On Thursday, July 18, Show-Me Institute Director of Municipal Policy Patrick Tuohey appeared on KCPT’s Ruckus to discuss taxpayer subsidies for a failing baseball team in Wyandotte County, Kansas, the tenure of outgoing Kansas City Mayor Sly James, and more taxpayer subsidies for a Sun Fresh grocery store that cannot seem to pay its bills despite millions in previous and ongoing subsidies. Click above to see the entire episode.
Rumor has it that later this month Major League Soccer (MLS) will announce the next cities to be blessed with professional soccer teams. St. Louis appears to be at the top of the list, and that’s great.
Proponents claim the current stadium deal, negotiated between the prospective team’s owners and city officials, is far superior to the previous proposal to lure the MLS to St. Louis. While this is true, the deal is still not all that great.
Before explaining why, let me reiterate that the current deal to bring the MLS to St. Louis is better than the 2017 effort. That effort (led by a different ownership group), which lost at the polls by a narrow margin, pushed intelligence-insulting stadium benefits, would have cost taxpayers more than $100 million, and seemed generally dishonest. Along with the St. Louis Post-Dispatch’s Dave Nicklaus, I’m glad voters rejected that effort. Moreover, I’m glad the current effort has engaged in relatively little economic pandering (save this (p. 1), and this).
So what of the new ownership group’s current proposal?
The current plan, approved by the Board of Aldermen late last year, includes the following public incentives:
· Free use of the land the stadium will be built on (the land will be purchased by the city from the Missouri Highway and Transportation Committee).
· A complete abatement of property taxes on the stadium and the land it sits on (since the property will be owned by the city).
· A 3 percent sales tax, generated by three distinct and overlapping special taxing districts, which will be levied on stadium-goers and may go toward stadium funding.
· A reduction in the city’s 5 percent amusement tax for soccer ticket sales, bringing it to 2.5 percent, and the squirreling away of that 2.5 percent for future stadium improvements.
· A complete sales tax exemption on materials used to construct the stadium.
Overall, the above incentives are valued at just shy of $40 million.
So what makes this plan better than the previous one?
First, the amount of incentives is significantly lower; the total incentives offered in the previous proposal totaled more than $120 million. Second, some of the incentives in the current proposal act like user fees, impacting only those who visit the stadium. The previous proposal would have relied on use taxes levied on city businesses, and ultimately would have been passed on to ordinary consumers, whether they visited the stadium or not. That also means we don’t need to further exhaust St. Louis’s sales tax capacity to make the deal work. (That funds are being saved for future improvements is also a plus, but how those funds may be spent will need to be hammered out in a lease agreement, which is yet to be finalized.)
Even so, I wouldn’t call this deal a good one for taxpayers.
First, there still is that $40 million. While that’s less than what city officials across the country usually cough up for a major league sports stadium, it is still $40 million. Second, since the city will purchase the land from the Missouri Highway and Transportation Committee, city taxpayers will likely bear that cost. And even though the land is currently publicly-owned, if it were sold to a private entity that would be tax liable, it could generate property taxes for local jurisdictions. Third, the city will lose out on millions from the sales tax exemption on construction materials. While the city is projected to come out on top in terms of overall sales tax revenue under the current proposal, it is no serious shot in the budget division’s arm. It’s also unclear (I have requested the analysis from the city but have yet to receive it) whether those “new revenues” will be genuinely new revenues or just diverted from other spending in the city.
Now, none of this is to say that the current deal isn’t worth it, or is a bad deal all things considered. St. Louis may very well be better off with an MLS team than with $40 million. But that doesn’t change the economic reality of the situation: government is giving very special treatment to a select, wealthy few. Even if the (30-year!) sales tax revenue projections are right, and the city makes some money on the deal, there are often more pressing needs or better investments the city could throw its limited resources at. But the decision has been made, and, not surprisingly, taxpayers are now at the behest of a major league sports entity.
(And a word for Bernie Miklasz: I live in St. Louis, and so, am very welcome to criticize St. Louis policies.)
Missouri is one of 13 states without any statewide programs to promote Next Generation Learning (a term coined by the advocacy group ExcelinEd to describe a set of innovative education models that can be tailored to each state’s unique circumstances). Most other states give schools more flexibility to explore methods like mastery-based education (see below), among others. Missouri, however, continues with its one-size-fits-all approach, apparently uninterested in experimenting with better ways to educate students. Meanwhile, student performance in our state continues to fall behind. And what, exactly, are other states trying?
Of course, states need to evaluate these new programs to ensure they are working and are a worthwhile use of tax dollars. Before launching any program, school administrators should establish specific metrics and goals by which the program will be assessed. For instance, career academies should be tracking graduation rates, training-related job placement, and the number of students earning industry-recognized credentials. If programs are not meeting expectations or are too costly, then they should be phased out so resources can be directed to programs that are delivering.
Whether it is grants for new programs, waivers for certain regulations, or embracing models like charter schooling, why doesn’t Missouri’s state education policy welcome local innovation and reward high performance? Sitting on the sidelines while educators in other states experiment with new ways of teaching the next generation of students isn’t working.
