Face-Palm: Loop Trolley Over-Budget, Likely Delayed, Again

Posted on by Graham Renz

Face-palming is defined as:

Bringing the palm of one’s hand to one’s face, as an expression of disbelief, shame, or exasperation.

It’s what I did when I read that the Delmar Loop Trolley, supposed Millennial-magnet and urban-revitalizer extraordinaire, is yet again over-budget and likely delayed. Joe Edwards, who’s leading the trolley effort, says he needs an additional half-million to cover signage and vehicle restoration costs, and to ensure the system can operate over “reasonable hours.” In other words, the Loop Trolley needs another bailout to help pay its regular bills—not to cover unexpected costs.

This request is not fake news, and unfortunately it shouldn’t come as a surprise. The Trolley has an expensive and protracted history. Sometimes past performance really is the best indicator of future results.

First, in 2014, bids for building the vintage streetcar line came in $11 million over-budget. A second round of bids came in $3 million lower, but that still put the project—originally estimated to cost $43 million—nearly 20% over-budget. County taxpayers coughed up the extra cash to bail the trolley out, after they were told cost-overruns would be paid by a special taxing district, the loop trolley transportation development district, which levies an extra sales tax for the project.

And then there were the delays.

Before construction even began, the Federal Transit Administration, which pledged to pay for most of the trolley’s capital costs, threatened to withdraw its financial support because of a lack of engineering and design progress. Then the University City council had to extend the terms of a special building permit six months so construction would be legal when it actually began. At that time, the line was slated to open in late 2016.

But then the public was told the line would open in spring of 2017. It didn’t. Trolley proponents later said the opening date would be sometime in summer of 2017. It wasn’t. Then they said the opening date would be in August. It no longer is. And then they said it would be sometime later in the fall of 2017. I wouldn’t be surprised if the trolley actually starts moving people sometime closer to 2018.

The Loop Trolley is a textbook example of government mismanagement. Proponents over-promised and under-delivered, and ultimately, taxpayers are on the hook. Unfortunately, the trolley’s foundering was entirely predictable. Projects like it are consistently over budget and often delayed for years. Perhaps policymakers will take this as a learning opportunity. It looks like the federal government may be doing just that.

The St. Louis Business Journal reports that:

Edwards also said he has been told by Federal Transit Administration Regional Administrator Mokhtee Ahmad that if the trolley is not completed in the immediate future and does not operate successfully for the first three years, future federal funds for other St. Louis-area projects could go to other cities. [emphasis mine]

Is the federal government really so displeased with the Loop Trolley that it is questioning whether regional leaders can competently manage infrastructure projects? On top of taxpayers not being able to ride the trolley they were promised, will they miss out on other, more meaningful projects?

Pension System’s Generous Benefits Come from the Pockets of Others

Posted on by James V. Shuls

Teachers love their pension system. And why not? A teacher can retire at age 55 with 30 years of service and draw 75% of their final average salary for the rest of her life. For a teacher who becomes a principal or superintendent, this benefit could easily be six figures annually. But have you ever stopped to ask yourself how the plan manages to achieve this? There is no magic. The plans do not have wizards for fund managers. The answer is much more straightforward—the system redistributes wealth from some individuals to others.

Logic tells us that when people receive benefits that far exceed the value of their contributions and interest, the funds must come from somewhere . . . and they do. They come from teachers who work for fewer years, from teachers with relatively low pay, and from future generations of teachers. The same characteristics of Missouri’s teacher pension system that enable some teachers to enjoy a comfortable retirement also create several forms of inequity that could undermine these plans.

Currently, teachers in Missouri (except in Kansas City and Saint Louis City) contribute 14.5 percent of their salary to the pension system. The district matches that amount, for a total equal to 29 percent of the teacher’s salary. A teacher who leaves before the five-year vesting period ends forfeits the district’s match. But even vesting doesn’t guarantee a teacher will receive full value for their contributions, let alone the district’s match. Because the benefits accrue slowly at the start of a teacher’s career and then rapidly as they approach retirement, a teacher must work more than 20 years just to recoup their own contributions. The teacher who works 15 years and moves because of a spouse’s job in another state, for example, will be leaving money behind that helps fund the generous benefits of others. This is known as intra-generational inequity—within a cohort of teachers, some benefit and others lose.

