A Property Tax Tale of Two Cities

Posted on by David Stokes

A version of this commentary appeared in the St. Louis Post-Dispatch.

It costs money to run cities, and that money comes from taxes. While governments at all levels waste that tax money to varying degrees, sometimes it is necessary to increase certain taxes to fund necessary services.

Right now in St. Louis County, two prominent suburbs have put property tax increase votes before their citizens in August. The first one is Clayton, the county seat and central business hub. The second one is Frontenac, a wealthy bedroom community with a major mall right in the center of St. Louis County.

Too often governments try to export the costs of running their cities to outsiders with tourist taxes, sales taxes, special district taxes, and so on. In the cases of Clayton and Frontenac, the best thing you can say about the proposals is that they are property taxes that will be paid by the residents and businesses of their respective communities. Of course, the businesses don’t vote—only the residents do. But businesses and residents all benefit from effective police, properly equipped fire departments, and well-maintained roads.

There is one difference between the two proposals. That is, simply, the size of the proposed property tax increases. Clayton’s proposal is relatively modest, at 18 cents per $100 dollars of assessed valuation. While Clayton has very valuable buildings and beautiful homes for which even a low-percentage increase will mean real money, at least at this reasonable level of increase people can fairly weigh the costs and benefits to the proposal. (As a point of reference, a home worth $500,000 would have a $171 tax increase.) Nobody is getting hammered with radical tax increases. What’s more, residents and businesses will see the same rate increase. They will share in the costs and benefits of the proposal.

The same can’t be said for Frontenac. Frontenac’s proposed tax increase is huge any way you look at it. The city’s residential tax rate is more than doubling from $0.435 to $1 per $100, and the commercial property tax rate is tripling. Tripling! The owners of 1701 S. Lindbergh, the primary parcel for Plaza Frontenac, will pay $150,000 more in property taxes to the city if this proposal passes. $150,000! The owners of the Frontenac Hilton—which just experienced a pandemic year with hardly any guests and furloughed 128 employees in 2020—will have to pay $40,000 more per year in taxes. Nothing says “we will all get through the pandemic together” like a huge tax hike on struggling businesses.

Do these cities truly need this money? That is up to the voters to decide. They both claim that they have cut waste as much as they can, and I believe they have tried to do so. Frontenac’s website details money it has saved by sharing services with other cities and freezing employee salaries. Fair enough. Clayton’s website also documents recent budget savings by the city, but considering that Clayton still offers rear-yard trash pick-up, I know of at least one more thing they could cut to save tax dollars—rear-yard trash pick-up). Clayton is expected to receive over $3 million and Frontenac about $750,000 from the latest federal stimulus funds. This is on top of the likely increases in tax revenue for each city from online sales tax collections and higher gas taxes passed in the recently concluded state legislative session.

Residents, voters, and taxpayers (most people are all three, of course) generally like the high quality of services found in most St. Louis County suburbs, especially in the more prosperous cities like the two we are discussing here. But you can only ask for so much before people start saying “no.” People want quality services; they also like fair taxation and the idea that their cities aren’t just out to gouge them. The Clayton proposal will probably pass that test with many voters, but with numerous Frontenac residents staring down an increase of over $1,000 in property taxes, I think the gouging question is going to be asked a lot.

A New Sales Tax for Law Enforcement in the Lake of the Ozarks

Posted on by David Stokes

There is a one-quarter cent sales tax increase on the ballot for August 3rd in Camden County. The extra revenue would go to the county sheriff’s department. The sheriff has been promoting the sales tax increase as a way to hire more officers, retain current officers (via a pay increase), and improve the department generally. Public safety costs money, and if the people of Camden County—the largest county in the Lake of the Ozarks region—want more law enforcement in their community then increasing funding for the sheriff’s department is the most direct way to do that.

I have no doubt that the sales tax is being proposed in order to make sure that tourists pay their “fair share” of the costs for greater law enforcement in the area. The Lake is one region where either a sales tax or a property tax increase is going to raise significant tax money from non-permanent residents, with either tourists paying the sales (and lodging) taxes or vacation homeowners paying the property taxes.

But back to the sales tax increase. Residents know better than anyone if increased or better law enforcement in Camden County is required. They and the tourists (like me) will pay for it. But is there money available outside of a tax increase? Here are some things to consider:

  • Online sales tax collections are coming (officially) to Missouri, which will increase local tax collections starting in 2023.
  • Parson just signed the gas tax increase, which (assuming it survives legal challenges) will further lead to more money for counties. (The money raised has to be used on roads, but that loosens up other tax revenues.)
  • In the short term, Camden County is set to get almost $9 million from the stimulus plan. That is, shall we say, a lot of money.
  • Housing values are soaring, and even with the required tax rate rollbacks, there will still likely be noticeable local property tax collection increases.