Having worked in education reform for more than twenty years, I’ve often found myself in a familiar debate about public education: Is it a private good—for the benefit of the child being educated—or a public good—for the benefit of society? Of course, it’s both. But what it isn’t, or shouldn’t be, is a pawn to prop up the tourism industry in a state.
Missouri has made the decision to mandate the earliest dates that schools can open each year, even as other states are moving away from similar policies. The reason? So that families have an extra week or two to vacation in the state’s tourist areas. I’ll be very curious to see how many families change their plans because of this law.
Where is the outrage from parents with full-time jobs who have to make summer arrangements for their children for a longer stretch of time? Where is the outrage from school boards that clamor for local control? Where is the outrage from principals who know full well about the impact of the summer slide?
The Missouri legislature had the opportunity to improve education in the state by encouraging innovative ideas and options for parents. Instead they chose to manipulate the public school system in the hope that it will benefit the Lake of the Ozarks and Branson. The next time a lawmaker claims that public education is their priority, pay attention to their actions, not their words.
In a recent debate, Kansas City Mayor-elect Quinton Lucas addressed a proposal for a downtown stadium by stating, “We need a new downtown baseball stadium like I need a new Maserati.” Lucas understands the impracticality of publicly financing such a stadium. However, many seem determined to hand the Kansas City Royals the keys to a new downtown home once their lease with the Truman Sports Complex expires in 2031. Supporters argue the proposed stadium would create jobs, increase tax revenue, and spur economic growth in the city. As Show-Me Institute analysts have detailed many times before, history and countless economic studies tell us projects like this fail to deliver on their promises.
There are innumerable instances where a city’s expenditures far exceed the tax revenues brought in by a publicly funded stadium (the Edwards Jones Dome in St Louis and Yankee Stadium in New York to name a few). It makes no sense (or cents) to promote the financing of a stadium for tax revenues when spending exceeds income.
Not only does public funding of a stadium severely hamstring city government, but a quick analysis reveals that the gains promised to the city’s economy rarely materialize. According to a 2008 study conducted by professors at Holy Cross, professional sports facilities, and even teams themselves “have little or no significant positive impacts, or even negative impacts on the local economy.” Why? Because the vast majority of fans who attend these stadium events are area residents who would likely be spending their money in the city regardless of the existence or location of the stadium. The same idea holds true for job creation. The thousands of jobs required to build a stadium are only temporary and often just taken from other projects occurring around the city.
This is not to say that professional sports franchises and their stadiums offer no benefit to cities. Sports teams promote civic pride and can unify city residents. If the Royals want to build a downtown stadium with their own resources, that’s fine. But the idea that a publicly-financed stadium will pay for itself by catalyzing economic growth is a tired, disproven argument.
In fact, Kansas City should have already learned this lesson. Almost two years ago, Patrick Tuohey detailed concerns about Wyandotte County funding a similar project for the semi-professional Kansas City T-Bones. Taxpayer subsidies could not overcome a lack of demand. The T-Bones’ failure continued and the owners are looking to sell. When it comes to subsidizing stadiums, policymakers should heed Breaking Bad’s Gustavo Fring and never make the same mistake twice.
Food deserts in Kansas City are a mirage. I’ve written about this numerous times before, and the fact remains that proximity to healthy food does not increase demand for healthy food. People in Kansas City and elsewhere vote with their feet, so to speak.
It should then come as no surprise to anyone who regularly reads this blog that the taxpayer-subsidized Sun Fresh grocery store at the Linwood Shopping Center is failing. Despite city-funded construction and dramatically subsidized rent, the store cannot pay its bills. The question now seems to be whether taxpayers should further fund this failing enterprise.
The answer is no. Just as with the years-long debacle with the 18th and Vine Jazz District, the problem here is market demand. There isn’t any; at least not enough to support an additional grocery store in an area that already has Aldi and Sav-A-Lot stores each within a mile of the Sun Fresh. Leon’s Thriftway grocery store, a mere mile and a half from the Sun Fresh, recently closed after 50 years because it could not keep up with the competitive market—presumably including a government subsidized Sun Fresh. This should not be surprising. As The Kansas City Star editorial board wrote in May 2015:
[Kansas City Mayor Sly] James said building the Sun Fresh Market would be the “beginning of the revitalization of this entire corridor.” In truth, that’s been said before. For example, the current forlorn Linwood Shopping Center opened to rave reviews almost 30 years ago on the site of the demolished St. Joseph Hospital.
The editorial board was right to be skeptical then, and that skepticism has been borne out. Good intentions are not a substitute for good policy. City leaders should not waste another penny on this failing enterprise, lest it become yet another perpetual drain on city resources.
Following in Arizona’s footsteps, Pennsylvania enacted an occupational licensing reciprocity law on July 1. This means Pennsylvania will accept occupational licensing from other states, given that certain criteria are met. Teachers, among others, can now move to Pennsylvania and start working immediately, instead of having to wait to get a new license. This reform will reduce barriers for workers and make Pennsylvania a more attractive choice for workers.
Missouri should take note, since it licenses over 200 professions and does not have a reciprocity law that applies to all workers.
