenue) from the development going through, and now, given that some homeowners don’t want to sell for the price being offered to them by the developer, city officials might be starting to worry. And if they have convinced themselves that this development must happen, no matter the cost to taxpayers, then kicking property owners out of their homes might be a price they are willing to pay.

This is worrisome for several reasons. First, the economic renaissance promised by development proponents, which is the main justification for the project, is unlikely to occur. Unfortunately, TIF—the subsidy mechanism the development most heavily relies on—just hasn’t been shown to increase surrounding property values. Trust me, a part of me wishes TIF did this, as I live just a few minutes from the redevelopment area. Unfortunately as the economic research suggests, TIF projects don’t make the neighborhoods surrounding them more valuable. If the ends justifying a blunt tool like eminent domain aren’t likely to materialize, we might not want to incur the costs of using that tool.

Second and most important is the fact that property owners—especially owner-occupied residential property owners—simply shouldn’t be forced out of their homes for the benefit of a private developer. Perhaps certain public projects, such as interstates and railroads, can justify the coercive removal of property owners from their property, but it is far from clear that homeowners should be ousted from their homes so that a politically-favored big-box store can make a nice profit. We’ve seen how these things can go.

But if you wonder why you, perhaps someone living far away from University City, should care about this, just keep in mind that your local government body is populated by the same sorts of people that populate University City government. If we are to learn anything from public choice theory, it’s that institutions—such as local governments—have values and goals of their own, and that the people behind local institutions are as fallible and greedy as everyone else. This isn’t to cast a blanket of doubt on all institutions, but rather to make clear that the violation of property rights in some areas of Missouri is a threat to the property rights everyone in the state.

In the end, University City officials should get over their infatuation with the I-170 & Olive redevelopment and abandon their apparent “any means necessary” strategy for ensuring its materialization. The threat of use of eminent domain is politically and morally disturbing, and would signal to University City residents and others that their homes and lives are for sale, so long as city hall thinks that the price is right. 

The post Is U City Considering Eminent Domain After All? appeared first on Show-Me Institute.

The head of the Loop Trolley Company, John Meyer, thinks that if policymakers don’t bail out the vintage streetcar line, bad things will happen. I look at the trolley’s situation and think that if  policymakers do bail out the line, bad things will happen.

Here’s what Meyer recently claimed in a letter to local leaders: “Inaction [in regards to bailing the trolley out again] will result inevitably in additional burdens on St. Louis taxpayers, the loss of federal funds, the destruction of a transit asset and long-term harm to the reputation of the St. Louis region.”  

Let’s consider these claims in turn.

How is it that should taxpayers not bail out the trolley, they will come to shoulder additional burdens? Perhaps Meyer thinks that the trolley tracks will have to be dealt with in some way or another, eventually, and taxpayers will have to fund that construction. Maybe Meyer is right, but that doesn’t mean bailing the trolley out is less of a burden than allowing it to languish. Moreover, without any more detail, I’m just not convinced that leaving the trolley to languish poses any additional burden to taxpayers; it costs nothing for the tracks to stay in the street.

What about the loss of federal funds? Meyer could be right about this; should the trolley shut down for good, St. Louis could lose out on future grants. But it isn’t clear that this is an unfair result. All the federal money St. Louis got to build the trolley could have gone to other, more deserving projects. There is a worthwhile project that didn’t get funding because St. Louis somehow got $34 million in federal dollars to build a novelty. One of the best ways to reduce poor spending like this is to punish those who encouraged it. (Of course, the federal granting agencies should have known better, too.) Now, if federal agencies pursue a lawsuit to recover some of the grant used to build the trolley, this money would come from agencies supported by local taxpayers. While that’s a real cost, the money would go back to federal taxpayers, some of which are, well, local taxpayers.

Meyer also claims that failing to revive the trolley will destroy a transit asset. While letting the trolley system collect dust isn’t the same as blowing it up, this is more or less true. But I’d quibble with one thing: the trolley is hardly an asset. Assets tend to be worth something, and it isn’t clear the Loop Trolley is worth much more than scrap metal. If the trolley were such an important regional asset, trolley advocates wouldn’t be begging taxpayers, again, for a bailout.

The final claim Meyer makes is that a non-operating trolley will mar the region’s reputation. This is true to a degree, but not the whole truth. The full truth is that the trolley, whether operating or not, is damaging to the region’s reputation. The trolley carries very few passengers, breaks down all the time, and is, well, pretty much a joke. How is having the trolley clanking around the loop any less damaging than having it sit quietly in a warehouse? What’s done is done.

It’s understandable that trolley proponents and employees want the line to get bailed out. But the data are clear—very few people think it’s worthwhile to ride the trolley—and there’s only one serious path forward. Here’s a hint: It doesn’t include any more taxpayer money.    

