Privatizing Lebanon, Missouri’s Municipal Electric Utility

City officials in Lebanon are considering getting out of the municipal electric business by selling their electric utility or, at a minimum turning over its management, to Laclede Electric. While discussions began only recently and no cost-benefit studies have been completed yet, residents should keep an open mind about this development.

Lebanon provides electricity to its residents through a small, city-owned and operated electric utility. However, a 2019 study from Concentric Energy Advisors found that small public utilities were comparatively inefficient when compared to larger co-ops or investor-owned utilities. Similar studies for decades have recommended that municipalities instead purchase electricity from these larger entities or get out of the business entirely. This is because of economies of scale, meaning that the larger the size of electricity operations, the lower the overall cost is of producing each megawatt of electricity. Think Cheaper by the Dozen, but for keeping the lights on.

Privatization can increase efficiency and expertise and provide public services at a lower cost. More than 86 percent of all electricity sold in Missouri is provided by a utility company or an electric co-op. In fact, Lebanon is the only city in Laclede County that has not already taken this route.

Cities nationwide, such as Eagle Mountain City, Utah (2015), Fort Wayne, Indiana (2011), and Readsboro, Vermont (2011) have privatized their municipal electric utilities in the past decade. These cities have used the divestments to fill budget holes, improve service, and decrease rates for residents. Lebanon officials should look at what worked for these and other cities and tailor their privatization process accordingly.

Lebanon’s electric utility equipment is valued at $14 million, but it is not known how much a sale would bring in. Lebanon residents could benefit from this money and sale in several ways. The city’s long-term public employee costs would be reduced, and the money could be used to finance any immediately needed public improvements, build a rainy-day fund, or finance a tax cut. As seen in other cities, this may also result in lower electricity prices or better services for residents.

Lebanon officials would make the deliberations as transparent as possible so citizens can observe. Adding the financial incentives of competition may be difficult due to Missouri’s monopolized electricity structure, but any deal should include a provision holding any new entity accountable if it does not meet quality-of-service and implementation expectations.

Lebanon officials and Laclede Electric will be studying the issue for the foreseeable future, and as more information emerges it will make evaluating the specifics of any deal easier. If the experience with privatization in other cities is any indication, Lebanon should consider taking advantage of this opportunity.

Crestwood TIF Commission Considers Redevelopment Plan with $17 Million in Giveaways

The Crestwood TIF Commission is considering a proposal to redevelop the land that was once the Crestwood Mall. The plan includes a Dierbergs grocery store and multiple retail spaces that would be partially funded with $13.5 million from tax-increment financing and $3.5 million from a community improvement district. There is also a residential component of the development that will not include public funding. There is a TIF Commission public hearing on this proposal at 7 p.m. on June 17th, 2021.

David Stokes joined The McGraw Show on The Big 550 KTRS to discuss the project.

Let Expired Agricultural Tax Credits Stay That Way

One of the better things to come from the 2021 Missouri legislative session was something that the legislature did NOT do: renew several agriculture-based Missouri tax credit programs. This is, of course, extremely concerning for the economic development officials who justify their jobs by the existence of such programs. Never mind the fact that these programs generally accomplish nothing and are an actively negative influence in most cases.

A Missouri Times article explains what the expired economic development tax credits are:

The New Generation Cooperative Incentive Tax Credit, Meat Processing Facility Investment Tax Credit, and Agricultural Product Utilization Contributor Tax Credit programs offered by the Missouri Agriculture and Small Business Development Authority (MASBDA) that sunset in 2021.

What kind of effect do they have? Well, that depends on whom you listen to. According to the Missouri Farm Bureau, the effects would have a larger impact than discovering a giant oil field in rural Missouri and turning Cuba, Paris, and Lebanon (MO) into the next Kuwait (note: there is no Missouri city named Kuwait). From a Farm Bureau commentary in favor of the programs (emphasis added):

The largest of these programs is the New Generation Cooperative Incentive. This tax credit helps investors draw in private investment for value-added processing. To date, $63 million in tax incentives have generated over $501 million in private investment.

For those of you keeping score at home, that statement claims an economic impact eight times the government investment. Whether you call it an economic multiplier, a cost-benefit analysis, or whatever, the claim that it generated an eightfold impact is absurd.  Even the Missouri state economic development agency makes much lower economic impact claims for this credit (and their claims are also almost certainly way too high). If you are asking yourself if an obscure Missouri state agency funded with other people’s money is capable of creating an economic return eight times the cost of the program, the answer is no, it isn’t.

