Remember the May 22 tornado that ripped through Joplin? There were 161 people killed and more than 7,000 residences destroyed. The Associated Press has reported a 17-fold increase in building permits for the city of Joplin since the tornado:
The city has issued an average of $35.4 million in permits per month since the tornado. Before the tornado, the city averaged just over $2.1 million a month in building permits.
Despite this evidence of a robust private market, the Missouri Housing Development Commission has:
. . . committed about $100 million in tax credits and loans over the coming decade to spark the construction of low-to-moderate income rental units and single-family, owner-occupied homes in the Joplin area.
At least two issues come to mind. First, are taxpayer-funded tax credits necessary to rebuild Joplin? After all, human history proves that individuals and private markets are more than capable of rebuilding housing and infrastructure following natural disasters. Second, even if one were to concede the efficacy of public subsidies, there is no doubt in my mind that public dollars, once committed to disaster relief, must be spent on behalf of the public in an efficient and responsible manner. That leads to the crux of the matter.
The housing commission will require contractors, as a condition of receiving rebuilding tax credits, to pay the federal prevailing wage to their construction workers. And the controlling federal pay scale for occupations has quadrupled in some cases, as the St. Louis Post-Dispatch reported
[A] Sept. 30 revision of the federal wage rules significantly increased those amounts. For example, the federal prevailing wage for a carpenter in the Joplin area rose from $7.98 an hour to $21.47 an hour plus $12.65 in benefits. The federal prevailing wage for a roofer in the Joplin area rose from $7.25 an hour, which matches the general federal minimum wage, to $21.30 an hour plus $8.08 in benefits.
So what is the purpose of the tax credits? If it is to get the most bang for the buck in providing critical assistance to low- and middle-income residents, efficiency requires waiving the wage standard for this project. The $100 million only goes so far, and artificially elevated wages means fewer homes built under the tax credit program. On the other hand, the tax credits and prevailing wage changes may have mixed purposes, not all of which seek what truly is best for the displaced and less fortunate in Joplin.