Page 200 – Show-Me Institute

Here Is Where LIHTCs Go

Posted on August 16, 2019May 5, 2026 by William Magee

Since its introduction in 1996, Missouri’s Low-Income Housing Tax Credit (LIHTC) has been the state’s primary tool for incentivizing the development of affordable housing. It has also been Missouri’s costliest tax credit program, and one of its most inefficient. For a program that has cost the state billions, Missouri taxpayers deserve to know how the money is being spent.

That’s why I reached out to the state agency in charge of allocating the tax credits, the Missouri Housing Development Commission (MHDC). The MHDC charged $122.76 for a list of projects and costs from the last 19 years of LIHTC allocation. (I also requested similar data from the 14 other states that have a state LIHTC program; they all provided the information free of charge.)

Missourians now can find where these LIHTC projects are located and how much they receive in subsidies from state and federal governments. The link below has a map displaying data on LIHTC projects since 2000:

LIHTC Interactive Map

The census tracts are colored by poverty rate, with the red and blue diverging at the statewide poverty rate of 14.6 %. The black dots represent every LIHTC project awarded since 2000. When hovering over a dot, the project’s name, address, city, county, owner, year awarded, and federal and state annual LIHTC allocation are shown.

Having this data is a good first step in analyzing and ultimately proposing solutions to the complex, problematic system that is Missouri LITHC.

The Entirely Predictable Failure of Sports Teams Subsidies

Posted on August 15, 2019May 5, 2026 by Patrick Tuohey

The River City Rascals are taking their ball and going home. This was not entirely surprising as the team was operating under a one-year lease extension with the city of O’Fallon. According to the St. Louis Business Journal:

The one-year extension came together after O’Fallon in October 2018 terminated the Rascals’ lease at CarShield Field and barred the team from the facility, saying at the time that the team’s ownership was “repeatedly behind on rent.” O’Fallon later let the Rascals back into the facility as it worked through negotiations with the team for new lease. O’Fallon said Monday that the Rascals still owe the city a balance of $36,600 on a debt of $60,000 from several years ago, and plans to discuss the debt with the team as it winds down operations.

Let’s not mince words: The city of O’Fallon was spending taxpayer money on a private enterprise exactly because the people of O’Fallon and the surrounding areas decided not to spend their own money on it. How was this ever a good idea? This comes on the heels of a similar situation in Wyandotte County, Kansas that we discussed and wrote about previously: A city spending limited taxpayer resources on a faltering private enterprise that only postposed the inevitable.

Incredibly, the larger cities on both sides of Missouri are contemplating even bigger versions of the same mistake, either by building a baseball stadium in downtown Kansas City or a Major League Soccer stadium in downtown St. Louis. The owners may be different, but the policy remains the same: City leaders using taxpayer dollars to shift the risk (but not the reward) from private investors to public taxpayers.

Bring the Free Market to College Athletics

Posted on August 15, 2019May 5, 2026 by Tyus Welter

Popular video game developer EA Sports has recently hinted at a return of its cult-classic game, NCAA Football. The game was discontinued in 2014 after a lawsuit settlement required EA Sports to begin paying student-athletes for the use of their likeness, a course of action made impermissible by NCAA amateurism bylaws. Nevertheless, speculation about the game’s possible revival is surfacing following a May announcement that the NCAA would be reviewing its policy on student-athletes’ ability to benefit from their own image. The impact of this issue exceeds the realm of virtual entertainment, and there is much the state of Missouri can do to promote free-market solutions to the financial woes of college athletes.

Missouri should be as cognizant of the benefits student-athletes provide public universities as any other state. The University of Missouri athletic department brought in $107.3 million worth of revenue in 2018, and its men’s basketball ticket revenue rose nearly 70 percent after signing highly-touted recruit Michael Porter Jr. in 2017. Although student-athletes do receive a sort of payment in free tuition and room and board, this compensation often pales in comparison to the massive sums of money the players generate. Shouldn’t Missouri allow student-athletes greater opportunities to profit from their position in the market?

Other states are already addressing the question of student-athlete compensation. Both Colorado and California have proposed bills in the past few months granting student-athletes the ability to sign endorsement deals, superseding the authority of the NCAA. Federal legislators have even gotten in on the action, as several members of the House of Representatives have introduced a bill that would alter the tax code definition of an amateur to allow college athletes to profit from public appearances.