Government officials cannot predict the future (which often makes the credits useless), and are often influenced by political calculations (which is what can turn the credits from useless to harmful). Missouri should let these tax credits remain dead, and the same thing goes for the film tax credit (wasteful), the low-income housing tax credit (rampantly abused by developers), and just about every state and local tax credit program we have.

Investment in rural Missouri is absolutely needed. State tax credit programs are not the way to do it.

Kansas City Council Should Say November Oscar to Hotel Bravo

The developers of a luxury hotel proposed for downtown Kansas City are back seeking major tax subsidies for their proposal. In a great but all-too-rare decision in 2019, the Kansas City TIF Commission recommended against using TIF for this exact project. Apparently, in modern America, you can’t build high-end luxury goods without taxpayer subsidies (as twisted as that is).

But the developers of the Hotel Bravo plan are back requesting subsidies from the council. They have not amended the plan, and because of the TIF commission’s 2019 rejection, the developers will need a supermajority of the Kansas City City Council to approve (9 votes out of 13) for it to pass. One would hope that there are five members of the council, including the mayor, who are opposed to a $47 million tax subsidy for another hotel in downtown Kansas City. Even the region’s tourism agency, Visit KC, has opposed new tax subsidies for more hotels because its own analysis concluded there were too many already.

Our former colleague, Patrick Tuohey, covered the issue of Kansas City hotel subsidies with gusto during his time here. I highly recommend reading or watching his work on the topic.

This should not be complicated. $47 million in tax subsidies for a high-end hotel in a saturated market (according to Visit KC) is insane. Vast evidence on the subject indicates that subsidy-based economic development doesn’t work. Local economic development officials can’t predict the future and are influenced by politics in their choices.

The TIF commission made the right decisions when it rejected the proposal in 2019. The city council should once again decisively say November Oscar to Hotel Bravo.

Yes, We Should Be Concerned About Critical Race Theory

Caroline Cureau was my great-great-grandmother. In 1902, Caroline married Onesiphore Sarafin Manade, my great-great-grandfather, and the couple moved from Louisiana to Missouri several years later. Much about their life story has been lost with the passage of time, but as facts go, two things are certain: Caroline was black, and Onesiphore was white.

Many Americans don’t know that anti-miscegenation laws—laws prohibiting certain races from marrying one another—were in effect well into the 20th century, including here in Missouri. They were odious laws affecting the marriages of not just the first generation, but of their children, their children’s children, and their children’s children’s children. The generational injustice of such laws was breathtaking.

For the better part of a century, Americans tried to move past this sort of thinking. Martin Luther King, Jr.’s dream that his “four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character” is the American dream, of a world defined not by who your family was but by who you are. It’s the dream of families of all colors that their children will not suffer because of the stations or sins of earlier generations.

It is right and proper that America’s tumultuous racial history is taught in every American classroom. Yet the line between racial understanding and racial grievance can be a thin one, so it’s unsurprising that there has been so much debate recently over the issue of critical race theory (CRT) and whether it should be taught in our schools.

While the precise contours of CRT vary from adherent to adherent, CRT as a belief system posits that white supremacy serves as the foundation of American institutions and government, and that white supremacy is advanced by whites as a class and who, individually, are definitionally racist regardless of their personal views. If the use of “class” sounds vaguely Marxist, it’s because CRT indeed has roots in Marxism, and some of its adherents are plain about their support for the suspension of private property rights and redistribution of wealth on the basis of race. Additionally, CRT (again, generally) gives great weight to ideas of race essentialism (that the color of our skin drives our value system,) neo-segregation (that racial groups should be regularly separated to develop their own identities), and collective guilt (that the wrongs of the past are assignable to racial groups today.)

In other words, it’s a belief system that is in direct contradiction to King’s dream. That, to me, is intolerable, and promoting such a worldview in public schools would be an alarming throwback to the bad old days of legally-enforced and culturally-accepted racism.

Some may feel differently, and that’s their right. But do Missouri parents even know whether their kids are learning this content? Have Missouri schools been transparent about whether and to what extent they agree with the principles of CRT? Parents have a right to know what’s being taught to their children regardless of the subject, but that’s especially true of contentious curricula that use CRT concepts.

