If You’re Paying, I’ll Have an Ice Rink

Posted on by Graham Renz

It’s far too easy to spend other people’s money. If you’ve ever had a credit card or your identity stolen, you know this far too well.

Stanford economist Russ Roberts summarized the phenomenon thusly: “If you’re paying, I’ll have top sirloin.”

But in Chesterfield, it’s more like: “If you’re paying, I’ll have an ice rink.”

News of the Hardee’s Iceplex closure in Chesterfield was quickly followed by calls to find a new home for the Chesterfield Hockey Association. Quicker than a winger can flank the defense, a proposal for a new, $22.6 million facility came forward. The only catch? Taxpayers would have to cough up $7 million.

Those funds could come from a special taxing district, better known as a transportation development district (TDD), which levies an extra sales tax in the Chesterfield Valley retail area. If voters in the district—which encompasses less than a single percent of Chesterfield households—approve the tax, shoppers in the valley will help buy and improve land for a narrow special interest, adding yet another chapter to what’s become Missouri’s never-ending-story of public-cost/private-benefit development.

The problems with this deal are obvious and myriad.

For one, there’s the issue of “investing” in an ice facility when one just went out of business. The developer’s own market analyses show there is a glut of ice facilities in the region, which has “resulted in creating a ‘buyer’s market’.” If an ice rink isn’t a good use of private resources, what reason is there to think it’s a good use of the public’s resources?

Second, despite tax dollars being used to buy and improve land for the developer, there will be no public ownership of the facility. In fact, there isn’t even an agreement in place to let the public use the facility! If the facility changes hands or goes under, the city could end up owning the associated parking lot, but the last time I checked, there was no dearth of parking in the valley. 

Then there’s the white elephant just up the road: the $45 million complex proposed by the Blues for Creve Coeur Lake Park. The duly-subsidized complex will undoubtedly compete with the Chesterfield facility, but—incredibly—proponents claim their project is insulated from economic pressures.

And the (unreported) cherry on top? Last month it was announced that a private investment group acquired a new facility for the Chesterfield Hockey Association to use as an ice rink. So even though the group has a new “home,” they still want you to build them an ice palace.

All in all, this project makes little economic sense. So why is it moving forward? Because Missouri’s loose TDD laws sanction (or rather, encourage) special interests to tax the pubic for private gain. And when you’re spending other people’s money, you’ll “invest” in just about anything.

TDD reform is long overdue. Until things change, I suggest we update Roberts’ adage so it reads: “If taxpayers are paying, I’ll have whatever I darn please.”

Breaking News: Trinity Lutheran Wins!

Posted on by Michael Q. McShane

This morning, the United State Supreme Court ruled 7-2 in favor of a Columbia preschool that was denied a state grant to purchase scrap tires for their playground. (For background on the case, check out this SMI paper).

The Court reaffirmed the position that “denying a generally available benefit solely on account of religious identity imposes a penalty on the free exercise of religion.” In order to justify that penalty, the state has to clear a very high bar in proving that imposing that penalty serves a compelling state interest.

Missouri did not clear that bar. As Chief Justice Roberts argues in the opinion of the court, “the Department offers nothing more than Missouri’s policy preference for skating as far as possible from religious establishment concerns.” That is not enough, the court ruled, with Chief Justice Roberts punctuating his opinion by stating, “the exclusion of Trinity Lutheran from a public benefit for which it is otherwise qualified, solely because it is a church, is odious to our Constitution . . . and cannot stand.”

This is an important victory for civil society and for religious institutions that feed the hungry, house the homeless, educate the young, and provide healthcare to the sick. However, this case does not settle the issue once and for all.

The Chief Justice’s opinion contains a footnote around which we can imagine the next round of lawsuits will hinge. In footnote 3, the Chief Justice writes “This case involves express discrimination based on religious identity with respect to playground resurfacing. We do not address religious uses of funding or other forms of discrimination.”

So what does this mean for school vouchers, for example? We don’t know. In concurring opinions, Justices Thomas and Gorsuch argue that this ruling should extend to cases beyond identity into how funds are used, but that appears to be left for another day. This is not the last we will hear about religious organizations participating in public programs, but it is a shot in the arm for the argument that they have a right to do so.

We Need to Make Missouri More Attractive to Charter Management Organizations

Posted on by James V. Shuls

Earlier this week, the Center for Research on Education Outcomes (CREDO) at Stanford University released a new study of Charter Management Organizations.  The study included more than 3.6 million student records from 26 states, including Missouri. A total of 5,715 charter schools were included in the study.