Legislation like this provides benefits for all involved parties. It allows student-athletes whose performance merits it to earn money without imposing costs on universities. Since schools no longer use third-party endorsement deals or individualized merchandise, students profiting from such deals wouldn’t interfere with university revenue. Moreover, providing these opportunities to student-athletes may give Missouri schools an edge in recruiting battles. In short, these policies introduce the free market to college athletics, and if Missouri acts it could be a win for the state.

Why “Developer” Is and Is Not a Dirty Word

Posted on August 14, 2019May 5, 2026 by Graham Renz

In a recent piece at the New York Times, a writer laments:

Real estate developers are indeed fraught characters in city life. . . . And the history of American development certainly includes shady land speculation schemes, racist intentions and bloated egos. . . . But at its best, development has also meant progress in America. And that possibility has been banished from recent debate.

The worry is that “developer” has become a dirty word, and that our mostly negative perception of developers and development is off-base. While urban politics demonizes developers, we ought to be grateful there are people who work to develop and build our cities, the thinking goes.

This assessment is both right and wrong.

It’s right inasmuch as developers shouldn’t be demonized for providing what consumers demand through market forces. People need housing and space for their businesses, and developers provide just that. Just as we shouldn’t lambast farmers and grocers for “profiting off” our hunger, we shouldn’t bemoan developers for profiting off of our need for homes and office towers. (Indeed, we all profit off of someone else’s needs through the exchange of goods and services for money.) As Adam Smith remarked in his Wealth of Nations, it is incredible that, without any sort of orchestration, the market is full of goods and services we need and want. What Smith said about butchers, bakers, and brewers is equally true of developers.

But the Times article also misses the mark in some ways. While there is nothing wrong with providing housing by chasing profits, there is something wrong with advocating that the public subsidize projects for private gain. Developers don’t invest just their own money; they often invest taxpayer money as well. Through subsidy programs like tax-increment financing, abatements, and special taxing districts, developers reduce their private risk. And since policymakers are often generous with these subsidies, for some developers it pays—and pays very well—to chase down subsidies and ensure they continue to flow for years to come.

The economist William Baumol, in his famous paper “Entrepreneurship: Productive, Unproductive, and Destructive,” argues that market agents are after profit, and they will try to get it through productive means or unproductive means. He thought that when governments have the power to pick winners and losers in the economy, entrepreneurs will chase government favor instead of working to meet consumer demand competitively. Many developers, like many market agents, have become infatuated with government handouts, and that is deserving of criticism.

The Myth of Supposed Market Failures

Posted on August 13, 2019May 5, 2026 by Elias Tsapelas

Markets are said to be failing when supply doesn’t respond to demand—like a beachside shop refusing to sell sunscreen. When it comes to public policy, the markets are more complex and the process of diagnosing a failure is often difficult. If policymakers determine that a market is failing, their question then becomes what, if anything, the government should be doing about it. The problem is that poorly targeted government intervention can be more harmful than if nothing had been done at all.

If a market is truly failing, there can be economic justification for government policies in response. Though in practice, government intervention rarely hits the mark. For example, Missouri’s state and local governments would have you believe the housing market is failing. Their argument is that the market is failing to provide a sufficient supply of affordable housing. In 1996, the state’s elected officials decided that they should intervene. But is Missouri’s housing market any better for the state’s low-income residents today than it was 23 years ago?

More than two decades have passed since Missouri implemented the state’s version of the federal low-income housing tax credit (LIHTC). In that time, billions of dollars have been devoted to building new housing with 30-year rent protections, yet the program’s wait list is supposedly longer than ever. If that is really the case, it’s time to question why policymakers would consider continuing a government intervention that is failing to solve the problem it was intended to address.

LIHTC is predicated on the idea that subsidizing the development of housing will increase access to more affordable places to live across the state. But this is only true if there is currently not enough housing because it’s too expensive to build, and if subsidizing new developments will spur further housing investment by private entities. Without both of those conditions being met, the program can’t be effective—which matches the academic research on the subject and more importantly, Missouri’s past experience.

If the market is failing and there is an insufficient supply, policymakers should look into what may be causing the inefficiency. Restrictive regulations and zoning laws add to project costs, which discourage investment in neighborhoods where an increase in housing supply may be needed. Or if there is already enough housing but it is simply unaffordable, demand-side fixes such as housing vouchers or other measures that effectively lower the cost of already existing housing may be more appropriate.

It’s extremely unlikely that the issues plaguing the housing market in St. Louis are identical to those being faced in Pilot Grove. Policymakers shouldn’t expect broad-stroke statewide policy actions to be equally successful in both Missouri’s metropolitan and rural areas.

