The Risks of the New Convention Hotel

Posted on by Patrick Tuohey

Despite being midsized in both population and convention business, Kansas City was rated among the top five cities in high travel taxes. That rating didn't include the new 1 percent downtown streetcar Transportation Development District (TDD) tax or the proposed 1 percent Community Improvement District (CID) for the proposed new 800-room convention hotel. These additional taxes will make Kansas City less attractive to conventions.

The proposed hotel deal not only will make conventions here more expensive, but it also will remove one of the few remaining charges conventions can keep down: open-bid catering.

Patric Mills works with Educational Testing Service (ETS), which brings over 5,000 people to Kansas City every year for between eight and 23 days—accounting for 26,000 room nights and 173,000 meals. She says that Kansas City is already more expensive than our peer cities. In a phone interview, she told me,

Kansas City is more expensive in general than some of our other site cities, such as Louisville and Cincinnati. Everything—travel, lodging, local transportation, IT support, decorators, security services, etc.—is less expensive in other cities. Being able to save on catering dollars makes Kansas City more attractive than it would otherwise be. 

The deal Kansas City is considering would give up the only cost advantage it has—catering—by giving Hyatt exclusive rights to it. As a result, convention planners like Mills will lose an opportunity to control costs. Mills said,

In most cities, the convention center has exclusive catering. Kansas City has open catering, and that is one of the biggest attractions, because it saves us money. . . . Exclusive caterers will have to bill for overtime and, with no competition, would have no incentive to offer low prices.

This will make Kansas City less attractive to ETS and probably many other conventions. Increasing costs and decreasing choice won't bring Kansas City new convention business. Mills concluded,

The College Board has a budget, and ETS, in managing their programs and events, has an incentive to keep costs low. If Kansas City moved to an exclusive caterer and prices rose as high as I am afraid they might, College Board could ask us to move the Kansas City AP Reading to a less expensive site.

The benefits of a new convention hotel are iffy, but the costs and the risks are real. Kansas City is already an expensive place for conventions—this effort to build a new hotel will make us more expensive and cost us an important competitive advantage: open-bid catering.

Taxpayers and the City Council need to understand these risks. If we're not careful, we may end up pricing ourselves out of contention.

Modernize Saint Louis’ Outdated Business Code

Posted on by Joseph Miller

Miniature pony tracks.

Bathhouses, detective agencies, and pool rooms.

Horse-drawn vehicles, junk dealers, cattle dealers, and street railways.

Vault cleaners.

Sound like the backdrop of a novel set at the turn of the century, or maybe the establishing shots of the newest period drama on HBO? How about Saint Louis City’s business regulations? All of those business models of yesteryear, along with many others, are part of the city’s antiquated regulatory code.

Unfortunately for Saint Louis, the city’s ordinances are almost comically outdated, concerned with protecting the public from businesses that no longer exist or are no longer considered dangerous to the public peace. Does anyone think that we should still require public petitions to set up a pool hall or open a tattoo shop? Should a transient photographer still have to apply for a specific license? Is it necessary that city officials should have, from the front door, an unobstructed view of the back wall of an arcade? Most residents would laugh at these laws, but they are laws. And the fun and games end when real people are prevented from starting businesses because the city has not reformed its licensing rules for decades.

The good news is that a much-needed overhaul of the business code may finally happen. A bill before the Board of Aldermen, BB 110, would eliminate or significantly alter specific license and operating requirements for more than 40 types of businesses, reportedly reducing the total length of the city’s business code by 75 percent. Much of the streamlining comes from eliminating regulations on business models that barely exist in the city anymore, like bathhouses, street railways, and motor carrier transportation brokers. However, some of the changes would eliminate outdated and ill-conceived regulations on a variety of businesses that still exist, including photographers, real estate agents, and massage therapists. For example, barbers would be able to stay open past 6:30 p.m. and work on Thanksgiving, if they so wished. Bed and breakfasts, pool halls, and tattoo parlors would no longer need neighborhood consent to open up shop.

Two related bills before the Board of Aldermen, BB 108 and 109, would supplement the reforms in BB 110 by making it easier to open a small business. Currently, registering a business with two or fewer employees costs $200 annually. Under BB 108 and 109, micro-businesses or home occupation operators would only have to pay a $25 fee. That could make Saint Louis a more attractive place for start-ups with shallow pockets.

While the proposed reforms to the city’s code represent progress, policymakers could go further. For example, the bills would not eliminate dated regulations that govern alarm businesses, brick dealers, laundry/dry cleaning, and pawn shops, among others. The city could also benefit if the business code were reworked to have a permissive attitude toward licensing—an attitude where, instead of a new company having to jump through hoops to start up, officials would have to jump through hoops to shut it down.