Put simply, an occupational license is the government giving you permission to work for pay. Show-Me Institute analysts have written about the negative effects of licensing in the past; it can be especially harmful to specific people and industries. An Institute for Justice (IJ) report details the significant negative effects licensing is having on Missourians.
Twenty-one percent of Missouri workers need a license or certificate to do their job—that’s higher than the national average of 19%. Architects, barbers, interior designers, massage therapists, and others all have to pay fees and follow government instructions to do their jobs.
IJ estimates that Missouri has lost 38,556 jobs and $188 million in output due to licensing requirements. To take one example, cosmetology jobs go unfilled because a lot of people can’t pay hundreds in fees, nor can they commit to 1,500 hours of schooling. The same thing happens with other professions. Unfilled jobs mean missed opportunities for output, including new products and more services, resulting in less economic activity in Missouri.
Money, time, and human capital could be used more efficiently with less restrictive licensing. IJ estimated the amount of misallocated resources in Missouri, or resources that were not put to their most efficient use, at $3.55 billion. Workers devote time and money to unnecessary education, consumers pay higher prices to cover the costs of licensing, and people get jobs outside their area of expertise because they cannot meet requirements. All of these burdens on workers hurt our economy.
Occupational licenses have become much more burdensome than helpful. While the reciprocity laws passed by Arizona and Pennsylvania don’t completely eliminate the problem, they do reduce barriers and promote mobility in the workforce. Missouri is bearing substantial costs from occupational licensing. Why is Missouri standing in the way of people trying to earn a living?
Show-Me Institute analysts have been a bit of a broken record on the Loop Trolley. But that’s because the project was ill-conceived from the start, with numerous mishaps and delays along the way.
Recent news is unlikely to reassure those skeptical about the project. A St. Louis Post-Dispatch article from last week shared some alarming numbers about the Loop Trolley:
Statistics released Tuesday showed the trolley sold 2,210 tickets in June, producing $4,062 in revenue. That’s up from 1,744 tickets and $3,861 in revenue in May but less than the line’s peak month of March, when 2,421 tickets were sold.
Overall since the trolley opened last Nov. 16, 11,364 tickets have been sold, producing farebox revenue of $22,283.
These are not particularly impressive totals. They’re nowhere close to what the public was promised when the project was being sold years ago. As the Post-Dispatch article mentions, back in 2015 trolley officials predicted 394,000 riders a year. In 2017, officials claimed the first year of operation (which was supposed to be 2018) would generate nearly $400,000 in revenue. The year isn’t over yet, but you don’t need a degree in math to see that things are off track.
However, Kevin Barbeau, the executive director of the Loop Trolley Co., told the Post-Dispatch there are important caveats to keep in mind. The trolley has only been running four days a week, and the initial projections were based on a full seven-day-a-week schedule. The plan was to have three cars running, but because of delays, there are only two cars in service.
I’m sure that missing a car and only operating four days a week is hurting business. But whose fault is that? The extensive delays in acquiring and renovating the third trolley car can’t be blamed on anyone but the Loop Trolley Co.
Even with optimistic projections, future revenue and ridership with three cars fully operational for seven days a week looks grim. If the trolley saw a fifteen-fold increase in revenue in the second half of the year, it would still fall short of its annual revenue goal. Barbeau claims secondary revenue sources from things like advertising and fundraising will pick up once the trolley is running on a daily basis. But based on all the broken promises and delays, it’s hard to take trolley boosters at their word.
Keep in mind that most of the trolley’s $1.3 million annual operating budget comes from a special sales tax levied on Loop customers, which has raised on average $780,000 a year since 2016. Taxpayers have been paying full freight for this project, despite the missing car and part-time operating schedule. If operating at half capacity is a valid excuse for missing ridership and revenue targets, shouldn’t taxpayers get half their money back?
Missourians have a new tool to track the state’s numerous special sales tax districts. Last week, Missouri’s Department of Revenue unveiled a map outlining the state’s many special taxing jurisdictions, including transportation development districts (TDDs), community improvement districts (CIDs), and others. This map is supposed to be a step toward transparent governance. Unfortunately, as currently constructed, the map lacks the functionality to adequately illuminate Missouri’s opaque region-specific tax burdens.
Each year, Missourians pay millions of dollars in sales taxes they often don’t know exist. My colleagues have written often about the problems with these special taxing districts. Many are created without a public vote, the projects often have questionable public benefits, and they usually lack oversight. It was welcome news that consumers were going to have a resource that illustrates whether a special sales tax will be collected any place they wish to shop. The bad news is the map is incapable of showing the cumulative sales tax rate for those locations.
To find the total sales tax burden for a specific address, you’ll need to go to another website. Missouri has more than 2,000 sales tax jurisdictions, and at least 1,400 of those are considered “special.” The remaining jurisdictions are made up of Missouri’s cities and counties who have their own sales and use taxes, but none of those are included on the map.
The map, as a whole, does paint a picture of just how overgrown the state’s special taxing districts have become. Nonetheless, you would think the Show-Me State could create a map that allows taxpayers to accurately determine their cumulative sales tax burden no matter where they are making purchases in the state without having to input a specific address.
See the Department of Revenue’s new map here.