Leaving aside this increased future revenue, are there other ways to increase funding for law enforcement in Camden County without tax increases?

I would suggest two things. First of all, get control of the generous tax subsidies granted to developers in the region. That is tax money that is given away to private interests instead of going to public services. The Lake Ozark region has currently promised TIF subsidies of $395 million. $395 million! To be clear, because the TIF reports don’t give addresses, and because many Lake of the Ozarks cities are in multiple counties, I can’t determine how much of that is within Camden County itself. But undoubtedly it is a very large amount of tax subsidies over the next decade or so, very likely in the hundreds of millions. That is tax revenue that could have been used for public services, including law enforcement.

Another option is greater consolidation of 911 emergency dispatching services, like Miller County and many other Missouri communities do. Camden County law enforcement agencies appear to operate their own dispatching services, which is an area ripe for economies of scale and cost savings.

But in the end, the choice, as it should be, is up to the voters.

Lee’s Summit School District Wants $40,000 to Show What It’s Teaching Kids

Posted on by Patrick Ishmael

As readers know, over the last few weeks we’ve made public records requests to schools and districts across the state to find out whether they are teaching critical race theory (CRT) or any of its related concepts. You can find the database of records we’ve received here. It was bound to happen, but we finally got a cost estimate for public records that shocked even me, and it’s a doozy.

$40,609.01. That’s what the Lee’s Summit School District wants to complete our Sunshine Law request. From the email:

The total amount that would need to be received to begin the discovery of the records requested would be $40,609.01. I do want to let you know that I have been conservative with the time estimates in order not to inflate the payment amount. However, it very well could require additional time, thus payment, in order to comply with all your requests. [Emphasis mine]

That figure looks bad, but it’s actually far worse than that. The main cost driver for the estimate is the request for whether teachers are including CRT in their lesson plans, and for that, the district estimates it would cost $35,997 per quarter!

That’s right—if you want to find out what’s in Lee’s Summit’s lesson plans for a full year, it looks like you’d be on the hook for over $140,000.

Organization and efficiency of reviewing all lesson plans would need to be a priority in this task. Therefore, I am suggesting that we review one quarter at a time. Each teacher has their own pay rate, depending on degrees completed and years of service. For purposes of this estimate, I will use the lowest hourly pay rate for a teacher which would be $27.69. I also will estimate one hour per teacher to review one quarter of the school year. For us, the first quarter will begin on August 25 and end on October 22. The total estimate would be 1300 hours @ $27.69 = $35,997. [Emphasis mine]

You can peruse the full correspondence at the link. We were able to get a handful of documents from Lee’s Summit prior to this demand; I don’t know what, if anything, changed since then, though it should be noted that the district has been in the news lately over a racial controversy.

Regardless, it’s not just startling that the district would demand tens of thousands of dollars for these records; it’s startling that the district apparently has no idea what teachers are actually teaching in their classrooms. Putting up an absurd barrier like this and preventing parents from seeing what their kids are being taught is bad governance. Lee’s Summit parents deserve better.

Columbia Public School District Bringing the 1619 Project to Classrooms

Posted on by Patrick Ishmael

This week at a meeting of its school board, the Columbia Public School District officially accepted a grant from the Pulitzer Center to teach aspects of the New York Times’ 1619 Project in the classroom. The Columbia Daily Tribune reports:

The 1619 Project is a central aspect of what is known as Critical Race Theory, which has been a controversial topic.

Under the program, teams of educators will receive grants of $5,000 each “to support exploration of key questions of racial justice and other pressing issues,” the agenda item reads.

District educators must manage the writing and sharing of at least one of the standards-aligned unit plans that connect students to resources from The 1619 Project as part of unit objectives. Unit plans should explore questions including under-reported stories and why they are important; the role of journalism in evaluating history; and examining contemporary under-reported issues with connections to the past.

Those following the Show-Me Curricula Project may have noticed that this was in the hopper, in light of the grant application we received from the district that it had filed with the Pulitzer Center. The memorandum of understanding, however, provides further definition to what is expected for the money. From the memorandum, which is also filed in our public database:

Network teams will develop standards-aligned units that engage their students in The 1619 Project, and other journalism and historical sources, to strengthen connections to existing curricula, practice media literacy skills, and build empathy. At least two educators from each team will then implement units with at least two classes, evaluate student outcomes, and share their projects publicly through Pulitzer Center’s lesson library and virtual professional development programs. Program details and deliverables are further outlined below. (Emphasis mine)

Keep in mind that the grant requires “at least two educators” and “at least two classes” to teach the 1619 Project. This is only the minimum required under the grant. It does not touch on what other teachers might bring into the classroom on their own. In any case, the board’s adoption of the 1619 Project appears to give a green light to bringing those resources and related resources into the classroom.

