Corruption Allegations: Disappointing but Hardly Surprising

Posted on by David Stokes

A version of this commentary appeared in the St. Louis Business Journal.

In 1977, the Chicago Sun Times newspaper bought a bar. They didn’t just buy it to serve people drinks. They bought it—under a fake name—for the purpose of loading it up with video and audio recording equipment to expose the rampant political corruption in Chicago. For months, as the bar went through the standard process of getting permits, licenses, and so on, the operators recorded the unending stream of bribe requests, kickback demands, and more that were (and arguably still are) commonplace in Chicago.

Even though news of corruption in Chicago was hardly earth-shattering, the series of stories released in 1978 caused a sensation. Rarely had the political cancer been so clearly documented via media, and the constant brazenness of the corruption startled the people of Chicago, who until then may have thought they’d seen everything.

Which leads us to last week’s news about the federal indictments of three St. Louis City aldermen on corruption charges. I may work at a think tank, but I know a little about bribery attempts. Back in 2001, I got a first-hand look at an attempted bribe for then-County Councilman John Campisi. He had just finished a meeting with a taxicab operator who, as he departed, left a brown paper bag on the Councilman’s desk. Suspicious, Campisi asked me (at the time a council aide) to come to his office so that we would both be present when someone (me) opened the bag. Sure enough, the bag had a bribe in it. The next year, that taxicab operator, another councilman who had arranged the meeting, and a few other county employees involved in the racket were convicted of bribery. That was the biggest scandal Clayton had seen until Steve Stenger decided to turn the 9th floor of the county building into a live-action RICO performance.

A part of me is delighted with the bribery charges. I have spent years decrying (including in the pages of this newspaper) the abuse of precisely the two things that appear to be at the heart of the corruption charges: tax abatements and the city land bank. Rest assured, I am going to update my talking points on these two issues, and trust me when I say that audiences pay a lot more attention when the lead is “politicians take bribes” than when the lead is “studies show . . .”

But on a more serious note, a much larger part of me is angry and depressed over the allegations. While everyone is innocent until proven guilty, the main question I ask is not about the guilt or innocence of these three politicians, but whether we have a system that enables corruption in St. Louis and the rest of our state (paging Tom Pendergast, please). I have to think the answer is a very dispiriting “yes, we do.” The ease with which tax subsidies, abatements, and so on can be handed out has long made them susceptible to this risk.

The tax subsidy rot is not limited to the minnows. Never forget that, for all Governor Eric Greitens’s flaws and self-inflicted wounds, the tax-credit industry apparently mobilized a political hit squad for him after he had the audacity to kill their golden goose in the low-income housing tax credit program. And while large-scale developers around the state may be smart enough to ensure their payments to elected officials are done as perfectly legal political donations instead of unreported cash-in-a-bag, one strongly suspects that the abuse of tax-increment financing (TIF), special taxing districts, and other forms of corporate welfare is greased by the legal version of just what got the three aldermen indicted. I have no doubt that some of the people at St. Louis’s country club bars who are most appalled by bribery charges in the city are standing next in line to get their own special tax credits or floodplain TIF deals.

The stench of corruption, both now and in the past, carries with it very real harms for our region. So back to Chicago: Studies have shown (see, I can’t avoid that phrase) that corruption costs Illinois $550 million a year. That represents the cost of not only the direct bribery, but, much more so, the decreased economic growth and lost investment that result from the fear of corruption. Ask yourself: would you think twice about investing in Mexico now? Of course you would. The endemic violence and corruption would make any rational person think twice. The same thing is true for cities and states known for corruption in our own country. Under Steve Stenger, some bidders undoubtedly thought twice about bidding on St. Louis County projects, knowing as they did that a winning bid was not going to be finalized until the county executive received a large campaign donation. Accounts of corruption in the City of St. Louis give residents and investors one more reason to keep themselves and their money out of the city. That’s the last thing the city needs right now, but that’s what it has.

As is often said, when the business of buying and selling is controlled by the legislature, the first thing to be bought and sold will be the legislators. Good government types (of which I am one), must do more than simply call for “electing better people.” We need to remove the incentives and opportunities for corruption. In the latest instance in the city, we should respond by completely eliminating the ability of politicians to dole out tax subsidies, credits, and abatements. Gambling addicts shouldn’t hang out in casinos and hope they aren’t tempted. The problem of corruption in our community will continue until we reduce the involvement in government in our daily lives and shrink the number of things that can corrupt politicians in the first place.

