When City Leaders Aren’t Concerned, Taxpayers Should Be

Posted on by Patrick Tuohey

In a recent story in The Kansas City Star about cost overruns for the downtown convention hotel, Steve Vockrodt wrote:

City manager Troy Schulte said he wasn’t concerned about the increased price of the hotel since cost overruns are covered by the developer.

“We are actually getting a better project with lower public commitment,” Schulte said.

This seemed ominously familiar to me. A quick search confirmed my suspicions. Back in 2009, Vockrodt wrote in the Kansas City Business Journal about Cordish’s effort to reduce the property valuation for the Power & Light District. He included this:

Kansas City Councilman Ed Ford said he was told by city attorneys that the Power & Light District’s dispute would not put the city on the hook financially.

“It looks like the city is not going to have a dog in the hunt on that,” Ford said.

But of course it did affect the city because a low property tax assessment meant Cordish paid less in property taxes, which in turn meant there was less TIF money available to apply to bond payments. And because city leaders committed Kansas City taxpayers to paying any bond shortfall, we very much did have a dog in that hunt.

This doesn’t mean that hotel cost overruns will necessarily cost the city—unless the hotel so underperforms that taxpayers are told they need to add amenities to improve performance, exactly as has happened in the past. When it comes to publicly financed projects, being told by city leaders that there is no cause for concern seems itself to be a cause to be concerned.

 

Finally, a Developer Using the Free Market

Posted on by Corianna Baier

Do people want a garage inside a garage? I’m not sure, but luckily, people will get to decide if this project succeeds instead of the government.

Developer Brian Hayden is creating private, suburban-style garages within a larger parking garage. The outer ring of his building will be Gallery Villas, and residents here will have their own private garage structure just like the ones attached to houses in the ‘burbs. When you open the garage door, you’ll be in a large parking garage for residents and businesses of other buildings.

The project is novel and a little unconventional, but is it a good one? Time will tell, but the good news is Hayden is willing to submit his ideas to the free market for approval. Hayden is not using tax abatements, tax credits, or other public financing methods to prop up his development. Rather, he’s relying on private investors and consumer demand for these private garages. Hayden is quoted as saying “I believe a project should fully financially support itself,” and I agree.

In the free market, a developer relies on people to decide if a project succeeds or fails—either people like the idea of a garage inside a garage and put money toward it (investing or buying the product) or they don’t. It’s as simple as that. Unfortunately, many developers don’t just submit their project to the free market. They seek money from the government to finance their projects, allowing bureaucrats to decide if an idea is good or bad. The boost from government dollars means developers don’t have to work as hard to convince investors and consumers that their project is worthwhile. As my colleague Patrick Tuohey has asked before, “If private investors won’t invest their own money, why should taxpayers invest theirs?”

When risk-takers, like Hayden, offer up their good (and bad) ideas to the free market, we get to use our hard-earned money to decide on the ideas that we like. Isn’t that better than having bureaucrats spend our money on ideas they like? I applaud Hayden for taking a risk with his innovative garage project and leaving it up to consumer to decide if it will succeed.

 

Where Are Those Jobs, Cerner?

Posted on by Patrick Tuohey

In 2014, Cerner received “the largest economic development project in the history of the state” to build its new headquarters at the former site of Bannister Mall. In return, it promised taxpayers it would create 16,000 new jobs in Kansas City. How is it doing?

At the time of the subsidy application in late 2014, Cerner claimed it had just over 10,000 employees in Kansas City alone. In Exhibit 4B of its application for tax-increment financing (TIF) it promised to create 15,659 “permanent jobs to be CREATED IN Kansas City” as a result of the new headquarters building [emphasis in original]. And Cerner claimed it would accomplish this in 10 years.

One of the unmet challenges with economic development incentives is that it is difficult to know whether any economic growth is due to the subsidies themselves. Growth, if there is any, may have happened for reasons other than incentives, such as an improving economy overall. As we have noted time and again, the economic literature makes clear that there is little evidence that economic development incentives themselves actually drive any growth.

Five years in, it seems the company is struggling to keep the promise about jobs. Just this week, The Kansas City Star reported that Cerner had 14,000 employees in the Kansas City region (presumably including its Wyandotte County, Kansas location). This is 4,000 more employees than what it reported in 2014. That’s pretty good growth for any company in just a few short years. But it’s nowhere near the 26,000 (a baseline of 10,000 jobs plus the 16,000 additional promised) it should have by 2024.

Maybe Cerner will make a lot of new hires in the next five years, but it needs to bring on at least 12,000 people in Kansas City to make good on its commitment.