Wayfair Bill Is Chock Full of Goodies

Posted on by David Stokes

Gov. Parson just signed SB 153 into law. Most of the attention on the bill will focus on the largest part—online sales tax collections. That is understandable, as that is a very important change for Missouri. Online sales tax collection is an idea whose time has come in Missouri.

But there is much more to the bill than online sales tax collections. There were a number of other reforms in the bill, including further tax-increment financing (TIF) reforms.

Prior to this bill, the use of TIF was outlawed in the floodplain only in St. Charles County. Now, the use of TIF is banned in the floodplain statewide except for the exemptions in the bill. While those exemptions are admittedly large, it is still a major step toward saner policy.

It is a very good thing that the baseline law now is that TIF is not to be used in the floodplain where it inevitably becomes a circle of subsidized absurdity: 1) Subsidize the floodplain developments 2) Subsidize the new operations with subsidized flood insurance 3) Increase emergency costs by moving the floodwaters out of that floodplain into someplace new, and, finally 4) Spend a fortune on emergency and rebuilding funds when the next flood inevitably comes and is now even worse than it would have been without additional levees and development.

What are the exemptions? Well, a number of cities and counties appear to have decided that subsidizing floodplain development with TIF is a sacred right, so Kansas City, Hannibal, Jefferson City, and a few more got themselves exempted from the rule. Also, port authorities and levee districts are exempted, although very importantly for port authorities it is only an exemption for actual port projects, and not just for anything that someone wants to operate through a port authority. Don’t get me wrong, we have a number of existing river ports in Missouri and I think subsidizing new ones with TIF projects is a bad idea. We do need a similar rule for the levee districts, too—TIF projects should only support levee infrastructure. (Note—the port and levee exemptions do NOT apply in St. Charles County, which maintains its total floodplain TIF ban except for one long-planned project.)

There’s still work to be done, but this bill represents progress. Hopefully we can continue to move forward on this issue.

Podcast: COVID Legislation, How to Hire Teachers and MO Toll Roads

Posted on by Jakob Puckett

Susan Pendergrass, Patrick Ishmael and Jakob Puckett join Zach Lawhorn to discuss Missouri’s newly-signed COVID liability legislation, MO DESE’s application for American Rescue Plan funds and Jakob’s recently published report on tolling in Missouri.

Listen on Apple Podcasts 

Listen on Sticher 

Major K-12 Teachers Union Endorses Teaching Critical Race Theory

Posted on by Patrick Ishmael

The National Education Association (NEA) made some big news at its annual meeting last week, endorsing the teaching of critical race theory (CRT) to K-12 students and calling on members to “fight back” against those that oppose it. The union also committed to providing:

an already-created, in-depth, study that critiques empire, white supremacy, anti-Blackness, anti-Indigeneity, racism, patriarchy, cisheteropatriarchy, capitalism, ableism, anthropocentrism, and other forms of power and oppression at the intersections of our society, and that we oppose attempts to ban critical race theory and/or The 1619 Project. [Emphasis mine]

I’ll let readers unpack for themselves what all those other terms mean. But not only do we know that CRT is already in K-12 classrooms around the country and here in Missouri, but its instruction is now officially supported by one of the biggest teachers unions in the United States.

Is your school in an “NEA district”? Maybe.

The Missouri NEA’s website offers the most current list of the group’s 300 or so affiliates in Missouri, but thanks to our Show-Me CBAs Project, we also know that there are a lot of Missouri districts that had formalized and active working relationships with the Missouri NEA in recent years. That list includes:

You can find our full CBA report here.

It might not be coincidental, then, that several of the districts on these lists have been less than open about what they’re teaching kids in response to our Show-Me Curricula inquiries. Taking the cake so far is Springfield, whose public schools want nearly $2,000 to produce documents relating to what they’re teaching their kids. If the district’s partners in the NEA are any indication, I can imagine why they might be reluctant to hand over these public documents.

The NEA’s endorsement of CRT reaffirms how important it is for Missouri schools to be honest with parents and the public about what’s being taught in their classrooms. Hopefully, those districts currently resisting our transparency requests will relent in their effort to evade what’s required of them under the Sunshine Law. We certainly won’t relent in pursuing those documents.

Does the Gas Tax Bill Violate the Constitution?

Posted on by Elias Tsapelas

Supporters of this year’s gas tax bill presumably don’t think they passed something that would violate Missouri’s constitution, but as my colleagues and I have outlined, there are reasons the bill’s opponents think otherwise. The question is whether the bill violates the state’s Hancock Amendment.