 

Part 5: Does Kansas City Have an Affordable Housing Problem?

Posted on by Elias Tsapelas

(You can read part one, part two, part three, and part four in this series here.)

How affordable is housing in Kansas City? The answer depends not only on how you define “affordable” for individuals, but also for a city or region as a whole. Earlier posts in this series discussed housing affordability for individuals, and how factors other than income can affect what housing is attainable. But when it comes to regions, the question of affordability becomes much more complicated.

For most people, when they say housing is unaffordable, they mean that it’s too hard to find a suitable place to live in an area they want for a price they can afford. For a region, the affordability discussion can take many different shapes. Are there enough places to live? Is the cost of renting or purchasing housing too expensive everywhere, or in specific areas only? How many people are struggling to find affordable housing? What is causing the unaffordability? And what could be done to address the issue?

A few months ago, I wrote about a report that tried to assess the housing affordability situation in St. Louis, and the results were illuminating. Like Kansas City, St. Louis and the surrounding region score fairly well on most affordability metrics. Nevertheless, this particular report gave St. Louis a “C” grade. According to the report, the way to determine whether a region has an affordability problem is by taking the number of people earning different incomes and comparing that to the number of housing options that would be affordable for them. The idea seems straightforward enough, but the grades require a bit of nuance because of the way housing affordability is defined, which is residents spending 30% or less of their income on housing.

The middling grade for St. Louis was not a result of the region having too few places to live. In fact, there are more places to live in St. Louis than people to live in them. Nor was the issue that those earning around the area median income were having too hard of a time finding affordable places to live. The problem was specifically an inadequate supply of housing with low enough rents to be affordable for people making less than 30% of the area’s median income, which for St. Louis represents a family of three making less than $23,000 per year. To put that in context, affordable housing for this specific family would mean a 2–3-bedroom residence that costs (with utilities) less than $560 per month, which is understandably hard to find.

So, when does a region have a housing affordability problem? Tying the definition of “affordable” to the income of residents assures that some amount of housing will always be considered unaffordable to someone. Ultimately, when you’re not talking about places like San Francisco or New York City, the answer for most regions is likely a subjective one that local officials and their communities may be best equipped to handle. Regardless of what’s decided, it’s important that elected officials have a good idea of what they’re trying to solve and how they’re going to solve it before they start enacting policies or throwing tax dollars at the apparent problem.

The next post in the series will discuss some of the ways in which the government has tried to address housing affordability.

Podcast: St. Louis BOA Indictments And The Future Of Tax Subsidies With Patrick Tuohey And David Stokes

Posted on by Susan Pendergrass

Susan Pendergrass is joined by David Stokes and Patrick Tuohey.

Patrick Tuohey is co-founder and policy director of the Better Cities Project.

He works with taxpayers, media, and policymakers to foster understanding of the consequences — sometimes unintended — of policies regarding economic development, taxation, education, and transportation. He previously served as the senior fellow of municipal policy at the Show-Me Institute.

David Stokes is a St. Louis native and a graduate of Saint Louis University High School and Fairfield (Conn.) University. He spent six years as a political aide at the St. Louis County Council before joining the Show-Me Institute in 2007. Stokes was a policy analyst at the Show-Me Institute from 2007 to 2016. From 2016 through 2020 he was Executive Director of Great Rivers Habitat Alliance, where he led efforts to oppose harmful floodplain developments done with abusive tax subsidies. Stokes rejoined the Institute in early 2021 as the Director of Municipal Policy.

Read Patrick’s report here.

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Financial Data on Missouri’s 20 Largest Cities

Posted on by Corianna Baier

The Tax Burden in Missouri’s 20 Largest Cities report that I published earlier this year displays financial information from Missouri’s most populated cities. To complete this project, I collected Comprehensive Annual Financial Reports from these cities for the years 2005 to 2020. A decent amount of leg work (and sometimes money) went into collecting these documents, so we are sharing the documents so anyone can access them. Feel free to use these documents to analyze the financials of Missouri’s largest cities. You can find the documents here.

Part Four: Does Kansas City Have an Affordable Housing Problem?

Posted on by Patrick Ishmael

(You can read part one, part two, and part three in this series here.)