If Cerner fails to live up to the promises that made it Missouri’s top recipient of taxpayer subsidies according to Good Jobs First, what are the consequences? Did the issuing agencies insist on clawbacks? Were subsidies issued on a performance basis? Or did taxpayers’ representatives just believe what they were told and not insist that Cerner actually deliver on its promises? If experience is any indication, it’s likely the latter.

 

Why Are Missouri School Districts Blocking Course Access?

Posted on by Abigail Burrola

Educational options are scarce for Missouri students. Missouri’s new virtual learning program should be a resource providing more options for students, but it’s being slowed down by red tape. Some parents have to go to great lengths—in some cases hiring lawyers—to access the virtual learning program. A family in the Warsaw R-IX district with a child who has a debilitating medical condition had to hire a lawyer to force the district to allow the child to enroll in a virtual learning program.

A few months ago, the Department of Elementary and Secondary Education (DESE) took the first steps to implement the virtual learning program. The newly mandated course access program offers options to students beyond their assigned public school and can provide a full-time virtual program for students.

But in July, a parent had to sue the Fulton School District so her three children could access an existing virtual learning curriculum known as Missouri Virtual Academy (MOVA). The judge ultimately ruled in favor of the parent, stating that DESE had to list MOVA as an authorized course access program provider because the plain language of the law required that MOVA be automatically approved. This was the first case when a family had to take legal action to access online courses.

You would think that after the Fulton case, the student in Warsaw R-IX should have had access to MOVA as well. But that’s not what happened.

The family in Warsaw R-IX had decided, after consulting with doctors, that a full-time virtual education would be best for their child for safety and educational purposes. The child was initially approved for course access, but the district rescinded the approval without following the proper protocol and despite no changes to the student’s circumstances.

The Warsaw R-IX district required MOVA to prove that it complies with state requirements. But that’s not what the law says, and DESE had already been ordered to list MOVA as an approved course provider. The district asked the family to choose either a part- or full-time traditional in-building class schedule for the student. The family was forced to hire a lawyer in response, and only then did the district allow the student to enroll in MOVA.

The virtual instruction program was intended to provide families with choices for their children’s education, and families want to use it. The first case in Fulton was troubling. The second case makes you wonder whether some Missouri public school districts simply oppose the legal right of parents to choose online classes and are willing to throw up roadblocks unless legally challenged. In these cases, whose interest is the district really serving?

 

Flipping the Script on School Choice

Posted on by Susan Pendergrass

In Missouri, the public education powers that be insist that Missouri parents don’t need or want options other than the public school to which their address assigns them. Parents should simply defer to the “experts,” and go along to get along. In many cases, if not most, parents make whatever financial sacrifice is necessary to move their families to a school district they’ve heard is “good,” even though there is little information on what that means. But, if you can move to a “good” school district, the “experts” should be better, and your child should be okay.

School choice in Missouri, therefore, has come to mean forcing schools to relinquish some of their assumed power over families. And it doesn’t come easily. A law that allows parents to choose a full or partial virtual education for their children has been implemented very begrudgingly in multiple school systems across the state. According to an approved virtual education provider, the excuses being given to parents who request their courses include: programs that were already approved don’t meet the school’s standards, signatures were missing on the application, and the district has its own virtual program (even though the law ensures that parents get to choose a provider). And this is just a sample of the excuses given; there are many others. In some cases, the denial of access to the virtual education program conflicted with medical advice from the child’s doctors.

It’s time to flip the script. The public education establishment does not, and should not, grant power to parents. Parents grant power to their child’s school.  Yet, when one alternative becomes available, parents have grabbed hold of it only to have their hands slapped. A system that spends more than $11 billion each year to achieve mediocre results does not know better than parents. The demand for more options is only going to grow and the design of the system needs to change as a result.

 

A Deep Dive into Our Transparency Lawsuit

Posted on by Patrick Ishmael

In this episode of the Show-Me Institute podcast, David Roland of the Freedom Center of Missouri, the Show-Me Institute’s Susan Pendergrass and I discuss the Sunshine Law lawsuit filed by our organizations earlier this week. We explore the facts and law surrounding the lawsuit, the lawsuit’s prospects, and the enormous importance of transparency on the part of government entities. Click here to listen to the podcast.

 

Why is Missouri’s Medicaid Enrollment Falling?

