On June 19, 2017, Show-Me Institute Policy Researcher Graham Renz testified before the Chesterfield Valley Transportation Development District (TDD) Board of Directors regarding the extension of the TDD sales tax for the purpose of subsidizing an ice complex. Click on the link below to read the entire testimony.
Putting the APPP in Perspective
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.
Show-Me Now! Chesterfield’s $500,000+ Wall
Fancy bricks and big bucks: Chesterfield’s half-million dollar wall is getting a lot of attention and not for the right reasons. Transportation development districts are supposed to fund community improvements like roads and bridges…But are some of these districts wasting your tax dollars on “beautification” projects?
To learn more about transportation development districts (TDDs), visit showmeinstitute.org
On Special Sessions, Public Service, and “Real Jobs”
This week the Missouri Senate returned to the Capitol for its second special session of the summer—an enterprise for which a handful of Senators have themselves to thank. After all, when you waste half of a Legislative session filibustering and singing Kumbaya, you may have to finish the People’s work on your own time. In the world of real jobs, that’s called earning your salary.
And it’s the “real job” debate that percolated during the first special session that I want to address here, since it’s now come back up in the second. During the first special session it appeared that a handful of senators might already have been looking ahead to the Memorial Day weekend, which I don’t begrudge them. But a common refrain during the session’s debates was that a few senators were put out by having to come back to the Capitol—that being a senator wasn’t a “real job.” At least one senator even threatened to try and close down future special sessions because his “real job,” whatever it is, was more important than finishing his work as a senator.
Are senators the victims here? They don’t donate their time to be senators. They’re paid. They’re aware that special sessions can be called. They weren’t tricked into this line of work.
And can you imagine U.S. Senators behaving like this when talking about their public service? Constituents aren’t honored by electing a senator to public office. Senators are, in fact, given the honor of representing their constituents.
So when I hear a senator complaining on the People’s floor about his pay, the burden of his office, and the inconvenience of doing the job he sought and received, I am left to wonder why he is standing there to begin with.
And now, as would happen in a real job, some of these senators are going to have to earn their cash advance. They were happy to walk away with their salaries during the regular session as bill after bill was buried by their filibusters and foot-dragging. Now they’re being paid per diems to do jobs that should already be done.
Maybe next year these senators will treat their real jobs—doing the People’s business—more seriously; otherwise, I suspect the summer of special sessions will evolve into an annual tradition. Let’s hope that won’t be necessary.
Ready-Fire-Aim Approach Yields Predictable Results at KCI
The rush to build something—anything—at Kansas City International Airport is calling into question the ability and even the seriousness of Kansas City leadership.
Consider a recent story in The Kansas City Star, which states that Burns & McDonnell would be given “the opportunity to equal other proposals if it chooses, since it brought the idea to a municipality to begin with.” The Star called this “nuance,” though apparently some thought it was a serious problem. Seven days later, the Star reported that:
City Manager Troy Schulte said Monday that the city’s lawyers had advised that the right of first refusal could potentially be subjected to a legal challenge, so it was eliminated.
How did a proposal outside the city’s municipal procurement code provisions, and possibly even fodder for a lawsuit, get past the corporate attorneys at Burns & Mac and all the attorneys on the City Council, including Mayor Sly James himself? Why did the City Manager announce the decision to allow Burns & Mac the right of first refusal without consulting with the city’s attorneys beforehand? If he did consult with them, how did they initially miss it? And how did The Kansas City Star, the city’s paper of record, unquestioningly describe a potentially unlawful bidding practice as mere “nuance?”
Could it be that this policy proposal—if it can be called that—is being rushed through? That may be an odd question to raise about a matter that has been under discussion in Kansas City for years, but it appears to be what is happening.
The public wasn’t convinced of the need for a new single terminal before this latest political fiasco kicked off. The deadline of a public vote in November has created a false sense of urgency—resulting in the kind of mistakes you’d expect from people more concerned with getting something done fast than with getting it done right.
The airport is an important and valuable asset. The consequences of a mistake in the planning or implementation of its development will reverberate throughout the region for decades. There is no reason to rush this decision—good policy is not served by hurried half-measures. The Star—and the airlines themselves—ought to suspend their calls for a November election, and the Council ought to ignore false deadlines.
Subsidies, Not Streetcars, Lure Developers
Kevin Collison, freelance reporter and supporter of taxpayer-subsidized economic development, inadvertently undercut the argument that streetcars spur economic investment in a recent story on a downtown Kansas City blog.
The piece details yet another downtown building getting historic tax credits and being let off the hook for property taxes. Taxpayers can be forgiven if they wonder whether the glass cube building completed in 1973 and pictured above is historic and worthy of subsidized preservation. But that is a matter for another time; this is about the streetcar.
Collison writes,
The $50 million redevelopment plan for the reflective glass-clad building known as the Flashcube received critical tax incentives to move forward today, the latest project on the downtown Kansas City streetcar line.