In the previous blog post in this series, I posited that (generally speaking) able-bodied individuals should be expected to pay for their housing, and that for housing to be “affordable” to an individual, it should take up no more than about 30% of their salary, both as a rule of thumb and by the federal government’s own definition. But that’s not the end of the story when it comes to establishing what affordable housing is.

Another major question is this: How far away from one’s employment can housing be to still be functionally affordable for that worker? If I work a minimum wage job on the moon, renting a house on Earth and paying to commute daily to outer space won’t cut it.

For a more grounded example, if a worker’s job is in Overland Park, Kansas, but their housing is 25 minutes away east of downtown Kansas City, would that housing—meeting all criteria before considering location—qualify as “affordable housing”, given the added cost of transportation? If the same job were in Independence—nearly 40 minutes away from Overland Park—would we expect that worker to change jobs to something closer to home, or move to housing closer to their job? How do our expectations change if instead of gas being $2 per gallon, it jumps to $5 per gallon?

This question of affordable housing in the context of geography is a nuanced question that doesn’t necessarily have an intuitive or universal answer. But that doesn’t mean answers aren’t being proposed.

For example, the Housing and Transportation Affordability Index, or H+T Index, attempts to simulate what residents of a given census tract might expect to pay in housing and transportation combined as a percentage of their income. Keep in mind that “transportation” here includes all transportation, including trips to the grocery store, for entertainment, etc., so the H+T Index isn’t an apples-to-apples comparison to the HUD definition or other housing-only definitions of affordability. But the H+T index is helpful for understanding that affordable housing that isn’t close to gainful employment is, for all intents and purposes, not affordable.

Other factors can also play into the definition of affordable housing, including whether affordable housing includes homes for purchase as well as homes for rent; whether affordability considers the mitigating costs of roommates where appropriate; and the extent to which affordable housing could still be inadequate housing in some other qualitative way.

That said, a reasonable baseline definition of affordable housing includes the following: it should generally be paid for by the individual, should not exceed 30% of their salary, and should be available in rough proximity to their place of employment. Now, we can turn to the question we’re exploring in this series: Does Kansas City have an affordable housing problem? Stay tuned.

 

Part Three: Does Kansas City Have an Affordable Housing Problem?

Posted on by Patrick Ishmael

(You can read part one and part two of this series here.)

One of the primary problems in the affordable housing debate is that the phrase “affordable housing” means different things to different people—and, more to the point, that different people don’t know what they might be agreeing to by accepting the premise that housing is “unaffordable.”

What is meant when someone says that we don’t have affordable housing? What if my underlying definition of “unaffordable housing” is “housing that isn’t free”? To have a useful conversation about affordable housing, we must establish some consensus around what our expectations are for both “affordability” and for “housing.”

From my perspective, the first necessary point of consensus has to be that able-bodied Americans are expected to pay at least something for their housing. While that might seem like a superfluous thing to stipulate, it isn’t. If housing is in fact a “human right” as some activists assert, then assigning any dollar figure or percentage of anyone’s income is inherently a violation of that right. What sort of “human right” could be denied on the basis of cost?

If there is an expectation that people (in general) should be paying for their own housing, how much should people be expected to pay?

As the federal Department of Housing and Urban Development, or HUD, notes, there are many ways in which “affordability” can be defined by researchers and policymakers. Researchers and policymakers could look at average incomes in a metropolitan statistical area (MSA). They could use median incomes in a county and establish an absolute floor for affordable housing costs. They could create ratios, they could bundle together utilities with housing costs or not consider utilities at all, and they could transform data in myriad ways to come to reasonable, but radically different, conclusions.

You can see the issue.

But despite the plethora of possible (and possibly contradictory) affordable housing definitions, HUD has generally settled on a set definition of what is “affordable” that it applies to many of its programs. As the department explains on its website:

In the 1940s, the maximum affordable rent for federally subsidized housing was set at 20 percent of income, which rose to 25 percent of income in 1969 and 30 percent of income in 1981. Over time, the 30 percent [gross income] threshold also became the standard for owner-occupied housing, and it remains the indicator of affordability for housing in the United States. Keeping housing costs below 30 percent of income is intended to ensure that households have enough money to pay for other nondiscretionary costs; therefore, policymakers consider households who spend more than 30 percent of income on housing costs to be housing cost burdened.

Defining affordability can be like listening to good music—you recognize it when you hear it, and others may still disagree with you. But the HUD definition would seem to be a reasonable one, and that it has been adopted beyond the bureaucracy as a general rule makes it more compelling as a starting point for this discussion. While this “general rule” is a good starting point, the details for defining “affordable housing” matter, too. More on that in the next blog.