Another form of intra-generational inequity is the cross-subsidization that occurs between workers with different earnings trajectories. Some teachers (generally in wealthier districts) get very large raises over the course of their careers, but others do not. Teachers who become administrators make even more money. Since pension payouts are based on salary earned in just the final three years of employment, these individuals receive retirement benefits that exceed the amount of their own contributions to the system over the course of their careers.

Others have to make up the difference. These “others” come, in part, from poorer districts and districts with relatively flatter salary schedules. Teachers in these districts pay more into the system than they will get out. Their “excess” contributions go to fund the pensions of the former superintendent making $150,000 a year in retirement.

Even though the pension system shortchanges many teachers, it still does not have enough funds to cover all its expected obligations. Therefore, the system must rely on new teachers to fund the benefits of retired teachers. This is the third type of inequity—inter-generational inequity. As generations of teachers contribute less than they receive in benefits, unfunded liabilities grow. In turn, future generations are asked to contribute more to the system. We have already seen individual contributions to PSRS grow from 10 percent in 1995 to 14.5 percent today.

Defenders of Missouri’s teacher retirement system will be quick to tell us that the system is well-funded, over 80%. (We can quibble about this calculation another time.) They will reiterate that the system is well-liked by teachers and claim that retirees are doing well in this system. To make that argument is to miss the point of this entire article: unless we tie benefits to contributions, the pension system will continue to favor some at the expense of others.

Is TIF Failing the “But-For” Test?

Posted on by Graham Renz

Tax-increment financing (TIF) is a development subsidy program abused all over Missouri, and especially in Saint Louis. See exhibit A: the Boulevard development in Richmond Heights, just east of the Galleria.

The development has been awarded more than $30 million in TIF over the years for the construction of high-end shopping, office, and luxury residential spaces in one of the most economically successful areas in the region. Just read this developer overview, which claims this part of Richmond Heights “forms the metropolitan area’s most successful and dynamic commercial and residential district.” The area hardly looks like the “urban blight” TIF was originally designed to remedy.  

But there’s a recent development, beyond the (ahem) questionable use of subsidies in this area, worth touching on.

The most recent phase of the development was originally estimated to cost just shy of $80 million. Back then, developers claimed the project was financially infeasible without TIF and other subsidies. But now the project’s costs are up $20 million and it’s still moving forward. But how can this be? How can a project that was infeasible at $80 million be moving ahead when it is now $100 million?

Here are three theories:

  1. The magnanimous developers decided they could part with an additional $20 million of their own funds even though they claimed the original cost of their project was too high to burden privately.
  2. The initial request for public assistance was far more than was actually required to move ahead, and so, the $20 million setback can be easily absorbed. (Though I doubt any public assistance could be considered reasonable for this project.)
  3. The developers were going to build their project with or without public assistance, but helped themselves to taxpayer cash because it was being offered.

This list may not be exhaustive; there may be other ways to explain the project going ahead. Nevertheless, if I were a betting man, I’d put my money on #2 or #3. Why? Because much of the academic research on TIF suggests developments will happen regardless of whether or not subsidies are awarded. The Boulevard development is consistent with this theory, and suggests that perhaps taxpayer handouts aren’t as essential to economic growth as many public officials seem to think they are.

Charter Schools Boost College Completion

Posted on by James V. Shuls

I graduated from high school in 1999. Since then, I have had few interactions with anyone who works for my alma mater, and none in any formal capacity. No one called a year later to see if I went to college. No one checked to see if they could offer me any career support. I didn’t expect them to. They had done their job. I had graduated high school, and that was that. I suspect this is the case for most high school graduates.  

When you have always come to expect something done one way, it can completely rock your world when you see someone doing it differently. That was the case when I visited KIPP Delta, a charter school in southeast Arkansas, midway through my doctoral program. I spoke with a staff member who told me about their mission to get students to, and through, college. The school was using business software to manage contacts with graduates and ensure that each student would have a KIPP staff member following up with them periodically post-graduation. Graduates within a certain distance would even receive a visit from someone from KIPP.

When I heard this, my first thought was, Why hadn’t my school done something like this?