Streetcar supporters may decide to include this renovation in their shifting and often incorrect list of projects that can be credited to the streetcar. At best, they can claim that the streetcar got developers interested in seeking taxpayer subsidies. But the streetcar was neither necessary nor sufficient for the project. The available research does not support the claim that streetcars—in Kansas City or elsewhere—drive development. And Collison’s own story makes that point clear. The building sat vacant for a decade, and it wasn’t until taxpayer subsidies were offered that any renovation deal moved forward—in short, the public is investing in yet another downtown development deal that businesses wouldn’t touch on their own.
Regardless of the merits of the downtown development subsidies—and again, we discuss that elsewhere—this project is moving forward because of the subsidies, not the streetcar.
Great News! Mizzou Embraces Free Speech
Last week, Mizzou took several important steps in ensuring that all students on campus, regardless of viewpoint, will have the freedom to express their beliefs openly. As the Foundation for Individual Rights in Education (FIRE) explains, the university released a policy statement recognizing the free speech rights of students and also adopted new policies around protests and demonstrations that clearly explain the rights of students to congregate and speak their minds in public spaces.
One paragraph in particular stands out:
“Thus, the University’s fundamental commitment is to the principle that debate or deliberation may not be suppressed because the ideas put forth are thought by some or even by most members of the University community to be offensive, unwise, immoral, or wrong-headed. Individual members of the University community, not the University as an institution, should make their own moral judgments about the content of constitutionally protected speech, and should express these judgments not by seeking to suppress speech, but by openly and vigorously contesting the ideas they oppose. Indeed, fostering the ability of members of the University community to engage in such debate and deliberation in an effective and responsible manner is an essential part of the University’s educational mission.”
This is exactly right. The mission of the University should be to empower students with the skills and knowledge that they need to debate and disprove things that they believe are false, not to tell them it’s OK to run and hide from them.
As FIRE points out, Mizzou’s new free speech policy is based upon the Report of the Committee on Freedom of Expression, a document published several years ago at the University of Chicago that has become the gold standard for ensuring that students and faculty have the maximum freedom to discuss and debate topics of importance.
Here at the Show-Me Institute, we have been urging the university to adopt such speech protections for some time now. In a report I co-authored with Michael Highsmith, “Moving Mizzou Forward: Reform Ideas from Around the Nation” we wrote:
“Freedom of speech and debate is at risk and can be protected. It seems that not a week of the school year goes by without some story emerging about efforts by a student council, residence hall, professor, or school administrator to stifle the speech of students. If we do not impress upon our students the importance of free speech and defend it vigorously, we risk creating a citizenry that does not value one of the foundational values upon which our nation was built. Luckily, institutions like the University of Chicago offer a great blueprint for fostering debate and protecting speech. Mizzou would be wise to study that blueprint carefully.”
Mizzou has clearly done this. Good for them.
How Much Are Kansas City Teachers Willing to Pay for their Pension?
As I wrote in my last blog post, a report authorized by the Kansas City Public School Retirement System (KCPSRS) suggests there is a 42% probability that the system will be insolvent in 20 years. This is serious. The retirement security of many hard-working teachers may be at risk. And, ultimately, the taxpayers may be at risk if the system goes belly-up. So, how can the system handle this problem?
As the authors of the KCPSRS analysis suggest, “long-term pension fund success is based on all three levers working together.” Those levers are contributions, benefit design, and investment design. As we’ve noted before, the plan is already shifting to riskier assets in an attempt to secure higher rates of return on investments. The system will likely keep the benefits design the same. So, what could they change in order to shore up the system? There is only one lever remaining: contributions.
Currently, teachers and their employers each pay 9 percent into the system for a total of 18 percent. An additional 12.4 percent is put into Social Security. The authors of the KCPSRS analyses suggest the system may need to increase contribution rates if they want to avoid insolvency. They project what the impact would be of increasing the contribution rate to 22 or 26 percent. Of course, increasing contributions will help the financial health of the system. It will also cost teachers.
Keep in mind that the contribution rate was set by the legislature at just 15 percent from 1999 to 2012. The legislature allowed for fluctuation in the contribution rate, but capped the maximum amount at 18%. In other words, increasing the contribution rate to the 22 or 26 percent highlighted in the KCPSRS report would not only require an act of the legislature, but possibly an act of a higher power. It is an increase that may be unprecedented in Missouri pension history.
Increasing contributions but not benefits means that employees of the future will get significantly less benefit from the pension system than their predecessors. They will, in effect, be paying for the benefits of the past.
The real question is how much are employees willing to pay for the same or a reduced benefit? Teachers today may be willing to put their 9% into the system, but would they be willing to put 11%? How about 13%? At what point do teachers decide they would rather have their contributions in a defined-contribution account, rather than an account that goes to pay for someone else’s benefits?
Regional Interdependence in Missouri
The Saint Louis and Kansas City metropolitan areas account for over half of Missouri’s economic output. Accordingly, the state’s economic performance is largely determined by the successes or struggles of the two metro areas. But can growth in Missouri’s outstate areas be predicted by metro area growth as well? This essay explores the question of whether economic events in the metro areas might be of greater interest to the rest of the state than is usually thought. To read the entire essay, click on the link below.