The post Trolley Delusions, or: How to Fill the Abyss with Other People’s Money appeared first on Show-Me Institute.

Listen to the segment here.

The post Graham Renz on the Marc Cox Morning Show appeared first on Show-Me Institute.

We weren’t the only ones present to speak though. A development official from the City of St. Charles also came prepared to present his viewpoint, and he was generally in favor of CIDs. But the arguments he marshaled were so unpersuasive I didn’t know if he took the whole hearing thing seriously or not.

Here, in outline, is what he said in support of allowing CIDs to collect sales taxes without notification to taxpayers.

“CIDs have been used to subsidize projects that many felt were important.”

The basic idea is that CIDs can make certain developments feasible, so they’re good, and we shouldn’t require merchants to post placards notifying shoppers that they’ll be subject to an extra sales tax.

But, of course, whether or not CIDs are powerful development tools has no clear logical connection to whether taxpayers should be given information on their existence. Grand theft auto is a powerful method for obtaining vehicles, and has been used to obtain vehicles that many couldn’t afford to purchase on their own. But this doesn’t mean grand theft auto is permissible or prudent, and it doesn’t bear on whether or not would-be victims of grand theft auto should know about the chances of losing their cars. The bottom line is that the efficacy of a development tool isn’t germane to the question of whether or not taxpayers should know about it.

“If merchants are required to notify shoppers of additional CID taxes, it will make it too hard for developers to find tenants.”

If I apply for a CID in order to build a shopping center, the ordinance being considered would require that I tell would-be tenants of my property that they must post a sign that says something to the effect of “You’re paying extra taxes here.” The concern is that this would dissuade shoppers from patronizing a business, and so would cripple developers’ ability to land tenants for their properties. And if there are no tenants to sign leases, then there just won’t be any new development.

Here is what such an argument boils down to: Letting taxpayers know what tax rate they’re subject to is (allegedly) bad for business, and since we want business to do well, we shouldn’t let taxpayers know what tax rate they’re subject to.

But it just isn’t the job of taxpayers to make life easy for businesses. And it certainly is government’s job to make sure taxpayers are being treated fairly and not being taken advantage of. The importance of honesty isn’t diminished by the profit one can make through deceit. Moreover, developers using another type of special taxing district known as a transportation development district are already required to post additional sales tax notices (though they often fail to do so), and they don’t seem to have any trouble getting tenants. What’s different about CIDs that would make such notices overly burdensome?

It takes some chutzpah to argue that it’s better for everyone if you are allowed to tax people without their knowledge.  Instead of being upfront and simply charging tenants an amount that makes the investment in a property worthwhile, developers are going through the rigmarole of forming a district and collecting a tax. It’s easy to see why a developer would want to have the government collect a tax from consumers and pass it along to the developer as profit. What’s harder to understand is why the government would want to play along.

The post How Not to Argue for Special Taxing Districts appeared first on Show-Me Institute.

As some readers will be aware of by now, the 8^th wonder of the world, the Delmar Loop Trolley, is in a financial pickle. The head of the company said that it needs $200,000 by next month to continue operations through the year, and $500,000 more to operate in 2020. One could call this a shocking policy failure, but I think many of us saw this coming. Whether it’s putting together or working within a reasonable budget, finishing a project on time or with appropriate permitting, or coming even remotely close to meeting ridership projections, the trolley leadership has proven time and time again that it cannot be trusted by policymakers or taxpayers.

(You should know that when your plan to boost ridership is to have stand-up comedians ride the rails, your project is absurd.)

But what I do find shocking this time around is the total lack of accountability exhibited by trolley leadership. They claim the trolley’s failure should be chalked up to delays in getting additional trolley cars on the tracks. So, the firm renovating the trolley cars is responsible for the delays, and thus responsible for the trolley’s laughable performance.

But this finger-pointing is all too easy to see through. First, the firm renovating the cars is accountable to the trolley company, its customer, and so, the trolley company should be compensated for the delayed product delivery. If the trolley company cannot be compensated by a contracted vendor for its failure to deliver, then the trolley company simply entered a bad agreement.

Second, it seems there are a number of other and far more reasonable explanations for the trolley’s failure. For one, the project was delayed for years and developed a sort of toxicity, and so would-be riders just gave up on ever riding. When you fail to deliver half a dozen times, people tend to just give up on you. Another explanation is that the trolley just doesn’t provide a valuable service, and so people just don’t ride it. Who wants to pay to sit on a glorified bus that takes you down the loop slower than the pace of an average pedestrian? And how many people do you honestly think are going to drive to the loop just to pay to take the trolley to the history museum? I’ll let you in on a little secret: not very many! (I am in the loop every day, and the most common number of riders I see is zero.)    