On average, charter schools improve test scores in English Language Arts and Mathematics at a higher rate than comparable traditional public schools. There is variation, though. Notably, the authors of the report found charter schools that belong to a network, (known as a charter management organization, or CMO), tend to perform higher than independent charter schools.  Missouri’s charter schools didn’t fit this trend, as non-CMO schools performed relatively well. Nevertheless, the findings of this report have some important implications for Missouri.

Currently, there are relatively few large, successful charter management organizations operating in our state. There are a few reasons why this is so: 

Limited Locations

For many years, charter schools could only open in Saint Louis and Kansas City.  For a network of schools to thrive, it needs to be able to enroll a large number of students. The limited markets of Saint Louis and Kansas City make it difficult for this to happen.

Limited Enrollments

Charter schools can now operate in unaccredited school districts, but they still face problems with enrollment. Missouri’s charter school law does not allow students to enroll in charter schools across district boundaries, and Missouri has relatively small school districts. A charter must attract a large percentage of students in a small school district in order to be viable. This has prevented charters from opening in the perennially struggling school districts of Normandy and Riverview Gardens, as well as other places. 

Making it easier for charters to open statewide and allowing them to recruit students from across district boundaries might entice more charter operators to open schools in other districts or on the borders of Saint Louis and Kansas City. Current law makes it difficult for charters to operate outside of the two cities.

Pension Barriers

An added difficulty is Missouri’s teacher pension system. Currently, there are three separate systems which do not have reciprocity between them, meaning that years of service do not carry from one system to another. Charter networks may wish to move teachers or administrators between schools, but if this means moving between pension systems, those individuals would lose money.

Funding Parity

Charters in Missouri do not receive local tax support for facilities and debt. An analysis by researchers at the University of Arkansas shows that charters in Missouri receive approximately 26 percent less funding that their district counterparts. This is a difference of more than $4,600 per pupil. Many states are trying to attract high quality CMOs and can offer them more support than Missouri can.

If Missouri wants to improve educational outcomes for students, the legislature should enact polices that make the Show-Me State more attractive to CMOs. For starters, the legislature could address the problems listed here by removing geographic limitations, opening enrollment policies, reforming pension policy, and improving funding parity. 

KC Convention Hotel: Lack of Transparency Undermines Confidence

Posted on by Patrick Tuohey

For years, a development group led by former Kansas City politico Mike Burke has been trying to close a convention hotel deal downtown. It’s tough to know exactly what is going on, but recent news stories do not inspire confidence. Eight months ago, we wrote that the group still did not have financing in place, despite saying a year earlier that they did. As of June 7, 2017, they still don’t. It’s one more missed deadline in a project beset with delays—before ground has even been broken.

They do, finally—maybe—have a guaranteed maximum price (GMP) from project general contractor JE Dunn. According to The Kansas City Business Journal, JE Dunn “provided the final GMP proposal two weeks ago.” Burke described the number as “preliminary,” making it reasonable to wonder if the price is actually guaranteed.

The Star now says that Hyatt has pulled out of the convention hotel project. This news wasn’t made public weeks ago when it happened, nor has the development group revealed how much the new hotel company, Loews, is investing in the project. This is no surprise; Burke’s group has previously refused to provide information about the hotel. When asked by The Pitch in 2015 to share information about the project, he said,

There’s some sensitivity to releasing anything that’s old or anything that causes us grief with the bond buyers,” Burke tells The Pitch. “The minute we put it out, somebody with the Show-Me Institute will say it’s unrealistic.”

Not only are we left wondering how much the hotel company is investing, but we also don’t know who the other investors are. Those who watched the Planning and Zoning Committee hearing on June 7 saw conflicting testimony. Development team member Steve Rattner now tells the committee, “the financing is in place; we’re ready to go.” Mind you, it was supposed to wrapped up by March or April, and Rattner said it was in place back in October 2015. But the project attorney, Roxsen Koch, said that drafting the bond documents will take months and only after that—in early August—will the financing be in place. How confident should we be that deadline will be met?

Those aren’t the only examples of information from the hotel’s development team being hard to come by or subject to change. Two months ago, Burke promised a summer groundbreaking. Now, he says groundbreaking has been moved to October. Before that it was spring 2017; and before that early 2016.   

Even members of the committee were hesitant to endorse predictions from the development team. Chairman Taylor called for a motion to advance the matter to the full Council and the committee members sat in silence for 9 seconds before Councilwoman Katheryn Shields laughed and offered the motion herself. (See here.) That delay likely represents a well-founded lack of confidence that this project will deliver as promised.

On KCI, Process Is Important

Posted on by Patrick Tuohey

The City of Kansas City has issued a new, new request for proposals to build a new airport terminal or perhaps even renovate the structures there now. This is good news; the process up to this point has moved in fits and starts, and according to one councilman, was “really weird.”