Saint Louis City’s greatest concern should not be how new business activity is controlled, but rather that there is too little activity to start with. While the proposed reforms go a long way toward updating the city’s regulations, there’s more that can be done to make it easier to invest in the city, whether that investment is a restaurant or a bed and breakfast or a private bus route. Or even a miniature pony track.

Taxicab Commission: Ridesharing a Want, Not a Need in Saint Louis

Posted on by Joseph Miller

The status of ridesharing companies, like Uber and Lyft, dominated the agenda at this month’s meeting of the Metropolitan Taxicab Commission (MTC). When the commission opened the floor to public commenters, most were supportive of reforms necessary to get ridesharing companies up and running in Saint Louis.

However, despite the public enthusiasm, the commissioners themselves were more critical and directed their criticism mainly at Uber’s business model. They doubted whether Uber’s background checks were up to their standards, they discussed at length the need for initial drug testing, and they questioned Uber’s insurance requirements. As is usual, they claimed that their concerns were only about customer safety.

In their nitpicking about which background check was most thorough, the MTC continued to ignore the fact that most of its for-hire vehicle regulations have nothing to do with safety. How does limiting the number of licensed cabs protect safety? How do pricing regulations determine whether a cab is road worthy? What consumer breathes a sigh of relief knowing that the MTC controls what drivers may wear?

Unfortunately, rather than take an open attitude toward innovation, a regulatory reflex reigns at the MTC. When the commission was asked to reconsider the necessity of its regulations, one commissioner asked, and I’m paraphrasing, “Would you get your hair cut at an unlicensed barber?” (Barbers require licenses in Saint Louis.) He was incredulous to the idea that, yes, many residents would feel perfectly comfortable choosing a barber that did not have the city’s seal of approval, if that barber did a good job. That same commissioner ended the meeting by saying that ridesharing companies were a want, but customer safety was a need. Customer safety as defined by the MTC, not customers themselves.

The MTC would best serve Saint Louis if it takes the demands of its residents seriously and gives up on its instinct to delay and control ridesharing companies. More than anything, Saint Louis needs a welcoming business environment; no one wants the MTC to hold the region back.

Maintaining the Education Status Quo

Posted on by James V. Shuls

Today it was announced that many St. Louis area school districts have agreed to accept a lower tuition rate for students transferring from the Normandy and Riverview Gardens school districts. Jessica Boch of the St. Louis Post-Dispatch writes:

 A significant number” of districts have agreed to reduce the tuition costs for transfer students to about $7,250, said Don Senti, executive director of EducationPlus, an organization of area school districts that has coordinated the transfer process for the past two years. That is the same amount most districts charge St. Louis Public Schools for transfer students under the voluntary desegregation program. In the past, tuition rates have ranged from $20,768 in Clayton to a low of $7,927 in Mehlville.

I am very pleased that the school districts have decided to take this step. Actually, I’ve been saying this action was possible all along. Back in January 2014 I wrote:

 Many have lamented that the inter-district transfer law, which allows students to transfer from unaccredited public school districts to nearby accredited districts, may bankrupt failing districts. Normandy and Riverview Gardens, the two unaccredited districts currently allowing students to transfer, are already seeing financial hardship, and reports indicate that Normandy could be bankrupt by the end of the school year. This has occurred because the districts are paying tuition rates that are often in excess of what the districts spend on their own students. This has led some to clamor for a set tuition rate. In a recent position paper by the Cooperating School Districts of Greater St. Louis, area school superintendents stated, “If transfers are made between school districts then a regional tuition rate should be determined.” The interesting thing is that nothing is stopping area school districts from charging a lower tuition rate now. Each district, with a vote of its school board, could decide to set a lower, consistent tuition rate. To date, none of them have. Instead, school leaders are asking for more state government action. This is the very problem that plagues our society in so many regards; instead of taking initiative and fixing a problem ourselves, we allow or we seek greater government involvement. The next time you hear a school leader complain about the transfer situation and how it may bankrupt unaccredited schools, ask him or her what his or her district is doing to help. Are these leaders taking action locally, or are they requesting a solution from Jefferson City?

Eighteen months ago school leaders scoffed at my idea. They wanted a legislative fix. They wanted to stop the transfer program. What changed? Now, area school leaders are acting to stop a legislative fix. The current bill sitting before the governor would improve Missouri’s charter public school law and allow for broader establishment of virtual schools. Eighteen months ago, the education establishment rejected the idea of lowering tuition because they wanted the legislature to maintain the status quo. Today, the education establishment welcomes the idea of lowering the tuition because they want to avoid the legislative fix and maintain the status quo.