But what about the $200–300 million in development the trolley has apparently spurred? Doesn’t that make the project worthwhile? Well, no. For one, most if not all of the recent development around the trolley has been subsidized. Who can tell if it was the trolley or the subsidies that spurred the development? Two, the loop is hot real estate, and so I think the strong market, rather than the presence of a needless novelty, is what spurred development. Three, the only reason for thinking the trolley spurred this development is that it occurred after the trolley was in place. But temporal succession is not identical to causation. Moreover, there is little evidence in general to suggest that vintage streetcars or streetcars in general spur investment.

So what should policymakers do at this point? Well, they needn’t rip up the tracks and say goodbye to the trolley forever. Here is a modest proposal: Don’t bail out the trolley company again. Force its leadership to find the funding on its own. In the meantime, shut the trolley down if need be. The more the trolley company is responsible for itself, the better it will be. And, let’s be honest; it won’t be leaving many riders stranded. 

The post If You Love it, Let it Go appeared first on Show-Me Institute.

The sales tax rate in St. Louis is now one of the highest in the nation, only behind places like Chicago and Seattle. Currently, the base sales tax rate in the City of St. Louis sits at 9.679%. So, when you shop, you’re paying nearly 10% extra in taxes, and when you shop in one of the many areas with overlapping special taxing districts, you’re paying close to 12%. The rate is high relative to other cities, and it is high absolutely—it is pretty darn expensive to spend your own money in the Arch City.

The chart below depicts the base sales tax rate in St. Louis over the past 20 years. Slowly and steadily (and sometimes in quick bursts), it has been on the rise.

Source: Missouri Department of Revenue, Sales/Use Tax Rate Tables

Recent increases are due to special sales taxes for additional public safety funding and expanded economic development initiatives (like the north–south MetroLink expansion, which is unlikely to spur any development).

As I’ve written before, with each increase in the sales tax rate, policymakers will have fewer and fewer chances to go to taxpayers for projects that truly need funding. St. Louis may soon reach a point where the public is simply unwilling to cough up more of its money, however pressing the public need. Some residents and businesses may just call it quits and move elsewhere.

Moreover, we should all ask ourselves whether we’re getting the government we’re paying for. When the city has basic infrastructure woes (you should see the road I drive on every day for work), has trouble keeping refuse trucks running, and seems most occupied with giving away subsidies, it is hard to believe St. Louis government is worth nearly 10 cents on the dollar (in addition to the numerous other taxes it levies). 

Policymakers, like the rest of us, could always use extra cash. But there is a point at which we must make do with what we have. St. Louis officials should begin tightening their belts instead of asking for more, just like the average taxpayer must.

The post St. Louis’s Ridiculously High Sales Taxes appeared first on Show-Me Institute.

Real estate developers are indeed fraught characters in city life. . . . And the history of American development certainly includes shady land speculation schemes, racist intentions and bloated egos. . . . But at its best, development has also meant progress in America. And that possibility has been banished from recent debate.

The worry is that “developer” has become a dirty word, and that our mostly negative perception of developers and development is off-base. While urban politics demonizes developers, we ought to be grateful there are people who work to develop and build our cities, the thinking goes.

This assessment is both right and wrong.

It’s right inasmuch as developers shouldn’t be demonized for providing what consumers demand through market forces. People need housing and space for their businesses, and developers provide just that. Just as we shouldn’t lambast farmers and grocers for “profiting off” our hunger, we shouldn’t bemoan developers for profiting off of our need for homes and office towers. (Indeed, we all profit off of someone else’s needs through the exchange of goods and services for money.) As Adam Smith remarked in his Wealth of Nations, it is incredible that, without any sort of orchestration, the market is full of goods and services we need and want. What Smith said about butchers, bakers, and brewers is equally true of developers.

But the Times article also misses the mark in some ways. While there is nothing wrong with providing housing by chasing profits, there is something wrong with advocating that the public subsidize projects for private gain. Developers don’t invest just their own money; they often invest taxpayer money as well. Through subsidy programs like tax-increment financing, abatements, and special taxing districts, developers reduce their private risk. And since policymakers are often generous with these subsidies, for some developers it pays—and pays very well—to chase down subsidies and ensure they continue to flow for years to come.

The economist William Baumol, in his famous paper “Entrepreneurship: Productive, Unproductive, and Destructive,” argues that market agents are after profit, and they will try to get it through productive means or unproductive means. He thought that when governments have the power to pick winners and losers in the economy, entrepreneurs will chase government favor instead of working to meet consumer demand competitively. Many developers, like many market agents, have become infatuated with government handouts, and that is deserving of criticism.    

The post Why “Developer” Is and Is Not a Dirty Word appeared first on Show-Me Institute.