The fact of the matter is that very little has been done to establish whether Missouri’s supply of housing is actually lacking or why that may be the case. Without that information, it’s nearly impossible for policymakers to successfully intervene. Two things they do know are that many of their constituents would appreciate greater access to less expensive housing, and that developers have told them that issuing tax credits is the only way to make that construction worthwhile.

For some reason, policymakers continue to act as though the LIHTC program is their only tool for “fixing” housing in Missouri, when that couldn’t be further from the truth. Instead of doubling down on an already-failed policy, why don’t Missouri’s elected officials take a closer look at the underlying causes of the supposed market failure to find a new path forward for Missouri; or better yet, step back and let the market take care of itself.

St. Louis Blight Authority: Philanthropy Might Provide What Markets Cannot

Posted on August 12, 2019May 5, 2026 by Bennett Lewis

St. Louis has many serious problems. One is the city’s downwardly spiraling population, which has been in decline for decades. A recent Show-Me Institute essay analyzes St. Louis’s population decline and some factors that contributed to it, along with some of the effects population loss has had on the city.

One of those effects—severe real estate blight—is immediately obvious to any tourist. Abandoned warehouses line the riverfront and entire neighborhoods in north St. Louis are decaying.

But two unlikely allies are trying to solve the problem by philanthropic means.

The St. Louis Post Dispatch reports on an effort by a new organization, the St. Louis Blight Authority, to address the blight crisis by demolishing vacant and abandoned homes:

Tech billionaire Jack Dorsey, a St. Louis native and co-founder and CEO of both Square Inc. and Twitter, along with Detroit native Bill Pulte, whose grandfather founded national homebuilder Pulte Homes, were paying for the demolitions — $500,000 for a pilot program to completely clear more than 130 lots in a four-block area of the northwest St. Louis neighborhood hard hit by abandonment and vacancy.

However, the Post-Dispatch article explains the initial pilot phase will only knock down 30 structures. It’s a good first step, but it will make trivial progress toward solving the problem. St. Louis has 7,000 vacant buildings and more than 12,000 vacant lots.

The blight crisis will not solve itself, and Missouri’s major cities already use economic development programs that haven’t been shown to improve the situation. Could private resources, invested in an ambitious project, successfully remove blight in St. Louis? And is the St. Louis Blight Authority the entity to usher in success?

From the Post-Dispatch: “Dorsey and Pulte hope to inspire other philanthropists to contribute to the effort and perhaps expand it to other city neighborhoods.”

With the price tag for total blight removal estimated at $70 million, inspiration won’t cover the bill. But it’s a place to start.

We Could Give Teachers a Ten Percent Raise Next Year

Posted on August 9, 2019May 5, 2026 by James V. Shuls

In a recent op-ed, I asked, “Why do our best superintendents always leave?” The answer was obvious—the pension system. After working for 30 or 31 years, superintendents can draw almost 80% of their salary in a pension and they can continue working. They just can’t keep working as a full-time educator in the same pension system. That is why nine out of the past eleven superintendents of the year have retired within two years of receiving the award but continued working, sometimes as a superintendent in another state. Mike Fulton, for example, retired from the Pattonville School District after winning superintendent of the year. Right now, he’s collecting over $210,000 in retirement benefits annually while earning an additional $250,000 as the superintendent of Shawnee Mission.

Advocates for Missouri’s current defined-benefit pension system argue that this type of system, where teachers are promised a generous and guaranteed pension once they retire, is needed because it increases teacher retention. Yet, there is little evidence that this type of system is a cost-effective method for increasing teacher retention. Rather, the example of these superintendents demonstrates how the system pushes out high-quality individuals. It does the same for teachers (teachers and superintendents are in the same pension system). When teachers hit 30 or 31 years, regardless of their quality or their desire to continue teaching, the financial incentive of the pension pushes them out.

Recently, Gov. Parson asked school superintendents to come up with a plan to increase teacher pay. One solution, which I have little hope will ever be recommended by the superintendents, is to change how we compensate teachers. A pension is basically a form of delayed compensation. We require teachers and their districts to contribute 14.5% of their salary to the pension system (the numbers are different in St. Louis City and Kanas City). That’s 29% of a teacher’s salary that is going into a pool that they may have access to if they make it to retirement.

We could give teachers in Missouri a 10% raise next year, with minimal cost to the state, if we just change this system.