Something Is Rotten in the County of Perry

Posted on by David Stokes

I support the privatization of many government services; I wrote an entire paper on it. I know you’ve all read that paper several times, but here’s the link if you need a refresher.

In many cases, privatizing services—either by sale, contracting, or other options—can lead to better service at lower costs for taxpayers and residents. Privatization is, in short, a good thing.

But it has to be done right. It has to be done as part of an open and transparent process. In Perry County, an attempt to privatize the local county hospital is not being handled properly.

But let’s step back, because the further back you go the worse it gets. In the 1990s, control of Perry County Memorial Hospital (PCMH) was passed from the elected, county hospital board to a private board. I was informed this was done behind the scenes and under the cover of night, like when the Colts left Baltimore. I’m further told everyone involved in that decision is gone now (i.e. dead), so who knows how or why it happened. Perry County still owns the physical hospital itself, but that is all.

Now, that private board is leading the effort to turn over management of PCMH over to Mercy health systems. There has been basically zero public input on this decision. Some community leaders scheduled a public forum on the issue, and nobody from the private board attended. A letter released by community leaders after that meeting stated:

This decision is being made by a small group of people in private meetings. This lack of transparency and secret maneuvering calls for your immediate attention as the PCMH private board has historically acted without transparency. The community’s citizens have a right to information that directly affects their access to health care.

Outsourcing the operations of PCMH to Mercy may be a great move. Heck, it probably is a great move. The economics of small, publicly operated hospitals are hard and getting worse. But that doesn’t mean that an unelected board gets to make these decisions behind closed doors without public input.

I fear the private board will frame its final plan to the county commission as a fait accompli with an implied threat to do something drastic if the county commission does not approve it. Possibilities there could include large cuts to hospital services, shutting down PCMH entirely, or hiring Joe Exotic to turn it into a big cat animal sanctuary. (Okay, probably not the latter.)

This process is bad public policy and bad for democracy. If the Mercy plan is good for the community, make the arguments in public and do the hard work required to convince the people of Perry County. After all, it’s still their hospital, even if just barely.

Part Two: Does Kansas City Have an Affordable Housing Problem?

Posted on by Patrick Ishmael

(You can read part one in this series here.)

It is often taken as gospel by some local (and many national) media outlets that “affordable housing” is elusive for Americans. While that is certainly true in places such as New York and San Francisco, high housing costs are often due to bad government policies, not just housing demand. A city with a solid economy and ample developable property can still experience an affordable housing problem if policymakers distort their housing markets with unwise housing policies.

For instance, rent controls freeze rents for some below market rates and can disincentivize the improvement of existing rental properties. It also deters investments in new housing that may be more affordable to the public and can put downward pressure on the rents of older properties. Government meddling in the housing market could be dissuading market participants from meeting each other’s needs.

Rent controls aren’t the only supply-limiting policy that can reduce affordability. Washington, D.C. is one of the most expensive cities in the country to rent or buy a house, and that’s in no small part due to government interventions such as the 110-year old Height Act. The Height Act, a federal law, caps buildings in the nation’s capital at 160 feet, making it impossible to convert low-lying properties into high-density high rises.

For perspective, the tallest residential building in Kansas City, the Power and Light Building, stands at 481 feet—three times Washington, D.C.’s height cap. The reason for the D.C. law is aesthetic—to keep buildings in the city shorter than the Capitol Building—but the practical effect is to drive up the price of available housing for all residents by reducing housing supply. Again, this isn’t the market failing; it’s the government failing.

State and local governments can also impose costs on the provision of housing through other regulatory practices. For example, land use limitations prohibiting multi-family dwellings on single-family lots, particularly in dense urban settings, can prevent obsolete structures from being replaced with housing consistent with present day housing stock needs. Needless red tape slowing the construction of new housing stock or slowing its development can also be a barrier to lower prices.

For its part, the City of Kansas City doesn’t have rent controls, nor are its other regulatory excesses terribly pronounced. There is also plenty of developable land throughout the region, even if such burdensome limitations were in place in Kansas City proper. Knowing all of this, the basis for Kansas City’s “housing crisis,” if it exists, would not seem to be closely correlated with government policies regionwide.

If Kansas City has an affordable housing problem, could it have more to do with how it’s defined? More on that in the next blog post.

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