Every quarter, the Missouri Department of Revenue releases sales tax rates for all jurisdictions across the state. Because of the growing number of special taxing districts, such as community improvement districts (CID) and transportation development districts (TDD), sales tax rates have been shooting through the roof.

Data for the latest quarter (July-September) pegs Missouri’s average sales tax rate at 7.71%. While that doesn’t sound particularly high, it is important to note two things. First, at this time in 2017, the state average rate was 7.42%. For a statewide average, that is a significant jump for such a short period of time.

Source: Missouri Department of Revenue, Sales/Use Tax Rate Tables, numerous years

Second, these figures represent averages: many sales tax jurisdictions have rates higher than even 10% or 11%. For example, in Kansas City where the streetcar TDD overlaps with the Convention Hotel and Performing Arts CIDs, the total sales tax rate is 11.6%. In St. Louis the rates reach 11.68% in places like Ballpark Village and Washington Avenue. What the statewide average does a good job of tracking is the impact of additional special taxes in the hundreds of CIDs and TDDs across the state. If the addition of CIDs and TDDscauses such significant jumps in the tax climate of the state as a whole, that means these taxing districts are not just nickel and diming taxpayers—they are significantly changing Missouri’s tax climate.

In a recent paper, Patrick Tuohey and I discuss reforms to help curb the growth of special taxing districts. Some reforms have proposed a sales tax rate ceiling, and while they would help, they wouldn’t prevent taxpayer abuse in areas with lower sales tax rates than the proposed ceiling. This much is clear: the longer policymakers take to address the state’s out-of-control sales tax problem, the worse it is going to be. The time to act is now. 

The post Up and Up: Sales Taxes Across the State appeared first on Show-Me Institute.

Things are no different in government. Analysts at the Show-Me Institute spend a lot of time combing through reports and audits, and as I looked through the state auditor’s 50 or so reports for this year, I found a whole lot of dust bunnies—nasty, government failure dust bunnies.

Of the reports that received a judgment (about half of the reports are follow-ups or monthly postings without a judgment), half enjoyed “excellent” and “good” results, while the other half received “fair” and “poor” marks. In short, about 50% of the public entities audited weren’t doing a great job by any stretch of the imagination. 

For context, here is how the SAO defines “Fair” and “Poor”:

Fair: The audit results indicate this entity needs to improve operations in several areas. The report contains several findings, or one or more findings that require management’s immediate attention, and/or the entity has indicated several recommendations will not be implemented. In addition, if applicable, several prior recommendations have not been implemented.

Poor: The audit results indicate this entity needs to significantly improve operations. The report contains numerous findings that require management’s immediate attention, and/or the entity has indicated most recommendations will not be implemented. In addition, if applicable, most prior recommendations have not been implemented.

Now, this all is a little abstract, so let’s consider some examples.

The City of Hamilton, the subject of SAO Report No. 2019-007, received a rating of “Fair.” For what exactly? Well, among other things, for lacking a road maintenance plan, for failing to stop conflicts of interest, for not following basic payment procedures, for not complying with Missouri’s Sunshine Law, for not giving the public library its money on time, and for failing to put its budget together in a proper way. So, while ‘fair’ might not sound so terrible, it is a long shot from being acceptable.

More troubling reports come from places like the City of Miller and Madison County. 

In Miller, west of Springfield, the city raised taxes for water treatment services but still can’t pay its bills, and has violated the state’s Clean Water Act. Basic timesheet procedures weren’t followed, city credit cards were not adequately tracked, the city’s budget wasn’t put together according to the law and was inaccurate, and the city hasn’t complied with the Sunshine Law. Most troubling is that the former police used city credit cards for personal expenses and kept his brother on the city’s payroll while he was working another job.

In Madison County, in southeast Missouri, where an investigation is ongoing, it appears taxpayers would pay their property taxes and then records of the payment would be deleted from county systems. The money from these transactions appears to have never made it to the bank. In short, it looks as if taxpayer money was being flat out stolen. Bad government? I think so.

With 114 counties, nearly 1,000 cities and villages, and thousands of other public entities across the state, bad government is a constant and ubiquitous problem. A liberty-minded skepticism of government seems warranted when reports like these make news. 

The post Show-Me . . . Lots of Bad Government? appeared first on Show-Me Institute.

Because of special taxing districts like community improvement districts (CID) and transportation development districts (TDD), many shoppers pay up to an extra two percent in sales taxes.

Over the past few years, my colleagues and I have written extensively about CIDs, TDDs, and other special districts. In short, most special districts are created by developers to funnel additional sales tax revenues into developments. Most shoppers don’t know about the taxes because they never voted on them and because many businesses in CIDs and TDDs don’t post statutorily required notices.