Posted on by Elias Tsapelas

Since the beginning of 2018, roughly 120,000 people have left Missouri’s Medicaid rolls. It now looks like many of them shouldn’t have been there to begin with. As I wrote nearly six months ago, this “surprising” drop has puzzled policymakers and health care advocates alike. The majority of those no longer receiving services are children, which has fueled further investigation by the state’s Medicaid agency. This past week, Missouri’s Medicaid director released a statement explaining the agency’s view of the enrollment decline and admitted the change was no surprise after all.

Missouri’s governor and other state officials attributed the decrease in enrollment to the state’s improving economy. It makes sense that an improving economy would reduce the need for government-funded health benefits, as more people are employed today than were a year and a half ago. But as Missouri’s enrollment is declining faster than the national average, and the state’s economic growth remains lackluster compared to the rest of the nation, it is unlikely the economy alone can fully explain the drop in enrollment. I think the following point from the Medicaid director’s statement highlights an important yet under-discussed driver of the enrollment change:

From 2014 to 2018, a previous administration did not robustly verify eligibility requirements of individuals on an annual basis and therefore automatically renewed a significant number of enrollees, many of whom did not qualify for assistance . . .

In other words, the drop in Missouri’s Medicaid enrollment is not surprising because the program has been providing health coverage to individuals who did not meet eligibility requirements. This is a shocking admission from our state’s government, considering the federal government requires states to annually verify each participant’s Medicaid eligibility.

The extent of the wasteful spending remains unclear, but the fact it occurred is sadly unsurprising. A recent audit of the Medicaid program in Louisiana found that 82% of enrollees were ineligible at some point during the year they were enrolled. My colleagues and I have written about the state’s potential for wasteful Medicaid spending, and this report confirms our worst suspicions.

As Medicaid costs consume more and more of our state’s budget, limiting improper spending on ineligible individuals is essential. Policymakers should consider a new investigation into how much taxpayer money was wasted while wrongfully propping up the program’s enrollment in the first place.

 

Plugging the Port Hole

Posted on by Patrick Tuohey

A recent column by Dave Helling in The Kansas City Star called for Kansas City Mayor Quinton Lucas to challenge Port KC, the city’s port authority, by asking for the resignation of the authority’s board of commissioners. Part of the reason was Port KC’s willingness to offer incentives to Google (a story we wrote about recently). This move apparently irritated the mayor, who had promised to rein in economic development subsidies.

The mayor’s irritation may have been exacerbated by Port KC CEO Jon Stephens’ reaction to the border war truce. He oddly offered that despite the truce, the port authority could “proactively recruit” businesses from the Kansas side of the border but that it wouldn’t. The quote does not present Stephens as a team player on economic development reform.

When asked if the port authority was just a way to grant tax incentives while avoiding city council and public scrutiny, Stephens answered [starts at 19:38):

I would say that that’s certainly is not something that I would consider. I view everything [Prima facie] on exactly what is the net benefit. And I can tell you that we’re working very hard on our social equity: how we roll out to communicate exactly what we’re going to do, how we’re going to do it, and how we’re going to communicate to the citizens and their elected officials.

I’m not sure what any of that means, but it’s a disappointment for anyone hoping the answer was simply “no.”

Even if the port authority is a subdivision of the state of Missouri, Kansas City leaders have the ability to rein it in. Its board is appointed by the mayor and state statute allows the city council to, “from time to time enlarge or reduce the area comprising any port district” with the approval of the Missouri Highways and Transportation Commission. Perhaps restricting future Port KC activity to within a quarter mile from the Missouri River is a good way to make sure that it cannot keep issuing incentives downtown or even, as Helling points out, south of Country Club Plaza. In appointing a new board, the mayor could make sure that within that quarter mile of the river, Port KC is acting in the best interests of taxpayers.

Missouri’s economic development policy is littered with legislative good intentions warped by subsidy-seeking developers and consultants. Such legislation must be revisited to clamp down on abuse. In many cases it’s the statutory definitions that must be revisited; in this case it may be port authority boundaries. Port KC has demonstrated it is unable—and perhaps unwilling—to restrain itself to development along the river. The mayor and city council—and perhaps the state legislature—should do it for them.

 

We’re Suing the State

Posted on by Patrick Ishmael

This morning the Show-Me Institute filed suit against Missouri’s Office of Administration for violating the state’s Sunshine Law. A full explanation of the litigation can be found in the Kansas City Star today, but here’s a sneak peek at why we took this action:

Government entities may think they can get away with these excuses because too few citizens are able to invest the time money and emotional energy required to pursue a legal fight to keep these government entities transparent and accountable. We have determined that this case is a crucial opportunity to ensure equality in government transparency for all Missourians. It is but one of many such opportunities.

Click the link for the full commentary. More to come.

 

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