Missouri is 35th. Yay!?

Posted on by Michael Rathbone

When thinking about Missouri’s recent economic track record, one would be tempted to treat any positive economic signs with much joy and enthusiasm. So when the Bureau of Economic Analysis shows that Missouri ranks 35th among states in gross domestic product growth for 2014, one can be forgiven for treating the news like Steve Martin treats the arrival of a new phone book.  

Yet should we really be all that excited? I guess it depends on your standards.

Sure 35th is better than 36th and it is a lot better than 49th or 50th, but we’re still below the national average. Nor are we in the top half of states in economic growth. Looking at the data, the most encouraging sign I see is that at least we’re growing faster than a few of our neighbors (Nebraska, Arkansas, and Iowa). You’ll notice Kansas isn’t on that list. That should give critics of the Kansas tax cuts at least a moment of pause before declaring the whole thing a disaster. 

So how does Missouri do better? Well, here are a few suggestions. How about abolishing the Department of Economic Development and using the millions it hands out in economic development tax credits to cut taxes on businesses? How about shrinking the public sector while delivering better services through privatization? How about making sure we have a well-developed infrastructure that benefits all of us?

Those are a few suggestions. You can always find more on our website at showmeinstitute.org. I am glad that Missouri is seeing some improvement in its economic performance, but I wouldn’t put us in the winner’s circle just yet. Missouri needs to do better and there are lots of places it can improve.  

Positive Train Control Creates Doubts for Amtrak in Missouri

Posted on by Joseph Miller

With the recent Amtrak derailment in Philadelphia, the push for increased passenger-rail safety measures has greatly increased. As part of this effort, the federal government may force the speedy implementation of long-delayed positive train control (PTC) systems for all Amtrak routes. PTC is a system of improvements to locomotives, railroad tracks, and IT connectivity for the purpose of preventing train-to-train collisions. While PTC’s effects on passenger rail safety are debatable, what is not debatable are its costs, which should cause a rethink of Amtrak subsidies in Missouri. 

Amtrak currently serves three routes in Missouri: the River Runner, the Southwest Chief, and the Texas Eagle. The Missouri River Runner runs entirely within in the state of Missouri (and is primarily subsidized by the state), while the Southwest Chief and the Texas Eagle are long-haul routes that make only a couple of stops each in Missouri. Amtrak has in the past garnered a fairly negative reputation. In most parts of the country, Amtrak has few riders, low levels of service, and large subsidy requirements. However, in the last decade inter-city passenger rail has seen large ridership growth in Missouri and elsewhere, although recently that growth has slowed:

mo-amtrak-ridership

Much of the increase is due to capital investments that have improved Amtrak’s previously notorious on-time performance. Unfortunately, while passenger levels have increased, all the routes that serve Missouri still operate deeply in the red. In 2014, the River Runner was able to generate more than $5 million in revenue. However, in the same year state subsidies to the service topped $8 million. That’s a $42 state subsidy per rider, more than the cost of a standard ticket.

The long-haul routes perform even worse, with the Southwest Chief requiring federal subsidies of $177 per passenger. The implementation of PTC on Amtrak routes will greatly add to this red ink. In fact, Kansas City Terminal (KTC) has estimated that improvements will cost $32 million in the Kansas City area alone. Statewide, the costs could be tens of millions more.

As of today, there is no agreement on who will pay for PTC improvements. The obvious candidate is the federal government, but Congress has been reticent to increase funding for Amtrak. Some policymakers want to push the costs of PTC onto the profitable freight rail industry, for the reason that they own the tracks. But freight rail companies are balking, because as they rightfully point out, they only need these immediate upgrades because Amtrak operates on their rails.

Missouri taxpayers will likely have to pick up some of the costs of upgrades, especially for the state-funded River Runner, or risk losing service. Perhaps it’s time for Missouri residents to give Amtrak subsidies another thought. With profitable inter-city bus and airline service, passenger rail is a redundancy. That’s all well and good if passengers are willing to pay for it, but they are clearly not, at least as it’s currently run. If the choice comes down to large state payments for PTC implementation and cutting Amtrak loose, residents should choose carefully.  

Employers Need Help-and They’ll Pay Too

Posted on by Michael Rathbone

There’s been a lot said about this new minimum wage proposal in Saint Louis. However, there is an interesting topic that gets lost in the back and forth about how many jobs will be lost (quite a few) versus how many people will be lifted out of poverty (not many) if the minimum wage goes up. That topic is how workers can benefit from wage competition among businesses.