In a recent paper, Patrick Tuohey and I detailed the growth of these districts and their tax collections. But more recent data on last year’s collections provide even more evidence that CIDs and TDDs have gotten out of control.

The graphs below depict revenues for CIDs and TDDs. From 2017 to 2018. Statewide CID revenues jumped nearly $10.7 million, the single highest year-to-year increase in Missouri’s CID history. Over the same period, TDD revenues jumped a more modest $2.5 million, but are nonetheless at their highest levels to date, at $73.5 million.

In our paper, Patrick and I detail reforms to help curb CID and TDD abuse. I would encourage readers to learn more about them here. Policymakers should recognize the sizable burden these districts place on taxpayers and enact reform sooner rather than later.

The post CID, TDD Collections Jump by More than $13 Million appeared first on Show-Me Institute.

Senate Bill 196 creates a fund to allow private donors to help defray the costs of building a 144-mile long hiking and biking trail, which runs east–west south of the Katy Trail. The bill was needed because, while the trail is a priority for policymakers, current state funding isn’t enough to acquire and construct the trail.

This is good news for Missourians and, in particular, outdoor-recreation enthusiasts. It’s also good news for liberty-minded folks who favor funding infrastructure and other public goods privately (and voluntarily). Should negotiations between the current landowner (a railroad) and the state go well, and should enough money be raised, Missouri could have one of the longer continuous trails around.   

While this isn’t the first privately-funded trail project in the state (there are some very nice private biking trails and parks, especially this one in Springfield), it is exciting to see the infrastructure in place to make such a large-scale project happen. Congratulations to policymakers for doing what makes entirely too much sense: creating the opportunity for enthusiasts to give to projects they’re passionate about.

The post How Strange: Private Money for Public Good appeared first on Show-Me Institute.

Proponents claim the current stadium deal, negotiated between the prospective team’s owners and city officials, is far superior to the previous proposal to lure the MLS to St. Louis. While this is true, the deal is still not all that great.

Before explaining why, let me reiterate that the current deal to bring the MLS to St. Louis is better than the 2017 effort. That effort (led by a different ownership group), which lost at the polls by a narrow margin, pushed intelligence-insulting stadium benefits, would have cost taxpayers more than $100 million, and seemed generally dishonest. Along with the St. Louis Post-Dispatch’s Dave Nicklaus, I’m glad voters rejected that effort. Moreover, I’m glad the current effort has engaged in relatively little economic pandering (save this (p. 1), and this).  

So what of the new ownership group’s current proposal?

The current plan, approved by the Board of Aldermen late last year, includes the following public incentives:

·         Free use of the land the stadium will be built on (the land will be purchased by the city from the Missouri Highway and Transportation Committee).

·         A complete abatement of property taxes on the stadium and the land it sits on (since the property will be owned by the city).

·         A 3 percent sales tax, generated by three distinct and overlapping special taxing districts, which will be levied on stadium-goers and may go toward stadium funding.

·         A reduction in the city’s 5 percent amusement tax for soccer ticket sales, bringing it to 2.5 percent, and the squirreling away of that 2.5 percent for future stadium improvements.

·         A complete sales tax exemption on materials used to construct the stadium.

Overall, the above incentives are valued at just shy of $40 million.

So what makes this plan better than the previous one?

First, the amount of incentives is significantly lower; the total incentives offered in the previous proposal totaled more than $120 million. Second, some of the incentives in the current proposal act like user fees, impacting only those who visit the stadium. The previous proposal would have relied on use taxes levied on city businesses, and ultimately would have been passed on to ordinary consumers, whether they visited the stadium or not. That also means we don’t need to further exhaust St. Louis’s sales tax capacity to make the deal work. (That funds are being saved for future improvements is also a plus, but how those funds may be spent will need to be hammered out in a lease agreement, which is yet to be finalized.)

Even so, I wouldn’t call this deal a good one for taxpayers.

First, there still is that $40 million. While that’s less than what city officials across the country usually cough up for a major league sports stadium, it is still $40 million. Second, since the city will purchase the land from the Missouri Highway and Transportation Committee, city taxpayers will likely bear that cost. And even though the land is currently publicly-owned, if it were sold to a private entity that would be tax liable, it could generate property taxes for local jurisdictions. Third, the city will lose out on millions from the sales tax exemption on construction materials. While the city is projected to come out on top in terms of overall sales tax revenue under the current proposal, it is no serious shot in the budget division’s arm. It’s also unclear (I have requested the analysis from the city but have yet to receive it) whether those “new revenues” will be genuinely new revenues or just diverted from other spending in the city.  