Recently, The 74 reported that just 9 percent of students from the bottom fourth of the income distribution graduate college within 6 years. For a number of charter school networks, however, that figure is significantly higher. Nationwide, 38 percent of all KIPP graduates go on to graduate from college within six years. That’s more than four times the national average!

I’m sure it isn’t just KIPP’s post–high school follow-ups that have led to this dramatic increase in college graduation; KIPP schools also appear to provide their students with a firm K-12 foundation. Whatever they’re doing, it seems to be working.

Yet, in Missouri we continue to restrict where charter schools can open. Both my experience visiting KIPP Delta and the evidence presented here suggest that we would be wise to remove these unnecessary restrictions. Doing so could help more of our students from low-income families get their college degrees.

For more information, read: “Charter Schools: Do They Work?” by Michael McShane. 

Georgia Paying to Promote Missouri with “Ozark” Series

Posted on by Patrick Ishmael

If you’re a Netflix subscriber, you may have noticed a new series being promoted on the site that features a very familiar setting. The show, Ozark, follows Jason Bateman, Laura Linney, and an intriguing cast of characters as they try to advance their mostly-illegal schemes at Missouri’s own Lake of the Ozarks. From drug running to money laundering to outright murder, the series in many respects follows the Breaking Bad television blueprint. I’ve seen all the episodes. It’s worth your time.

But this blog post isn’t a review. (If only!) Alas, it is instead a continuation of our sometimes-Sisyphean task of criticizing the corporate welfare doled out by government, albeit this time with a twist. This time Missouri, where “Ozark” is set, didn’t subsidize the show’s production. Georgia did.

While the show won’t film at its namesake location, it is expected to drive film tourism to the Lake of the Ozarks. The expansive Missouri reservoir will be recreated at Lake Allatoona. The decision to film elsewhere is likely to do with Missouri’s lack of film tax incentives, after their 35% tax credit programme expired in November 2013.

The state of Georgia on the other hand has one of the most lucrative film incentives in the country. Productions filming on location need to incur a minimum spend of USD500,000 to access 20% in transferable tax credits. An uplift of 10% is available if productions embed an official Georgia logo somewhere in the finished product.

There are no per-project caps on the amount that can be claimed through the programme, which has made Georgia an incredibly popular filming location for productions of all sizes. AMC’s The Walking Dead has been filmed in multiple areas throughout Georgia including Atlanta and Senoia.

References to real places in and around the Lake of the Ozarks are everywhere in the show, and at one point about two episodes into the series I turned to my wife and said I thought Ozark was good enough, and its geographical depiction true enough, to drive some serious tourism to the Lake of the Ozarks—that a lot of people were going to be introduced to this uniquely Missouri asset and want a closer look. Certainly residents at the Lake have a right to gripe about the less-than-positive portrayals of the Ozarkian villains in the show, but on the whole, you couldn’t really craft a more subversive promotional vehicle for the mid-Missouri region.

Suspense! Excitement! Drugs! Violence! Light comedy! More drugs! And all the while, Georgia is paying for that entertainment—at no charge to Missouri taxpayers or Lake residents. 

In fact, contrary to what tax credit supporters may suggest, letting Missouri’s film tax credit expire in 2013 was a benefit to the state and ultimately got the Peach State to pay for about 10 hours of promotional material free of charge for the Show-Me State, with potentially hours and hours more to come should the show be renewed. And renewal is looking likely.

If I were Georgia, I’d cut bait on the credit. But if I were Missouri? I’d laugh all the way to the Lake.

Subsidized Downtown Stadiums, Forever and Always, a Bad Idea

Posted on by Patrick Tuohey

The Kansas City Star editorial board rightfully condemned even idle talk of building a sports stadium downtown.  And while most of the editorial was sound, it ended on a disappointing note:

For now, though, downtown baseball is and should be off the to-do list. The region must deal with more urgent priorities first.

Subsidizing sports stadiums is a bad idea regardless of the timing. Recently, Saint Louis has spent an inordinate amount of time and money trying to force taxpayers to do exactly this. First, there was an effort to build a new riverfront stadium for the Rams. When that plan failed, there was a sprint to build a soccer stadium in hopes of luring an Major League Soccer team to town. Stadiums are said to generate jobs in their construction (they don’t), and drive economic development once they are built (they don’t). At best, they divert people’s disposable income from one activity to another. Stadiums only create wealth for the team owners—who don’t have to share their profits with the taxpayers underwriting their team’s overhead. (In Wyandotte County, Kansas, taxpayer subsidies likely just postpone the inevitable closing of a baseball park.)

