Better Late than Never

Posted on by Susan Pendergrass

With just one day left in the session, the Missouri Legislature is on the verge of finally making it easier for Missouri families to choose charter schools and virtual education. By an overwhelming vote of 119 to 26, House Bill 1552 is now Truly Agreed (the House has approved Senate changes) and will be sent to the governor’s desk.

This bill will broaden choices for Missouri parents in two ways. First, it fixes the funding glitch for charter school students in Kansas City and elsewhere. Because more families in Kansas City have chosen charter schools than traditional public schools, Kansas City Public Schools (KCPS) doesn’t receive enough state funding to cover what’s owed to the charter schools. This bill fixes that by having the state make up the difference. It also ensures that charter school students have access to the same sources of local funding as students who choose their neighborhood school.

Secondly, this bill improves the way full-time virtual students in the Missouri Course Access Program (MOCAP) are treated. And it ensures that schools and districts stay out of the way of families that choose this option for their children. Full-time virtual providers will now be considered their own attendance centers and report student test scores instead of being part of a local district.

Tens of thousands of Missouri families are already choosing charter schools and MOCAP. These children shouldn’t be treated as second-class citizens just because their assigned public school doesn’t work for them. Fortunately, the Missouri Legislature has agreed.

Pittsburgh, Poster Child for Sloppy Housing Policy

Posted on by Patrick Ishmael

In the weeks and months ahead, researchers at the Show-Me Institute will be taking a closer look at housing policies in Missouri, with a particular emphasis on the low-income housing tax credit (LIHTC) program. Readers of this blog are familiar with common objections —LIHTC is expensive, doesn’t live up to its promises, and is mainly a sop to developers—but Institute researchers haven’t spent as much time on the broader subject the LIHTC program supposedly addresses, housing supply and affordability. The question of housing affordability is an enormously important one and deserves more attention, especially during a period of rampant inflation.

Some policymakers are starting to deal with the challenge of housing inflation thoughtfully. But some cities, like Pittsburgh, are adopting half-baked (but trendy) policies from elsewhere to solve a problem that, practically speaking, may not exist locally. As reported in the Wall Street Journal:

On Monday the mayor signed an ordinance . . . to expand the city’s inclusionary zoning requirements. Developers building 20 or more units in the gentrifying Bloomfield and Polish Hill neighborhoods will have to set aside at least 10% for affordable housing. Under the rules, a designated studio apartment could rent for no more than $742 a month, though the average rent for one is $1,300 in Pittsburgh, according to the housing search website Rent.com. . . .

[I]nclusionary zoning forces developers to set aside affordable housing whether or not they receive government incentives, so “the other 90% of the units have to subsidize that cost,” Mr. Eichenlaub says. “They are making the developer and the owners of those units, or renters, absorb those costs. Effectively, it’s a tax on housing.”

And when you tax something, you get less of it. Portland, Ore., introduced inclusionary zoning in 2017. Permits for residential buildings with 20 or more units plummeted 64% in 25 months as developers went smaller to get around the mandate. The nonprofit Up for Growth concluded that “rather than increasing the number of affordable units,” the zoning scheme “appears to be diminishing the supply of housing at nearly all income levels.” [Emphasis mine]

My colleague Elias Tsapelas has done, and continues to do, outstanding work digging into LIHTC. The Pittsburgh “inclusionary zoning” mandate is the same sort of government burden as the LIHTC, minus the incentives. As the Wall Street Journal editorial board astutely observes, Pittsburgh’s newly mandated costs are likely to metastasize not only into higher housing prices for other renters and owners, but also into overall housing supply degradations.

But Pittsburgh’s housing policy change is notable for another reason: by one prominent metric, the city is the only major metropolitan area in America that doesn’t appear to have an affordability problem. Wendell Cox is a prominent researcher on the issue of housing affordability, and he has published his “median multiple” index for many years now, ranking metropolitan areas worldwide based on how affordable their housing markets are. His 2022 edition of the index is illuminating, not only for the other findings (which I’ll get into in another blog post) but especially for Pittsburgh—which now ranks as the only purely “affordable” housing market in the United States. In other words, Pittsburgh is trying to fix a problem it doesn’t really have.

My colleagues and I will pull apart why housing costs can be artificially inflated by government interventions and why those interventions can nonetheless be politically popular, but Pittsburgh stands as a cautionary tale that Kansas City and St. Louis policymakers must be aware of and must refuse to emulate. There are numerous reasons that housing costs have risen nationally, and the solution to that challenge is neither simple nor monolithic. In its case, Pittsburgh should go back to the drawing board and ensure it isn’t about to create a problem that doesn’t meaningfully exist. Yet.

Inflation in America: The Role of the Fed and the Risk of Recession

Posted on by Aaron Hedlund

On May 10, 2022, Aaron Hedlund, chief economist at the Show-Me Institute, and Tyler Goodspeed, Kleinheinz Fellow at the Hoover Institution at Stanford University, discussed the impact of decades-high inflation on the economy, workers, and consumers, as well as the role of the Federal Reserve in solving the problem and the risk of the next recession.

Listen to the podcast:

Listen on Apple Podcasts 

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Missouri Missing Telemedicine Opportunity

Posted on by Elias Tsapelas

Time’s running out on this year’s session, and Missouri’s legislature has yet to act to preserve key telemedicine reforms. A few months ago, I wrote about the regulatory and statutory changes needed to keep the telemedicine momentum going, and I even expressed optimism that one of the many bills filed on the topic would make it across the finish line. In the weeks that followed, those bills appear to have lost traction (along with many other legislative priorities). With just a few days left before legislators head home for the year, time is of the essence if our elected officials want to avoid missing this golden opportunity.

There haven’t been many silver linings to the COVID-19 pandemic, but one is the rapid growth of telemedicine services. Of course, the ability to see your healthcare provider from the comfort of your own home was available prior to 2020, but various laws and regulations kept the service from becoming a popular option. But once the pandemic began and most of the unnecessary barriers were waived as part of Missouri’s response to the virus, the service surged in popularity.

Now that the pandemic is receding and telemedicine is much more popular, Missouri’s legislature needs to act to allow the service’s growth to continue.  As I wrote a few months ago, state statutes need to be changed to allow health care providers to more easily write prescriptions for patients they’ve seen remotely. It should also be easier to establish a doctor–patient relationship remotely. While telemedicine may not be the answer to every health problem, it’s clear the service provides tremendous value in many circumstances, and government should not stand in the way.

As we near the end of the 2022 legislative session, lawmakers now face the tough task of deciding which bills will or won’t make the cut this year. I hope our elected officials act on what was learned over the past two years (besides how to spend more taxpayer money than ever before) and permanently enshrine the COVID-era telemedicine access provisions into law.

Death on the Vine in Jeff City

Posted on by David Stokes

Every legislative session, there is plenty of bad legislation introduced. But each year, there often seems to be a few especially terrible pieces of legislation that stand out.

Perhaps the thing that makes bad legislation into terrible legislation is when legislators try to implement programs that have clearly proven to be failures elsewhere (or previously). This is exactly the case for a few bills I have been following closely that seem close to passing this year.

There are many poorly designed tax credit and subsidy plans. Out of all of them, film tax credit programs are among the most studied, probably because of their more high-profile nature. People find films to be more interesting than soybeans, I guess. Those studies are clear in their conclusions: film tax credits do not succeed in growing the economy and do not generate the tax revenues to justify the subsidies. Missouri used to have a film tax credit program and we removed it—how often does that happen?—because it was clear it was not working. Yet, once more, there is legislation moving to reinstate a failed program. Why in heaven should Missourians pay millions of dollars to watch Ben Affleck drink coffee on Main Street for a few days? Missouri is better off without film tax credits. If the people of Georgia or California want to subsidize the shows and movies we watch, go ahead and let them. (Related bills are SB 961 & SB 732, primarily SB 961 at this point.)

Closely related to the zombie-like film tax credit program is the proposed Entertainment Industry Jobs Tax Credit that will provide tax subsidies for businesses that provide rehearsal and touring studios in Missouri. This entire program is aimed at one new company opening in Chesterfield, one that has already received other state and county tax subsidies. Apparently, that is not enough, as this proposal would have taxpayers further fund this new studio and entertainment center. It is simply awful policy for the state to decide that this particular type of business deserves a subsidy as opposed to a thousand other types of businesses. Taxes should pay for public goods such as parks, police, and transportation. There are other public goods, too, but however you define it, a private recording studio doesn’t make the cut. A new business coming to Missouri and, first and foremost, investing in a massive lobbying effort to get taxpayers to fund its operations represents everything that is wrong with our current system. (Related bills are SB 961 & SB 733, primarily SB 961 at this point.)

