Lee’s Summit Is Generous to a Fault

Posted on by David Stokes

A bad idea doesn’t get better with age. Bad ideas aren’t wine, jeans, or your high school memories. The tax subsidies for the Paragon Star development in Lee’s Summit were a bad idea back in 2015 when the development was proposed, and they are a bad idea now, as Lee’s Summit gets close to finalizing approval on the project and granting the latest tax subsidies.

Using tax subsidies for economic development rarely benefits the public. Instead, it lowers the risk and increases the returns for the private investors. Under a capitalist system, the relationship between risk and reward for investors can a wonderful thing, but in recent decades the government has somehow decided the public should get involved in private business dealings with tax subsidies and incentives. Taxpayers in Independence were left holding the bag for the failed Bass Pro tax increment financing (TIF) plan, and most economic development schemes are like an expensive game of musical chairs where the taxpayer is always the one with nowhere to sit.

The Paragon Star development, which includes youth athletic fields, hotels, office space, apartments, restaurants, and more, has already been approved for significant taxpayer subsidies, including a $32 million TIF, another $32 million in transportation bonds, and $5 million in special sales taxes. Now the developers are requesting $6 million in neighborhood improvement district (NID) subsidies. Keeping track of all the TIFs, CIDs, NIDs, and more requires an advanced degree in acronyms.

Subsidizing all of this in the floodplain of the Little Blue River makes it even more absurd. In fact, as of August 28, using TIF in the floodplain in most of Missouri will be illegal. But Lee’s Summit has nothing to fear; Jackson County got itself exempted from that law. It will remain perfectly legal in Jackson County to use tax subsidies to develop in the floodplain, which will raise the height of the water in the next flood—causing more damage than before and requiring public money to rescue or reimburse those harmed. As insane as it is, it all makes perfect sense in the world of the developer-subsidy complex.

I have no illusions that the Lee’s Summit city council will deny the NID and risk the project at this late point. There are eleven current TIFs within the city, whose leaders seems to believe that it must subsidize its way to growth. Numerous economic studies have proven the fallacy of that belief. Prosperous, desirable communities like Lee’s Summit are fully capable of economic growth without tax subsidies. However, part-time city councilmembers are rarely willing or able to fight back against the well-paid phalanx of lawyers, planners, and lobbyists that developers employ in their quest for other people’s tax dollars.

Whether it is a TIF, CID, or NID, the taxpayers are always the ones without a chair when the music stops. I hope the citizens of Lee’s Summit realize this before it is too late.

Podcast: Mask Mandates in Missouri Schools, Plans for Economic Justice and Restrictions on Doctor Visits

Posted on by Michael Q. McShane

David Stokes, Elias Tsapelas and Mike McShane join Zach Lawhorn to discuss the impact mask mandates are having on the school choice debate, what we know about St. Louis’ “economic justice action plan” and the extension of a rollback on telemedicine regulations.

 

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New Data Show Charter Enrollment Increased During Pandemic

Posted on by Michael McShane

One of the dominant stories in American education over the past year and a half has been the exodus from traditional public schools during the coronavirus pandemic. In June of this year, the federal government released data showing a three percent drop in enrollment from the 2019–20 to 2020–21 school years. Missouri’s numbers looked like the nation’s, with a similar three percent drop during that time period.

But a new analysis by the National Alliance for Public Charter Schools (NACPS)  argues that not all schools saw drops in enrollment. In fact, across the country and in Missouri, charter schools actually saw increases in attendance.

The report’s authors worked with state data (and state education agencies) to examine enrollment trends in both traditional public and public charter schools. For the nation, they found a 3.3 percent decline from 2019–20 to 2020–21 in enrollment in traditional public schools, a similar trend to what the federal government’s data wonks found. But for charter schools, they found a 7.08 percent increase during that time period, representing some 237,311 students newly enrolled in charter schools.

In Missouri, while only finding a 0.1 percent decrease in enrollment in traditional public schools, the authors found a 3.5 percent increase in charter school enrollment.

Now, caveats are in order. Data on school enrollment is fluid right now. Sources conflict (as we see in the differences between what the feds counted in Missouri and what NAPCS did). Online learning, in both the traditional public and charter sectors, messes with the numbers as students move between modalities. I will be much more confident with another year of data.

That said, what NAPCS reported does align with a lot of what we’re hearing anecdotally. Lots of families were frustrated during the pandemic and were looking for other options. Charter schools are one of them. Especially in places where charter schools found ways to either be open in person or to provide a quality virtual option while their neighboring traditional public schools did neither, charter schools were an attractive option. We shouldn’t be surprised if families took advantage of it.