These aren’t just the musings of free-market, small-government cranks, either. There is a robust body of research from organizations left and right and in-between that shows stadium handouts are a waste of public resources. Nor do we need to rely on academic studies. The dome formerly known as Edward Jones failed to attract the economic development or population density its boosters promised. Anyone who doubts this should just look at aerial photos of Truman Sports Complex. Much of the land around two stadiums lays un- or under-developed.

Subsidizing sports stadiums, wherever they are built, is bad public policy. Not because of timing, or because there are other more pressing matters in Kansas City, which is true. It’s bad because diverting tax dollars to help big businesses build their own buildings is wasteful of limited public resources intended to provide basic services.

Chesterfield’s Corporate Welfare House of Cards

Posted on by Graham Renz

Missouri’s development house of cards is all too often built upon a shaky foundation of corporate welfare. It looks as though Chesterfield may be stacking the cards higher and higher.  

If you drive along I-64/40 in western Saint Louis County, you’ve likely seen three competing shopping malls: Chesterfield Mall, Taubman Prestige Outlets, and Saint Louis Premium Outlets. You can’t tell just by looking at them, but the two outlet malls are subsidized through various special taxing districts. Yes, that means the public is helping to pay for two competing malls less than five miles apart. And no, the bad policy doesn’t stop there.

Chesterfield Mall, around long before either outlet mall, has been in steady decline, and was recently foreclosed on. Unsurprisingly, the mall’s owners claim business declined significantly after the outlet malls opened roughly five years ago. (Other failing malls in the region make similar claims.) While competition is good for consumers, the government subsidizing some market participants at the expense of others isn’t something to cheer about. It is no more than government picking winners and losers.

And things get worse still.

Public officials and developers are now cooking up ways to bring new life to Chesterfield Mall. One proposal would convert the mall into a mixed-use facility, incorporating office, residential, and retail uses. This is an exciting idea, and could keep a long-standing community fixture in use. The issue isn’t with what the mall might become, but how its rebirth might be funded. Chesterfield’s department of economic development has a troubling idea: create a special taxing district (in particular, a transportation development district) to help subsidize a conversion. Sound familiar?

Government interference seems to have helped put the mall in the spot it is today. But if government subsidies didn’t work the first time—or only worked for some at the expense of others—why use them again? Why not let the market work? If the mall doesn’t prove to be a good investment, why should taxpayers have to bail it out?

It’s unfortunate to see a major community development languish. But it is even more unfortunate that taxpayers could be asked, yet again, to remedy what could be a government-induced development collapse. 

Man versus Machine in Saint Louis

Posted on by Patrick Tuohey

We’ve written about the encroachment of machines into the workforce previously. From fast food kiosks to the advent of workplace computers, the march of technology remains constant. This week we learned that Schnuck’s in Saint Louis has roaming robots to check stock on the shelves and verify prices.

Maryland Heights-based Schnuck Markets, which operates 100 stores in five states, on Monday will begin testing its first Tally at its store at 6600 Clayton Road in Richmond Heights. The pilot test is expected to last six weeks. A second Tally will appear in coming weeks at Schnucks stores at 1060 Woods Mill Road in Town and Country and at 10233 Manchester Road in Kirkwood.

The race between man and machine is a fixture of popular culture, from John Henry to Yoshimi Battles the Pink Robots. In most stories, robots represent the movement of technology replacing man: of cheaper, stronger, more efficient labor. It’s not surprising then that in most folklore, the machines are depicted as sinister. But that isn’t the case for consumers.

All of this is an effort by producers to provide better, faster and cheaper service, and to that end it is a good thing because it drives down prices for everyone. It should be a wake-up call to activists who think they can affect positive social change merely by increasing the minimum wage—in which only a few benefit at the cost of many. Making labor more expensive not only makes technology more attractive, but it puts smaller businesses who cannot afford the investment in technology at a competitive disadvantage.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging