On Thursday, September 22, the Show-Me Institute’s Patrick Tuohey appeared on Kansas City Public Television’s Ruckus to discuss possible light rail plans, extending the Kansas City Streetcar, and other local issues. Click on the link to watch the entire show.
How Can Schools Raise Property Taxes Without Voter Approval?
Last month, school districts throughout the state set their tax levies for this school year. I suspect most people believe that taxpayers vote to approve a certain property tax rate, and that the rate just stays the same until they vote to change it again. In reality, it’s a bit more complicated. For example, the Eldon School District will be increasing the property tax levy by two cents this year; while the School of the Osage’s tax levy will increase 11 cents. Both of these increases were possible without voter approval—kind of.
When you vote to raise your local property tax for schools, you are essentially voting to raise the district’s property tax ceiling. This is the maximum rate the district can use to collect local revenue for schools. The district may be forced, however, to lower the rate during times of economic growth thanks to the Hancock Amendment in Missouri’s Constitution. Basically, school district revenues collected from existing real property cannot increase beyond the rate of inflation. If an increase in taxable property values outstrips the pace of inflation, the district rolls back the property tax rate.
Rollbacks create a gap between the tax rate ceiling and the tax rate used by the school district. Thus when districts have space under the cap and their property values are flat, the school board can choose to raise the rate without voter approval because the voters have previously given approval.
Despite the tax rate increases this year in Eldon and School of the Osage, each district will remain under its tax rate ceiling. Moreover, each school district’s tax rate will remain below the state average. In Eldon, the rate was $3.54 per $100 of assessed valuation in 2015; it was $2.849 for the School of the Osage. The state average tax rate for operating and capital expenses was over $4.
School funding is complicated, but we are here to help. If you want to know more about how schools are funded in Missouri, check out our Funding Formula Primer. And, if you have questions don’t hesitate to contact us.
Out with Football, in with Fútbol?
With the Rams on the West Coast, many Saint Louisans have shifted their attention to other sports. The Blues had a spectacular season this past year (though it ended a few games earlier than I had hoped), but not everyone thinks that hockey and baseball alone can fill the void. MLS2STL is working to attract a Major League Soccer (MLS) team to the region in 2020, and while a new stadium may be built in hopes of securing a team, research tells us that such expenses rarely pay off.
An estimated 20 acres would be needed for construction, and the search for locations has been narrowed to three places, including one just west of Union Station. It might be more cost-effective to use the now-dormant Edward Jones Dome than to build a new stadium, but soccer-specific stadiums are becoming the norm, so the odds of re-purposing the Ram’s old home don’t look good.
I should note that MLS has not committed to bringing a team into Saint Louis yet, so we shouldn’t get ahead of ourselves. But in any case, the overwhelming majority of research shows that sports stadiums do not generate significant economic growth and the revenues they bring in are insufficient to justify the use of public funds.
Of course, there is much more to having a team than just turning a profit. People take pride in having a team put their city on the map, and rallying behind a successful enterprise can be a fantastic experience. Saint Louis has a soccer fan base that will be understandably excited if the MLS decides to expand here. but as to how a new stadium should be funded, the research speaks for itself.
Do You Hear That? It’s the Drumbeat for School Choice Getting Louder
In January 2011, Mike McShane and I co-wrote our first opinion editorial for a Missouri newspaper. At the time we were in grad school at the University of Arkansas, but still keeping an eye on our home state. We followed up with another piece, “A to-do list for legislators,” one year later. In both pieces we argued that Missouri lawmakers should expand educational options for students.
Since then, we have continued to advocate for these policies. Though we have had some small successes, the policies of today are very similar to the policies of 2011. Charter schools are still very limited and still confined to Saint Louis and Kansas City, we do not have a private school choice program, and students have relatively few options. But support for choice is growing. We regularly hear wonderful stories of students thriving in charter schools or benefitting from inter-district choice. And we are starting to see other voices advocating for broader school choice policies.
For example, Steve Spellman, a financial services professional, recently penned an op-ed that appeared in the Columbia Missourian. In his piece, Spellman spoke about how parents will often move or illegally change their address so their children can attend the public school of their choice. He argued for many of the same policies that McShane and I wrote about back in 2011 and 2012. It is exciting to see Spellman and others picking up the mantle of school choice.
Last year a school choice bill made it further than ever—passing out of the Missouri House—and received a hearing in the Senate. I suspect support for school choice will continue to grow in the coming years. As one of our professors from the University of Arkansas, Jay Greene, recently wrote, “the great political virtue of school choice is that it generates its own constituents…” When people have school choice, they want to keep it. We aren't there yet, but the drumbeat for increased educational options is getting louder.
Road Blocked for Tesla in Missouri
Over the past decade, Tesla has made a name for itself in the automotive industry through innovative design and the noble goal of reducing every human’s carbon footprint. While Tesla is looking toward a brighter future, it seems that automotive regulations are living in the past. Tesla has been operating dealerships in Missouri for a few years now, but last week a Cole County judge ruled that its current business model violates state law.
The ruling comes from a lawsuit filed by the Missouri Automobile Dealers Association (MADA) against the Missouri Department of Revenue. MADA argues that allowing Tesla to sell directly to consumers is forbidden by the Motor Vehicle Franchise Practices Act (MVFPA) and that the DOR was mistaken in granting a dealer’s license to Tesla. The law requires manufacturers to sell cars via a franchise agreement with a car dealer, but Tesla argues that the two (manufacturer and franchisee) can be one and the same. In other words, Tesla established an agreement with Tesla to sell Tesla’s cars.