	Current	Proposed
Salary	$50,000	$55,000
Pension Contribution (29%)	$14,500	$0
Social Security Contribution (12.4%)	$0	$6,820
Defined Contribution	$0	$2,750 (5% of salary)
Total Compensation	$64,500	$64,570

Currently, teachers in the Public School Retirement System (PSRS) do not contribute to Social Security. The pension system is their only required retirement savings. In this proposed scenario, the teacher would receive a 10 percent raise on his or her salary. The teacher would begin contributing to Social Security (6.2 percent from the individual and the employer) and would be eligible for Social Security benefits. Additionally, the teacher and his or her employer could contribute a combined 5 percent of salary to a defined-contribution retirement account, such as a 401k or a cash balance plan. Of course, with a smaller raise the teacher could contribute more to retirement.

There are numerous benefits to this proposal. First, teachers would own their retirement accounts. They would not lose any money if for some reason they do not vest at five years. They could also continue to work past 31 years and their accounts would not lose value. Teachers could also choose to invest more in their account, as many do now in 403b accounts.

The biggest benefit is that teachers would have higher salaries today. If we want to keep our best teachers and superintendents, higher salaries are a much more effective tool than outdated pension systems.

Port KC Versus Taxpayers

Posted on August 9, 2019May 5, 2026 by Patrick Tuohey

Steve Vockrodt over at The Kansas City Star has a story about Google wanting to invest $600 million in a data center in Kansas City. If this were the whole story, it would be great news. But the shell game of taxpayer incentives makes this opportunity less than meets the eye. Vockrodt writes:

The Port Authority, or Port KC, ultimately could issue up to $25 billion in bonds over 35 years for the Google data center project, a figure that represents the company’s maximum investment in Kansas City. Think of the $25 billion as a credit limit on a personal credit card. It’s not necessarily an indication of how much Google will invest.

The benefit to Google is that the Port KC can issue Chapter 68 bonds that give Google a property tax exemption for 25 years. Vockrodt goes one step further and makes clear in the story that such subsidies for data centers don’t offer a great return, if any, for taxpayers:

Good Jobs First, a research group often skeptical of corporate incentives, in a 2016 report identified a Google data center project in Oregon from 2006 that received $360 million in subsidies in return for 175 jobs, or $2 million per job. Good Jobs First advised cities and states to treat data center subsidies with caution.

“Internet-based companies have to grow the cloud and they will choose stable areas with cheap electricity,” the report said. “They will barely benefit your local economies because they create so few jobs and often import top-wage labor.”

Once again, Kansas City through its port authority is playing handmaiden to large corporations even when there is so little to gain. (Rest assured, this same story will unfold if/when the USDA considers locations in Missouri.) How is Kansas City supposed to fund infrastructure, education, public safety and all the other basic needs on which we depend if we continually offer exemptions from the taxes needed to provide them?

If taxes are too high for Kansas City to be a competitive place to attract business, then that needs to be addressed fairly for everyone. Offering sweetheart deals to a few while the rest of us pull their weight is no way to operate a city.

Eighty-Three Special Taxing Districts Opted Out of Tax-Free Weekend

Posted on August 9, 2019May 5, 2026 by William Magee

During the season of back-to-school chaos that thousands of Missouri families face each year, the state in recent years has eased the burden by offering tax-free shopping on school supplies during the first weekend of August. But some taxes kept on working through the holiday.

By state law, local taxing jurisdictions can opt out of the annual sales tax holiday. This year, 50 counties, 156 cities, and 90 Special Taxing Districts decided not to give Missouri families a tax break. Of the 90 Special Taxing Districts, 83 were either community improvement districts (CIDs) or transportation development districts (TDDs). But unlike taxes collected by cities and counties, most of these districts’ sales tax revenues help the private interests that set up the districts rather than funding public services. Many of these districts are found in the most popular shopping areas in the state and encompass large retail stores like Walmart and Target. Some examples include the Arnold Retail Corridor, the Delmar Loop, and the Hanley Road Corridor in Maplewood/Brentwood.

These overgrown microgovernments have already taken over a billion dollars in taxes from Missourians to fund the development or redevelopment of commercial districts, with privately owned businesses reaping the benefits. One 3-day weekend without sales tax revenue would hardly put a dent in the millions collected the other 362 days of the year.

Absent any action from a special taxing district’s board of directors, the district, by default, participates in the tax holiday. However, the board of each of these districts—usually elected by a small number of property owners—instead voted to keep charging the district sales tax rather than give Missouri families a break. Unlike state, county, and city sales taxes, the taxes collected from the special taxing districts formed by developers do not contribute to the funding of public services for the average taxpayer. Instead—perhaps due to the lack of accountability and oversight—they go toward subsidies that primarily help big businesses.

So if you found yourself confused by the presence of a tax amount on your receipt this past weekend, thank the misguided laws that govern special taxing districts.

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