Another program that has consistently failed in Missouri is land banks. Show-Me Institute researchers produced significant work years ago on how the St. Louis land bank succeeded in accumulating property, not disposing of it (as was the plan), and empowered local politicians further by politicizing the land bank decisions. When Kansas City wanted to institute a land bank, Institute analysts warned those failures would be repeated there. According to investigative reports by the Kansas City Star, that is precisely what happened. The Kansas City land bank has favored local politicians at the expense of local communities, among many other problems. Despite that record, there are bills to now allow any city or county in the state to institute a land bank. This bill would empower local governments to proactively seize or purchase private property under the guise of assisting development. This would be highly troubling even if land banks had a successful track record, but the track record is terrible in St. Louis and Kansas City. (Related bills are HB 2177, SB 1089, and SB 724, primarily HB 2177 and SB 724 at this point.)

In government, nothing succeeds like failure. There is nothing quite as frustrating as watching legislators—many of whom would consider themselves supporters of limited government—trying to pass bills that propose policies with a proven record of failure.

I like a nice vineyard and a good glass of wine as much as anyone, but for these spoiled grapes, I’m hoping they all die on the vine in the last week of the session.

The Kansas-Missouri Border War Isn’t Over

Posted on by David Stokes

A version of this op-ed was published in the Columbia Missourian.

Missouri and Kansas are no strangers to border conflict. No, we’re not talking about the chaos that inspired ‘The Outlaw Josey Wales.’ The fear today is over cross-border job poachers. However, that doesn’t justify giving Fidelity Security Life Insurance $12.7 million just to stay in Kansas City. No one gets a gold medal in a race to the bottom — but politicians will waste endless taxpayer dollars trying to tell you that they’re ‘winning.’

Fidelity’s new headquarters — less than a mile from its current home — will be luxurious. The real estate is the most desirable in metro area, overlooking greenspaces in Penn Valley Park and Union Cemetery and sitting on a “transit node” of the expanded streetcar route. One-third of the office space will be rented out at the highest price in the area — more than double the average rate for Class A office space. The building will use less than half of the site, allowing for another high-rise in the future.

But should the public fund a project that overwhelmingly benefits one company? What if the company would likely be successful without subsidies? And why do local leaders even consider subsidizing these kinds of projects?

The answer won’t surprise you: it’s just a sad symptom of the larger problem exemplified by border-hopping businesses. Kansas City politicians might have worried that if they didn’t offer subsidies, Fidelity could be stolen by a suburb, much like how they nearly poached Waddel & Reed from Overland Park, Kansas.

There have been hopeful signs that everyone is tiring of these border wars. In 2019 and 2020, city and state leaders took the first steps to limit the misuse of subsidies. The two state governors agreed to end subsidies that lure businesses across the state line, and then Kansas City reduced its own subsidy program to mirror that offered by Kansas suburbs. More, however, remains to be done.

Denver offers a good example of how to escape metropolitan economic warfare. Since 1987, the mayors of municipalities around the city have met every month to ensure they are cooperating on shared economic growth, rather than undercutting each other.

Moving forward with similar ideas along the Missouri-Kansas border is important for multiple reasons.

First, subsidies generally harm the local economy. Every dollar spent on a subsidy is one that can’t be spent on social services or broad-based tax cuts for all businesses. This creates a negative economic impact that rarely outweighs the projected benefits of the subsidized project. Worse, only one-in-eight subsidies is material in changing a company’s decision of where to locate or expand, as Kansas City recently discovered with BlueScope Construction’s vacuous threat to relocate to Kansas. That means most subsidy spending is a waste.

Second, Missouri’s and Kansas’ existing subsidy reforms are tenuous and temporary. Kansas’ participation in the truce relies on an executive order, meaning it’s only as durable as the next governor’s goodwill. Missouri’s olive branch is a bit sturdier, since it was implemented through statute, but the law expires in 2025. Plus, while the agreement has limited the subsidies local governments can offer, it does not eliminate them entirely.

Third, this is a national problem. State and local governments waste $100 billion every year in an anti-growth competition over jobs. However, a growing coalition of policymakers is working to develop an interstate compact — a more sophisticated and durable version of Missouri’s and Kansas’ “gentlemen’s agreement” — that would provide a sustainable solution.

Both states have a good reason to join in, because without a more holistic and permanent agreement, the border war is almost certain to restart.

Special Taxing District Don’t Stop Coming

Posted on by David Stokes

Thanks to the Walt Disney Company and the State of Florida, special taxing districts are in the news. Florida is set to repeal the Reedy Creek Improvement District, which is the special taxing district that underpins local government—for lack of a better term—at Disney World. (I can envision various anthropomorphic cartoon characters sitting around a dais arguing about quorum calls and motions being properly seconded, but I digress.)