Regardless of whether Tesla is exploiting a loophole in the current legislation, to me the real question is whether the law should effectively prohibit a manufacturer from selling to consumers. While dealerships can reduce a manufacturer’s burdens regarding advertising, selling, and maintaining cars for consumers, does it make sense to “force” a third party into the mix? Given that dealerships tend to provide insufficient information on electric cars, and that direct manufacturer sales can lower distribution costs, it’s difficult to see the rationale behind limiting consumers’ decisions regarding how to purchase a car.
Tesla is bringing innovation into Missouri’s automobile industry, and to shun such innovation is a missed opportunity. Regulations such as the MVFPA should be in place to serve consumers, not protect specific dealerships. If they don’t do this, then perhaps it’s time for an updated business model.
“I Don’t Care What the Research Tells You”
Is Kansas City getting an adequate return on its investment in economic development? We’re skeptical. The research says it is not. But one supporter of subsidized development just doesn’t care. Literally. Steve Rose tells us on KCPT’s Ruckus, “I don’t care what the research tells you.” He then misidentifies the author of the study under discussion.
This shouldn’t be surprising. Much of the claims and the reporting on downtown development, the streetcar, TIF subsidies, and the like make the same mistake. They’re based on the assumption that a development that occurred after a subsidy occurred because of the subsidy. It’s a common logical fallacy, post hoc ergo propter hoc, (after therefore because of). And Kansas City is rife with it.
Consider the recent construction of a new Burns & McDonnell world headquarters building at Wornall and Bannister in Kansas City. In order to believe that economic development incentives were responsible for this project being undertaken, you have to believe that without taxpayer subsidies, Burns & Mac would never have developed the land, which sat on property adjacent to their existing headquarters and which their partner, VanTrust, already owned. Yet that is what we’re asked to believe.
Similarly, Rose and others point to the new buildings downtown and talk of a Renaissance. But the Power & Light District has not resulted in a net increase of jobs, businesses or tax revenue. H&R Block, whose building kicked off the downtown development binge, seems to be a study in obfuscation and failure. Not only is the streetcar a drain on resources, but according to Jackson County, the aggregate market value in the area around the streetcar is actually lower today than it was in 2012 and growing more slowly than the County as a whole.
The impacts of these investments are very real, resulting in the diversion of hundreds of millions in property tax revenue over the past decade away from taxing jurisdictions such as schools, libraries, and mental health funds, all of which are denied the money they need to operate. But the promised return on those investments never materializes.
As I told Rose when he said he didn’t care, if you don’t care about the research, we can’t have a discussion. Policies must demonstrate some sort of return: increased tax revenue, more jobs, an increase in population. Otherwise we’re just relying on the word of people who are lining up to take our money—and guess what they’re telling us? They want more, more, more.
Entrepreneurship in Missouri, Part 1: Techweek Masks Tough Times for Kansas City’s Entrepreneurs
Today is the final day of the Techweek conference in Kansas City. This week-long event fosters and promotes entrepreneurship and innovation, and it is considered one of the best festivals for entrepreneurship networking in the nation. In recent years, Kansas City has worked to position itself as a hub of entrepreneurship, and Techweek reinforces that image.
Unfortunately, during the other 51 weeks of the year, Kansas City (like the rest of Missouri) seems to be struggling in this regard. Since at least 2013, businesses in Kansas City have been taking a long look at whether they should remain in Missouri or move, in many cases across the border into Kansas. Greg Allen, President of Allen Financial Corporation in Kansas City, summed up the concerns facing these businesses nicely:
. . . one of the problems in the central city is we have an escalation of costs. . . . We need to be smarter about resources in the central city. We don’t need to be building more Power and Light districts.
Happily, as of this writing Allen’s company is still located in KC-MO, but as I show below, the data indicates that entrepreneurial activity is down in Kansas City and across the state since the recession ended.
A good way to measure the vitality of the entrepreneurial sector is to look at startups. Startups are the backbone of the economy, and they are the businesses we deal with every day in our local communities.
At the national level, the share of workers in firms less than 5 years old is now at 10.9%, the lowest it has been on record. The trend prevails in Missouri as well—the state now sits at 9.3%. A look at the table below shows that Missouri and its two largest population centers were growing with the U.S. average share until 2001. Since then, Missouri, has lost a larger percentage of its startup workers than the nation, and Kansas City and St. Louis have lost a larger percentage than Missouri.
(Data from U.S. Census Bureau)
Startup firms aren’t necessarily the key to our economy—growth in long-established companies could conceivably make up for less-impressive results among startups. But if we aren’t comfortable relying on older businesses to revive our economy, it’s time to ask some questions about the environment in which Missouri’s startups operate.
We can start with an attempt to locate the problem geographically. Where in the state are we seeing the starkest drop in startup growth? Is it tied to one particular region, or are startups struggling across the state? Next week, I’ll examine entrepreneurism across Missouri’s major population centers in Part 2 of my “Entrepreneurship in Missouri” series.
Patrick Tuohey Discusses KC’s Intercontinental Hotel on KCPT’s Ruckus
On Thursday, September 16, the Show-Me Institute’s Patrick Tuohey appeared on Kansas City Public Television’s Ruckus to discuss the luxurious Intercontinental Hotel’s application for blight status, expensive sunshine request fees, and other local issues. Click on the link to watch the entire show.
Early Returns: School Poll Results
The tenth annual Education Next poll assessed the views of American’s on our education system. Mike McShane summarizes some of the key findings of the poll results, first reported in this post.