Now, none of this is to say that the current deal isn’t worth it, or is a bad deal all things considered. St. Louis may very well be better off with an MLS team than with $40 million. But that doesn’t change the economic reality of the situation: government is giving very special treatment to a select, wealthy few. Even if the (30-year!) sales tax revenue projections are right, and the city makes some money on the deal, there are often more pressing needs or better investments the city could throw its limited resources at. But the decision has been made, and, not surprisingly, taxpayers are now at the behest of a major league sports entity.

(And a word for Bernie Miklasz: I live in St. Louis, and so, am very welcome to criticize St. Louis policies.)

The post Better Is a Relative Term appeared first on Show-Me Institute.

There is much to bemoan in the deal. Besides the fact that nearly half of the project’s costs will be covered by taxpayers, the upfront payments from Novus the city negotiated—funds to improve the Olive Blvd. corridor and Third Ward in general—have been cut in half, at least in the short term.

But there is something else lurking in the deal worth worrying about.

Although it seems to have been a part of the plan from the outset, a community improvement district, or CID, will be created in the main development area. The district will be controlled by the developer, and will collect a 1% sales tax to fund . . . pretty much anything associated with the development (see pp. 20-21). (CIDs often fund site improvements, such as earthwork and infrastructure, but it is not uncommon for them to fund developments more directly.) And while the final agreement states that no other CIDs or related districts may be formed in the area, it only prohibits proposed districts that would overlap with the main development area, not the entire development footprint, which extends south of Olive Blvd (see pp. 21-22). So there could be even more special sales taxes for University City in the future.

So, what does this mean? In short, more taxpayer money than meets the eye will subsidize the project. In more concrete terms, it means that everyone who shops in the main development area, where a Costco is slated to be built, will pay an extra 1%. That might not sound like much, but it is important to keep in mind that CIDs and their close cousin, transportation development districts (TDDs), have collected more than a billion in revenue from Missourians since their inception. As I’ve detailed previously, CIDs and TDDs are growing at alarming rates, and have altered the state’s tax landscape. Perhaps it should be no surprise that they’re written into this recent mega-deal. 

If policymakers at the local level seem inclined to approve handouts like these, what can be done to stop taxpayer abuse? As Patrick Tuohey and I make clear in a recent paper, the most effective reforms would come at the state level, and would either prohibit developers from forming CIDs and TDDs without a public vote (what will likely happen in the case of this CID) or rescind their sales taxing authority. Short of these reforms, consumers can only brace themselves for higher and higher taxes.

Disclaimer: The author lives in University City’s Third Ward.

The post A Snake, or CID, in the Grass appeared first on Show-Me Institute.

In our new paper, “Overgrown and Noxious, the Abuse of Special Taxing Districts in Missouri,” Graham Renz and I detail the hundreds of micro taxing districts that have collected over a billion dollars from Missourians. Some of these, such as fire protection districts and sewer districts, may be familiar to readers. But explosive proliferation of two other types of district—community improvement districts (CIDs) and transportation development districts (TDDs)—is driving the increase.

Since they were created in the 1990s, the number of CIDs and TDDs in the state has grown to more than 600. Many were created without any public vote and too many lack basic mechanisms of oversight. After a recent report, the Missouri state auditor stated,

There need to be protections in place to ensure public dollars are being utilized efficiently, effectively and for the good of the public. It is simply unacceptable that state law allows for self-dealing and conflicts of interest within these taxpayer-supported projects.

Our paper examines the history and growth of these special taxing districts and suggests some simple reforms that could help increase public accountability and reduce the likelihood that private developers will be allowed to pass on their own private costs to taxpayers.

Listen to our podcast on special taxing districts in Missouri: https://soundcloud.com/show-me-institute/the-hidden-costs-of-living-in-missouri

The post Taxes and Taxing Districts on the Rise in Missouri appeared first on Show-Me Institute.

Over the past eight or so years, the number of distinct sales tax jurisdictions in Missouri has grown by more than 9 percent—a total of 199 new jurisdictions created. This growth is caused by several factors, but mostly by new and overlapping special taxing districts, such as ambulance districts, levee districts, and, most prominently, transportation development districts (TDDs) and community improvement districts (CIDs). These districts are formed to collect sales and other taxes to fund various improvements and services. Unfortunately, TDDs and CIDs usually just help pad developers’ bottom lines.

Source: Missouri Department of Revenue, Sales/Use Tax Rate Tables, numerous years.

As the figure above shows, with the increase in sales tax jurisdictions comes an increase in the average sales tax rate. This means that as more and more jurisdictions come on the scene, taxpayers cough up more and more money.

However, just because the average sales tax rate has been on the rise, it doesn’t necessarily mean all Missourians are paying more in sales taxes. As noted above, the driving force behind the rate increases has been the creation and overlapping of special taxing districts, which usually encompass relatively limited geographic areas. And although the TDDs and CIDs that are driving the rate growth are all over the state, about two-thirds are in the St. Louis and Kansas City metro areas, where much of the state’s population lives. So, overall, even if some Missourians are not significantly affected by the recent rate increases, many are.