Recently, I’ve written a lot about the potential for Hancock Amendment issues with the gas tax bill but have yet to outline the more technical questions on the topic. Here is a non-exhaustive list of what I’ll be watching as the situation unfolds:

  • How should the revenue impact of SB 262 be calculated for Section 18(e) compliance?
    • The amendment states that the effect shall be measured the first fiscal year the tax increase is “fully effective.” Since the bill would be phased in over five years, should compliance be determined in each of the five years or only once when fully implemented in 2027?
    • At one point Section 18(e) describes compliance as being based on revenue estimates, while elsewhere it refers to the measurement of actual collections. Does this mean the gas tax hike has to go into effect before it can be determined whether the bill should have received a public vote or not?
      • If the calculation is based on estimated revenues, how should the state project the number of Missourians who will take advantage of the refund provisions and how will that impact the ultimate revenue calculations?
      • If using actual collections, how much revenue will the gas tax hike raise and how much will be claimed for a refund? There’s always a real chance that actual collections differ widely from revenue projections, and if that turns out to be the case, what would that mean for the bill’s compliance?
    • How will the other bills signed by Governor Parson this year impact compliance?
      • Based on the answers to the SB 262 questions, similar principles will likely have to be applied to every bill that becomes law this year. What will that mean for Hancock Amendment compliance this year, and for years to come?
        • For example, if the online sales tax bill currently sitting on the governor’s desk becomes law, the fiscal note projects it could potentially increase state revenue collections next year yet reduce total state revenues five years from now. In other words: Could bills passed this year exceed the Hancock Amendment cap next year but be in compliance once they’re fully implemented?
      • What will the courts decide?
        • If the gas tax bill becomes law, there will likely be legal challenges. As I’ve mentioned previously, the approach taken with SB 262 is unprecedented, so the courts could provide some clarity to this complicated topic. What the courts ultimately decide is anyone’s best guess.

Before too long, we’ll know where the governor stands regarding many of these questions, but if he signs the bill his decisions will likely only be the beginning in terms of adjudicating these issues.

Missouri’s Hancock Amendment and the Gas Tax

Posted on by Elias Tsapelas

With Governor Parson set to decide whether to raise Missouri’s gas tax in the coming days, the general assembly’s decision to sidestep voter approval on the issue has reignited discussion about the state’s consequential Hancock Amendment.

In 1980, Missouri voters approved an amendment to the state’s constitution adding Article X, Sections 16 through 24, which are collectively referred to as the Hancock Amendment. The sections are some of Missouri’s most important safeguards against higher taxes and growing government. But as with most constitutional topics, the Hancock Amendment and its implications are quite complex.

The concerns about this year’s gas tax bill center around Article X, Section 18(e) of Missouri’s constitution, which was approved in 1996. The subsection states that in addition to the other limitations imposed by the Hancock Amendment, Missouri’s general assembly cannot raise taxes or fees above a certain threshold in a given year without voter approval.

To avoid a public vote, the cumulative revenue impact of every bill passed by the legislature each year must be calculated and determined to be below the constitutionally defined limit. If the limit is exceeded, the bills that raise revenue must be submitted for a public vote starting with the largest increase, then every other increase in descending order, until the net effect of the remaining bills is lower than the year’s cap.

Here’s an example. Let’s say the cap in a given year is $100 million, and the legislature has enacted net tax increases of $125 million, and the most expensive bill raises taxes by $30 million. You would only need to vote on that one bill. If the bill is rejected by voters, then the legislature is below the cap. If voters approve the bill, the bill no longer counts toward the Hancock cap. If one single bill didn’t cover the entire gap by itself, that’s where voting on each bill in descending order comes into play.

When the amendment was initially adopted, the cap was $50 million in new revenue but has since been adjusted according to state personal income growth, and for 2021 it was $111.8 million.

For this year’s gas tax bill, the official fiscal estimates suggest that once fully implemented, it could raise between $123–$455 million. On its own, the bill would appear likely to exceed the Hancock Amendment cap, but that’s only one part of the story.

First, since compliance with the amendment’s limit is based on the net effect of all legislative changes in a year, we can’t know whether there’s a violation until Governor Parson finishes signing this year’s bills. It is also important to remember that if one bill raises enough revenue to violate the amendment, as long as there’s another bill that would simultaneously lower taxes or fees such that the net tax increase is below the threshold, the general assembly could still avoid violating the constitution.

Second, the gas tax bill is really the first of its kind. There haven’t been similar past efforts to raise taxes the way it does while avoiding a public vote. The gas tax bill has a refund mechanism, which is explained in the first post in this series. Given the potential complexity of a refund, this part of the bill appears to serve as a tactic to avoid triggering the Hancock Amendment rather than an effort to ensure Missourians pay less tax. Consequently, there are a variety of unanswered questions about how a potential Hancock Amendment violation would be handled. (See here for further breakdown of the questions at hand.)

One thing we do know is that Missouri voters are all too familiar with being asked to raise the state’s gas tax, and since the last approved increase in 1997have shot down every one of them, including a vote in 2018. While we wait to see what’s decided on the topic, it’s fair to wonder whether the legislature’s choice to avoid a public vote will prove to be a wise one.

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