In a free market, as workers compete for jobs, businesses also compete for workers. If a worker won’t bring enough value to an employer to justify his/her salary, he or she will not be hired. On the other side, if a business doesn’t provide an attractive wage to a worker, that worker will find work elsewhere. Thus, both sides have to provide enough value to the other.

You might think that big business might be immune from these forces, but you’d be wrong. Even the largest companies have to offer decent wages to their employees. Take Walmart for example. It has the highest revenue of any company in the world and is one of the largest private employers in America. Even it has to compete for employees. That competition results in jobs paying higher than the (current) minimum wage.

I took the above picture at a Walmart in Saint Louis County last Wednesday. The starting wage is $9.00 an hour, which is higher than the minimum wage. Is Walmart making this offer out of the goodness of its heart? That’s doubtful. They’re probably offering a high starting wage because they recognize that if they don’t workers will head over to Target, Costco, or Walgreens instead.

That’s how the free market is supposed to work. Increasing the minimum wage is popular with the public, but it is not good policy. An individual and a business should negotiate compensation that is mutually agreeable to both parties. Mandating a higher minimum wage will end up mandating unemployment.

Would Union Elections Help SLU Nurses?

Posted on by John Wright

Some SLU nurses seem to be dissatisfied with their union representative recently. In May, a Saint Louis University Hospital nurse filed a federal charge against National Nurses Organizing Committee, a major California-based health care union, for violating workers’ rights.

In the complaint, the nurse alleges that union executives are using illegal dues deduction authorization forms and refusing to provide workers with information about their right to refrain from paying certain fees. This is important because workers have a right to refrain from paying for union political campaigns and other activities that are not directly related to representing workers.

When union fees are automatically withheld from employees’ paychecks without an option to pay for only core union services, employees may be forced to pay for political activities that they do not agree with or benefit from.

SLU nurses also recently held a vote on ending forced union dues. While 22 percent of nurses eligible to vote voted for the measure, 36 percent voted against it, meaning union dues will remain mandatory for SLU nurses.

Between the lawsuit and the vote to end mandatory union fees, it seems that a faction of nurses at SLU hospital are no longer satisfied with the way they are represented. A union exists to give workers a voice before management, but what happens when workers feel they no longer have a say before their own union?

Regular union elections are one answer to the question of how to keep union leaders accountable. In such elections, workers have the opportunity to vote in a secret ballot whether they wish to continue the union’s representation, select another organization to represent them, or forgo formal representation altogether. Such elections have recently been considered by Missouri’s legislature as a way to ensure accountability for public sector workers, but the proposal has not gotten much traction among private sector unions, such as SLU nurses.

Union elections may or may not be the answer for nurses at SLU; however, such elections provide one answer to the question of how to keep organizations democratic and accountable to the people they represent.

Equitable Funding For Charter Schools?

Posted on by Brittany Wagner

ad for charity event

“Funds raised from our Fourth Annual Soiree will fund the gap between public dollars and the true cost of educating every SLLIS student,” reads the invitation for an upcoming fundraiser for the St. Louis Language Immersions Schools.

Because SLLIS is a charter school, it does not receive the same amount of public dollars as a traditional public school. In 2011, on average, Missouri charter schools received $3,800 less than traditional public schools.

“Missouri’s charter public schools are living up to their end of the bargain and demonstrating the ability to provide a high quality education. It’s time to move past ‘stepchild’ funding and ensure every public school in Missouri receives equitable funding,” Missouri Public Charter Schools Association Executive Director Doug Thaman wrote in the Missouri Times.

While some argue that charters are able to fill the gap in funding through fundraising, a recent report found that charitable donations do not eliminate the funding gap between charters and traditional public schools.

Buckets of Water into the Ocean: Non-Public Revenue in Public Charter and Traditional Public Schools found that revenue from nonpublic sources (non-public food service, investment revenue, philanthropic fundraising, etc.) totaled almost 6.4 billion for traditional public schools and nearly 400 million for charter schools in the 15 states included in the study.

Interestingly, the authors found that traditional public schools receive most of their non-public revenues from selling meals to their students and investment profits. Charter schools receive most of their non-public revenue through philanthropy. Still, charitable donations do not make up the difference—adding as little as $74 (New Jersey) and as high as $1320 (Hawaii) to total per pupil revenue.

The findings of this report may change the conversation in Missouri as revisions to the way schools are funded are considered. One of the authors of the study, Arkansas Professor Patrick Wolf said:

If students in public charter schools are to receive funding on a par with students in traditional, district-run, public schools, it will have to come from more equitable public school funding laws.  Saying that charitable donations can make up the funding gap between district-run and charter schools is like saying that throwing buckets of water into the ocean will change the tide.

 

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