Unfortunately, as things stand there is little taxpayers can do to curb the state’s sales tax rate growth. That’s because many if not most TDD and CID taxes can be established without the approval of the general public. These districts can be formed by property owners—often developers—meaning the taxpaying public has no say in whether the rate hikes become law. Real reform would have to come in the form of significant changes to the laws governing TDDs and CIDs. So, as the new year gets going and the legislature meets in Jefferson City, lawmakers keen on lowering (regressive) taxes should take some time to think about redesigning the laws that allow these districts to be established.

The post New Year, New Sales Taxes appeared first on Show-Me Institute.

A new government accounting standard known as GASB 77 theoretically requires public districts to disclose how much revenue they have foregone because of tax abatements. While GASB 77 provides a starting point, in the first year of reporting under this rule lost revenue was greatly understated—mostly because of carve-outs from the reporting requirements and misunderstanding of how to implement the rule.

Nonetheless, the numbers reported by the governments themselves show that the affected districts lose out on tens of millions of dollars every year. Instead of funding education, libraries, and other services, this money ends up in the bank accounts of private developers who in most cases don’t need subsidies to finance their projects.

About half of all public school budgets comes from local property taxes—so it matters that Missouri’s school districts lost out on nearly $100 million in fiscal year 2017 alone. St. Louis Public Schools missed out on at least $10.5 million, or nearly 3 percent of its annual operating budget, while Kansas City Public Schools lost out on at least $24 million, or nearly 10 percent of its annual budget.

The effect incentives have on other smaller districts, like Ste. Genevieve County R-II School District (1,858 students in 2018), can be even more significant than the larger ones. The amount forgone in fiscal year 2017 was $7.8 million. But with only about 4,500 students in the district, that’s equal to $4,172 per student.

Libraries also took a hit. According to the reports we examined, the 20 largest library districts across the state lost out on at least $6.8 million. A significant chunk of that foregone revenue came from the St. Louis Public Library, which missed out on $1.1 million (nearly 4 percent of its annual operating budget) and the Kansas City Public Library, which missed out on $2.5 million.

These numbers give taxpayers an idea of the cost when policymakers decide to put developers’ interests ahead of basic government services. But even the statistics above fail to capture a significant amount of the total revenue lost. GASB 77 is a step in the right direction, but more transparency is needed.

During a time of teacher protests and tax hikes, these figures give taxpayers an idea of how much money has been diverted from schools and other public services. The next time local officials stump for more revenue, ask them this: What did you do with the taxes we already sent you? Unfortunately, many have been giving them away through tax incentives.

The post Tallying the Costs of Development Subsidies appeared first on Show-Me Institute.

But who knows what city taxpayers will end up getting for their “investment?”

Taxpayers likely won’t get the 17-mile route they were presented last year. After more than a year of study, it was recently announced that the first phase of expansion will run some 9 miles, roughly from Chippewa St. to the NGA site north of downtown, and will cost $700 million. The project is also totally dependent on federal funding, which is a big if at this point, and will begin operations, best case scenario, in a decade.

It’s also unclear whether the expansion will get St. Louisans out of their cars. While consultants project the line will carry some 9,200 riders a day, my colleague Joe Miller has pointed out that it runs through neighborhoods with relatively low population density—density about a quarter of what’s needed for light-rail to be successful. Also, overall MetroLink ridership is trending downward; not only has it lost 3.9 million annual rides since 2014, but the rail system carries fewer passengers than it did prior to the 2006 Shrewsbury expansion. And crime on and around MetroLink trains has, according to Metro, contributed to an 11% decline in ridership since last year. While I don’t doubt that an expanded system will (at least initially) carry more passengers, experience—and more than 15 years’ worth of data—suggest we shouldn’t get our hopes up.

Source: National Transit Database, Federal Transit Administration

But perhaps the biggest if is the economic renaissance promised by MetroLink officials and proponents. Transit advocates claim that rail spurs economic development, that, once you put the rails in, the traffic generated by riders will induce all sorts of business growth. Unfortunately, this claim just doesn’t hold up. Many MetroLink stations are surrounded by land that’s either (a) already developed (and likely heavily subsidized), or (b) relatively empty. In fact, transit-oriented and adjacent development is so scarce in St. Louis that rail advocates have to cast an incredibly wide net for any evidence of it. For instance, Citizens for Modern Transit, the region’s major transit advocacy group, includes investments on Interstates 64 and 70 and parking garages as development “spurred” by MetroLink. And Metro, which operates MetroLink, seems to think any investment within a half-mile of a rail station is causally linked to the presence of their trains. (Or, all they present is data on development within a half-mile of their stations.) Perhaps this is why consultants are now saying that MetroLink could “spur possibly millions of dollars in economic development….” (my emphasis).