Does Your Household Pay Corporate Taxes?

Posted on by Jakob Puckett

With all the talk about increasing corporate taxes rates in the news, it’s important to remember that corporate tax rates affect every level of the economy. This is because taxes have spillover effects— companies pass extra costs on to their customers.

A good example is electricity bills in Missouri. From 2008 to 2017, the average retail electric bill in Missouri rose 29 percent—the second-biggest increase in the country over that time period. After the Tax Cuts and Jobs Act (TJCA) lowered corporate tax rates from 35 to 21 percent, Missouri utilities reduced electric rates for customers. And it wasn’t just a coincidence; Missouri’s utilities specifically stated that the reason for the rate decreases was the corporate tax cuts.

For the past decade, electric rate increases for three of the four investor-owned utilities in Missouri have far outpaced average salary increases and general inflation. This means that a larger percentage of Missourians’ budgets are being dedicated to paying electric bills, with less being left over for other needs. However, that finally changed between 2018 and 2019 (2018 was the first full year of TJCA implementation) when electricity rates fell by 6 percent—customers of Missouri’s four investor-owned utilities saw cumulative savings of $159 million in 2018 alone.

In sum, just because you may not run a corporation doesn’t mean what happens to corporate tax rates doesn’t affect you. If a decrease in corporate tax rates meant an electric rate decrease for Missourians, it’s fair to believe a corporate tax rate increase would result in electric rate increases. And, as the last decade has shown, that’s an expensive proposition for all Missourians.

Property Tax Proposals in Missouri

Posted on by David Stokes

Senator Mike Cierpiot is suggesting some changes to Missouri reassessment procedures as the state undergoes the biennial reassessment process. The primary change discussed in the article is a proposal to phase in any property assessment increase above 15 percent (and the related tax increase) over a two-year period instead of homeowners being hit with the higher assessment and taxes all at once. I think this is a reasonable suggestion that would be a small yet positive policy change to help people deal with property tax increases.

He also suggests that Jackson County elect its assessor, which I also think is a good idea. St. Louis County made that change about a decade ago, and I think the change has been beneficial. This way, voters can always bring back the crooked assessor (as happened in California) if they want to. However, the only way to really address property tax increases in Kansas City is to change the state constitution. Currently, an exemption in Missouri’s constitution allows the Kansas City school district to maintain its tax rates even as tax assessments rise significantly. That is the biggest part of the problem in Jackson County.

It is not a coincidence that Sen. Cierpiot, who represents Jackson County, wants to address this issue. Over the past several assessment cycles, Jackson County has been a hotbed of property assessment and tax disputes, within both Kansas City and its suburbs. SMI analysts have written about this issue before. There are two main factors at work. One is that, for whatever reason, Jackson County does appear to have been historically under-assessed.

My belief is that the under-assessment was a response, in part, to the large school desegregation tax increases ordered by Judge Clark in the 1980s. It doesn’t matter how high someone raises your property tax rates if the property is substantially under-assessed. The Missouri State Tax Commission instructed Jackson County a few cycles ago to correct the under-assessment, and that is primarily what led to such a large increase in assessments in Kansas City in 2019.

The second part is also related to Kansas City school desegregation. Per the Missouri Constitution, the Kansas City school district is the only taxing entity in Missouri exempt from property tax rate rollbacks. So, when the assessments increase dramatically, as they have in Kansas City, taxpayers in Kansas City school district see no rollback in the rates. That results in a very large and immediate tax increase, and that situation has to be addressed. If elected officials from the Kansas City area really want to make a major change that will address a big part of the problem, they need to propose amending the state constitution to make the Kansas City school district roll their rates back when assessments increase.

Highlighting an Energy Opportunity During Missouri’s Clean Energy Week

Posted on by Jakob Puckett

In recognition of Missouri’s first “Clean Energy Week,” let’s take a look at an energy challenge in Missouri that affects all types of energy sources in Missouri, clean and traditional alike.

A basic challenge for electricity generation in Missouri is a lack of transmission capacity. Electricity must be transmitted via wires from where it’s generated to where it’s used. But these transmission wires can only carry so much electricity at once, and carrying too much power will fry the wires. Large parts of Missouri’s grid infrastructure (and the larger regional grids it participates in) are too congested to accommodate all the electricity generated today, let alone have room for new projects. Take a look at this map. The map is a little confusing at first glance, but the blue, green, and yellow represent regions that can handle more electricity on their transmission lines, whereas the grid is already overloaded in the orange, red, and brown regions. How much more or less electricity transmission lines can handle can be seen in the map legend, with dark blue able to carry the most additional electricity and dark brown being the most overloaded.