Process matters in public policy. Moving past a fast-track no-bid contract to an open and transparent bidding process is necessary for good decision-making. As a city-wide vote is required, there will be a public campaign on what to do. The public has been wary of the proposal up to this point.

That may be changing. Steve Vockrodt at the Star has authored a piece about a public opinion survey conducted by Remington Research and paid for by Burns & McDonnell, the firm that was to be awarded the no-bid contract before the City Council got involved.  Vockrodt wrote:

The latest poll by Remington said 40 percent opposed the single-terminal idea, while 22 percent were unsure.

Those results ticked upward by double-digit percentage points when respondents were told about a Burns & McDonnell plan to privately finance, design and build a new single terminal. Support on that basis grew to 55 percent favoring the proposal, compared to 23 percent against and 22 percent unsure. The polling suggests that respondents warm to a local firm’s involvement in the project as well as a private financing model.

Unfortunately, neither Remington nor Burns & Mac have released the full survey. This is important as surveys can be subject to bias—both intentional and not. Having worked in public and corporate polling for 15 years, I know that opinion research can not only measure public opinion, but be used to influence it. That is why the American Association for Public Opinion Research’s (AAPOR) Code of Ethics requires researchers to release, among other things:

The exact wording and presentation of questions and response options whose results are reported. This includes preceding interviewer or respondent instructions and any preceding questions that might reasonably be expected to influence responses to the reported results.

Vockrodt quoted Councilwoman Katheryn Shields as being skeptical of a poll sponsored by a firm that had so much to gain from the debate. She offered, “I’m astonished that a company with the reputation of Burns & McDonnell would continue to needlessly interfere with the bid practices of this city.”

The public has been engaged in the discussion of a new terminal at MCI for at least 4 years. The debate has been less than transparent, and many of the arguments in favor of a new terminal have been proved false. Councilwoman Shields is right: For the sake of good public policy, it is incumbent on all the participants, including Burns & Mac and other applicants, to respect the process.

Putting the APPP in Perspective

Posted on by Graham Renz

The City of St. Louis is exploring the privatization of Lambert International Airport through the federal Airport Pilot Privatization Program (APPP). The APPP allows a limited number of publicly owned and operated airports to exchange the right to operate and manage their facilities (and so, pursue profits) with private firms in return for major up-front cash payments, a share of future revenues, and major capital investments.

Privatizing Lambert could be a win–win–win proposition for St. Louis. The city could get an infusion of cash; private firms could get the opportunity to pursue profits; and the traveling public could get an improved and more efficient airport. But skeptics point out that a limited number of airports have gone through the APPP, implying that privatization is rarely successful, if not unrealistic.

So, is privatization realistic? Why hasn’t it taken off in the US?

The answers: “Absolutely” and “It’s complicated,” respectively.

Privatization is becoming more common abroad. As of 2016, 41% of European airports were partially or fully privatized, and the Canadian National Airport System (comprising Canada’s 26 largest airports) has been successfully operated by the private sector for decades. According to Airports Council International, the private, market-based approach in Europe has led to “significant volumes of investment in necessary infrastructure, higher service quality levels, and a commercial acumen which allows airport operators to diversify revenue streams and minimize the costs that users have to pay” (p. 1). Privatization has also led to greater competition, which has “pushed airports of all sizes to fight for route development and traffic growth, to become leaner and more efficient… and to find the optimal means of financing investments “(ibid). In short, privatization works; in fact, it works really well.

But European and Canadian airports weren’t privatized through the APPP, which might be why privatization has been faster and smoother abroad. While the APPP is promising, it can take years to finish the application process, and time is money. For perspective, Henry County Airglades Airport had its preliminary application approved in 2010 and has yet to receive final approval from the Federal Aviation Administration (FAA).

The APPP also imposes restrictions that can make crafting a privatization deal challenging. For instance, a 65% majority of airlines need to approve a lease agreement for privatization to go forward. And if the city wants to use proceeds from the agreement on projects outside the airport, it’ll require that same 65% approval. Moreover, private operators must assume any public debt held for the airport unless the FAA waives the responsibility. On top of all this, the passenger facility charge (PFC) airports levy on travelers is capped at $4.50 by Congress, which limits revenue for private operators. (Read this recent Congressional report on the APPP for a more detailed account of the program and its challenges.)

The question isn’t “Should we privatize?” but “How should we privatize?” The FAA has discussed the benefits of privatization and increased competition for decades, and the APPP gives St. Louis a chance to capitalize on those benefits. And while few airports have been privatized through the APPP (note that most simply withdrew their applications), policymakers can work to craft a deal that works for all involved: the city, the airport, airlines, and the traveling public. Look for more soon on what a privatization deal could include to offer the best outcomes for all parties.

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