At this point, it’s unclear what, if anything, taxpayers will get in return for hiking up their sales taxes. Although rail proponents may have inexhaustible faith, history and facts suggest taxpayers won’t get much for their investment.

The post What Will the City’s New MetroLink Tax Get Us? appeared first on Show-Me Institute.

A recent UCPL survey asked some University City residents how they felt about a potential property tax hike to bolster the library’s budget. The increase mentioned would raise library tax rates from 28 cents per $100 of assessed value to 40 cents per $100 of assessed value. So, for example, a home with an appraised value of $100,000 would pay an additional $23 or so per year in property taxes if such a rate increase were to occur.

What’s notable is not that a public institution is asking for more cash, but that officials seem to be testing the waters as a massive TIF-funded development is being debated. For the proposed I-170 and Olive development,  taxpayers are being asked to part with $70.5 million over the next 20 or so years. Much of that $70.5M would come from property taxes that would otherwise go to schools, libraries, and other jurisdictions. So, in short, if the development goes through as proposed, the library (and school and other districts) would miss out on millions in revenue.

Now, I’m not claiming that UCPL is considering a tax hike because of the I-170 and Olive development, but I wouldn’t be surprised if there was a connection between the two. This would hardly be the first time a library or library district had to go to voters for additional funding because of loose tax subsidy policies. It was just in 2016 that, after years of losing out on millions in revenues because of tax giveaways, the Mid-Continent Public Library in Kansas City asked voters to approve a tax hike. At the time, my colleague Patrick Tuohey aptly dubbed the tax hike the “TIF Tax.”

UCPL and those it serves would likely benefit greatly from extra funding. UCPL has a modest staff of 16 employees and spends around $1.6-1.8 million a year (see pp. 165-171). Besides some pension liabilities somewhat out of their control, UCPL officials appear to be good stewards of the taxpayer funding they’re given. It’s just a shame that libraries and other districts are impacted so much by misguided economic development programs like TIF, and it’s an even bigger shame that taxpayers are often left holding the bag.

The post The More They Give, the More They Take appeared first on Show-Me Institute.

To which group the new owner of the Chesterfield Mall—Hull Property Group—belongs, we’ve yet to see. Hull acquired the mall earlier this month and, even though it currently has no plans to redevelop it, Hull is already asking taxpayers for a handout.

In a statement, Hull said the mall is “too important to fail,” and that, without community support (read: your money), “the marketplace may dictate an unfortunate and unforgiving future.”

Those don’t sound like a fool’s words to me.

Hull has an impressive portfolio of dozens of malls and redeveloped retail centers across the southeast. It didn’t purchase the mall without a plan, or from some sense of benevolence. Hull knows what it’s doing.

Trickster? Maybe.

“All communities need their enclosed mall and the surrounding retail corridor to succeed as it is a symbol of a thriving community,” Hull’s website reads. Really? Is the entire Chesterfield Valley not such a symbol, with its dozens and dozens of retailers and other malls? And in Chesterfield, where the median household income in Chesterfield is over $97,000—tens of thousands more than most of the region and country—does anyone really believe that the mall—sitting lonesome atop a hill—is the lifeblood of Chesterfield?

Genius? Perhaps.

Hull purchased the property for a cool $13 million, less than 5% of what it was valued at in 2006. For acres and acres of land, replete with infrastructure and a massive improvement, directly adjacent to the interstate, that isn’t a bad deal. Whether because of changes in broader economic trends or a creative repurposing, the mall could become incredibly valuable again. Perhaps the mall is repurposed for retail or a mix of uses, razed and platted for a subdivision, or just sat on and later sold. Whatever happens, the property has a huge upside potential.

Whether fool, trickster, or genius, Hull shouldn’t be given a handout. If its plans are foolish, taxpayers shouldn’t have to bear the risk. If it’s a trickster, the public shouldn’t pad its bottom line. And if it’s a genius, no public money should have to be involved at all. Plus, given how much taxpayer money has already been doled out to developers and landowners in the Valley (especially to the outlet malls, one of which is already slated for redevelopment a mere five years after opening!), now is as good a time as any for officials to turn the spigots off.

Fortunately, Chesterfield officials have intimated that incentives won’t be forthcoming. Given that it is was just last year that other city officials suggested a special taxing district be created to help subsidize the mall, this is very welcome news.

Let’s hope that policymakers in Chesterfield stick to their guns and continue to stand up for taxpayers.

The post Chesterfield Should Protect Taxpayers in Mall’s Redevelopment appeared first on Show-Me Institute.