Building new transmission capacity can help solve this problem. Transmission lines owned by public utilities are open to be used, for a fee, by any power generator. Since 1996, this “open access” practice has been required by the Federal Energy Regulatory Commission (FERC), the agency responsible for overseeing interstate power transmission.

Increased transmission capacity can help the integration of new power plants. It also aids in overall economic development by increasing the ability of cities to access the electricity needed for growth, as well as the incorporation of new energy sources like small modular nuclear reactors and distributed generation.

Missouri needs more transmission capacity, and injecting competition to the construction process, which was started with FERC Order 1000 in 2011, can bring real cost-savings benefits for new construction. The process of building new transmission lines begins when the grid operator declares the need for more capacity to meet electric demand. However, states and grid operators have used project classification loopholes to allow incumbent utilities a competition-free bidding process to construct transmission lines. Even small competitive reforms to tighten these rules can have a big impact. A study from the Brattle Group found that the winning bids in competitive transmission projects were 40 percent less expensive than original estimates, whereas noncompetitive projects ended up costing 34 percent more than the original estimate.

Transmission capacity is necessary for delivering electricity from power plants to homes and businesses, and expanded transmission capacity is vital for Missouri’s economic growth. As Missouri sets its sights on revving up the economy after Covid-19, building more transmission capacity can help get Missouri to where it wants to be.

Podcast: New Test Scores for Missouri Schools, Development Developments in Webster and Food Truck Potpourri

Posted on by Corianna Baier

David Stokes, Corianna Baier and Susan Pendergrass join Zach Lawhorn to discuss the just released preliminary test scores from last year, a multi-million dollar development planned for Webster Groves and cities around the state debate regulations for food trucks.

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Hey Licensed Professionals: It’s Time to Move to Missouri

Posted on by Corianna Baier

Missouri lawmakers made an uncharacteristically groundbreaking move in 2020 when they passed occupational licensing reciprocity. This means that occupational licensure from other states will now qualify a worker to receive that license here in Missouri. To date, only twelve states have given workers this freedom. With this new legislation, there has never been a better time for licensed professionals to move to Missouri.

The twelve states with occupational licensing reciprocity are Arizona, Colorado, Florida, Idaho, Oklahoma, Missouri, Montana, New Jersey, Pennsylvania, South Dakota, Utah, and Wyoming. Notably, only one of Missouri’s border states and very few midwestern states have adopted this policy.

Being on the forefront of this movement gives Missouri a competitive advantage. We’ve significantly decreased the red tape that burdens workers when they relocate. Many licensed workers can move to Missouri and continue working much more easily than if they moved to Kansas or Illinois, for example. It’s the legislative equivalent of a giant arrow above Missouri telling workers to move here.

Though there is still more work to be done, occupational licensing reciprocity was a step in the right direction. It’s icing on the cake that Missouri was one of the first states to adopt this legislation, giving us a huge advantage over surrounding states.

Companies Pushing Back Against Government Overreach

Posted on by Corianna Baier

Three food delivery companies are suing New York City over its cap on commissions the companies can charge restaurants to use their services. According to a Wall Street Journal article, DoorDash Inc., Grubhub Inc., and Uber Technologies are “contending that the fee cap is harmful and constitutes government overreach.” I’m glad companies are pushing back on government interference in the market; businesses and consumers should be decision makers in the market, not lawmakers.

St. Louis City has one of these caps too. The St. Louis Board of Aldermen passed an ordinance in July of 2020 that sets a cap on fees that third-party delivery services charge restaurants at 20 percent (up from the 5 percent originally proposed). This ordinance includes a sunset measure that ends the cap 60 days after the city’s health proclamation has been lifted.

Previous agreements between restaurants and delivery services generally set fees higher than 20 percent. The city’s health proclamation is still in place, so this arbitrary cap has been intruding in the market for about 15 months. As predicted, consumers have been experiencing the effects. For example, DoorDash added a regulatory response fee on all delivery orders in St. Louis City (and other places across the country) with a spokesperson noting that this fee was necessary to pay drivers appropriately amid pricing regulations.

The contention between delivery companies and lawmakers seems to exist nationwide, and it’s coming to a head with this lawsuit. I’m not a lawyer, but I think workers and consumers have paid the price for lawmaker interference in the market for long enough. St. Louis City should remove this cap now to avoid any potential repercussions from the lawsuit and to honor market arrangements between delivery services and restaurants.

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