Special taxing districts are generally defined as public entities that are created to do one thing only, such as a street light district, as opposed to general districts such as cities or counties. Obviously, the latter get much more attention than the former. We discuss Kansas City far more than we discuss the Cape Girardeau–Bollinger County Joint Recreational Lake Authority.

What does this debate in Florida have to do with Missouri? Well, we actually have an enormous number of special taxing districts in Missouri, although none as large and all-encompassing as Reedy Creek in Orlando. Special taxing districts fall into two broad categories in Missouri: ones that perform a single public service, such as fire, ambulance, street light, and road districts, and ones that essentially funnel corporate welfare to various private entities under the guise of public improvements. The latter are primarily Community Improvement Districts (CIDs) and Transportation Development Districts (TDDs).

The latter two are also the ones expanding most rapidly in Missouri. Right now, there is a debate in Jefferson County about the Bear Ridge Community Improvement District, which is essentially a taxing district that, according to my sources in Jefferson County, will fund infrastructure improvements for a new subdivision. What’s wrong with that? Well, until very recently developers would fund these improvements themselves and recoup their investment and profit upon sales of the homes, rental of the office buildings, etc. Now, developers have figured out that they can transfer many of these costs to taxing entities, based on either property or sales taxes, and use these public tax dollars for what are essentially private services.

Missouri Auditors from both parties have documented the abuses and mismanagement that inevitably come with so many tiny taxing districts with hardly any oversight. Show-Me Institute analysts have covered this issue for years. There is at least one bill before the legislature this session that has needed changes to many special taxing districts. Hopefully, the dispute at Disney World can help shine some light on special taxing districts in Missouri.

Why? Because we need reform, too.

To Make an Omelette in Branson, You Have to Break a Few Eggs

Posted on by David Stokes

Last year, voters in Branson voted in a new mayor. Last month, they went further by voting into office a new city council majority aligned with that mayor. Clearly, the people of Branson want change.

In the past few weeks, the newly elected Branson leadership team has dramatically altered city management in Branson. The city administrator, assistant city administrator, city attorney, finance director, and the head of planning & zoning (and several other city employees) have either resigned or been fired.

There is, not surprisingly, opposition to this in Branson. A former city official stated:

“Branson does not need this, gentlemen. You three were not elected to conduct business like this. . . . We’re not supposed to be tearing the city apart.”

According to Skains [a former alderman who just lost an election], remaining city staff are “terrified” of being fired at any moment.

I am not unsympathetic to people losing their jobs, but the reality is that if voters want real change in their cities and towns, replacing the part-time elected officials over time usually won’t get it done. Most Missouri cities are run by full-time bureaucrats who have significant power advantages over the part-time elected officials.

Leaders dealing with powerful and recalcitrant bureaucrats is a fight as old as history, but the dynamic at play in Missouri towns is heightened by the fact that the full-time employees simply have much more information at their disposal. It is hard for a part-time councilmember to stand up to a city attorney with years of experience and a law degree, no matter how right the councilmember may be.

I remember over a decade ago when the people of Ellisville were opposed to a tax-increment financing (TIF) plan and elected a new mayor who was opposed to the TIF. The new mayor did all he could, but the pro-TIF city administrator, city attorney, and other city staff answered to the pre-existing council majority that hired them, not the new mayor. They did all they could to frustrate the new mayor, up to and including impeaching him and removing him from office. (The new mayor was returned to office by a county judge who found the entire impeachment process invalid.) Eventually, after another election cycle, the anti-TIF forces won and ultimately stopped the TIF, but the fight was brutal.

But back to Branson. If the people of Branson want to see change and have voted for change, then change is what they should get. Perhaps they will get more change than they realized. In that case, Mencken’s line that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard,” may be proven true in Southwest Missouri. But when the citizens of a city or county want change, the interests of the voters should be the priority, not the employment status of city workers.

Change is hard, but when people see what their communities are doing—be it mask mandates, tax subsidies, or hospital privatizations—and demand accountability and new leadership, they deserve to have it.

Podcast: Disney, $500 for Missourians, and an Education Super Bill

Posted on by Susan Pendergrass

David Stokes, Susan Pendergrass and Elias Tsapelas join Zach Lawhorn to discuss Disney bringing special taxing districts into the headlines, the latest on a tax credit bill, and everything education legislation.

Listen on Apple Podcasts 

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Listen on SoundCloud

 

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