For my part, I’d like to think that Missourians will reject critical race theory for themselves and their kids. Maybe that’s because of my own background and upbringing. Above all else, I think most Missourians believe we are all really part of an “American family,” with shared successes, shared disappointments, and shared history.

But being American isn’t about who our parents were or what we look like. It’s about what we choose to be . . . and what we choose to be together. As we look back at our American story, I hope we don’t lose sight of that; otherwise I fear we won’t just be looking back at the past, but falling back into its errors, as well.

Coming up for AIR After COVID

The last year has been a difficult one for Missourians. Our friends and neighbors have not only contended with a serious public health threat but have also had to fight government stifling their liberties in ways that would have been unimaginable a year ago. It’s no surprise that as fear and government restrictions recede, Missourians may feel like they’re finally coming up for air.

But Missouri policymaking could use fresh AIR as well—Accountability, Investment, and Reform. As pandemic restrictions end and life moves back to normal, policymakers have a unique opportunity to reassess where the state is going and enact free-market and good-government reforms that would have helped during the pandemic but will certainly help after it is long gone. With federal stimulus dollars waiting in the wings, policymakers will also have spending decisions to make, and they should make those decisions conservatively, deliberately, and with reform as a top priority. But whether these ideas are funded with federal or state money, having a framework of potential programs and reforms ready for them as they embark on their work is crucial. The ideas presented in this document provide a starting point for the work ahead.

Click HERE to Download Coming Up for AIR After COVID

https://issuu.com/showmemo/docs/coming_up_for_air__1_

Jobs, Jobs, and More Jobs

It’s fitting that a new report from the Bureau of Labor Statistics (BLS) on job openings was released during Missouri’s last week of federal pandemic-related unemployment benefits. At the end of April 2021, job openings reached 9.3 million, the highest since the BLS began its job openings series in December 2000. The industry with the largest increase in job openings from March to April was accommodation and food services, which shouldn’t come as a surprise to anyone who has seen “Help Wanted” signs at their favorite eateries. The hiring rate, on the other hand, remained unchanged at 4.2 percent from March to April.

With all these job openings, it really does seem like it’s time for things to finally get back to normal and for people to get back to work. The reasons we may have needed additional unemployment benefits during the height of the pandemic are fading fast—businesses are opening, vaccines are widely available, and people are returning to life outside their homes.

The economy is recovering from the pandemic, but it’s possible that increased federal unemployment benefits have slowed down our recovery by causing people to push back their job search. Governor Parson decided that Missouri would end all federal pandemic-related unemployment benefits on June 12th to incentivize people to get back to work. I think this was a smart move because jobs are clearly available. It’s time to stop relying on government handouts and fill those job openings.

Residential TIF Versus School Districts

The St. Louis TIF Commission approved a second phase of the City Foundry TIF project by a vote of 5 to 3. The first phase of this project is nearly complete, turning an old Midtown factory into a food hall with other entertainment and retail spaces. Two of the votes against the amended second phase, which now includes an apartment structure with over 280 units instead of an office building, were from the school district representatives on the TIF commission. This really shouldn’t be a surprise, as residential TIF projects have direct negative effects on school districts.

When a TIF district is created, the property taxes allocated to the school district (and all other taxing districts in the TIF district) freeze at the pre-development amount. The developer receives any increase in property tax payments due to the increase in the property value during the life of the TIF project (up to 23 years). If the property generated $100 in property taxes before it was developed and generates $300 after it was developed, the developer gets to keep the increment of $200 for certain development costs while the school district and other taxing districts continue to only receive their portion of $100.

This aspect of TIF is always harmful for these taxing districts, but it is especially harmful for school districts when the TIF project has a residential component. With such residential projects, some families with school-aged children will likely move in, and the children will likely attend the local school district. The school district, however, won’t get additional funding. How are school districts supposed to educate additional kids without the appropriate funding?

Harmful residential TIFs have been proposed elsewhere in Missouri. In some cases, the school district raises taxes on everyone to cover the additional expenses. These potentially huge negative effects on the school district—on top of the $18 million in tax dollars, sales tax exemptions, and general display of governmental special treatment—should make us question whether the City Foundry project is actually a good thing for St. Louis’s citizens.

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