It’s Time to Disband the Metropolitan Taxicab Commission

Posted on by Joseph Miller

The Metropolitan Taxicab Commission (MTC) regulates all for-hire (and I guess now not for-hire?) vehicles in Saint Louis City and County. We’ve long been critical of the organization for overregulating the taxi market and blocking ridesharing companies from coming to Saint Louis. We’ve pointed out that having four of the nine commissioners represent the taxi industry is a clear conflict of interest. However, recent events call into question not just the MTC’s policies, but the policy of having the MTC at all.

Earlier this week, Uber announced that it would provide free UberX rides in Saint Louis for the Fourth of July weekend. That seemed like a huge benefit for the city, as the holiday week is notorious for drunk driving accidents. Free ridesharing has been a promotion many other cities, including Kansas City, allowed while policymakers worked out regulatory hurdles. But despite support from just about everyone, including Mayor Slay, the MTC said thanks but no thanks.

That action was bad enough, but subsequent statements by the MTC’s chair are downright embarrassing for that commission and the Saint Louis region as a whole. The chair of the commission wrote that complaints about Uber were down to “white privilege,” despite all the evidence that the entire Saint Louis community would benefit from ridesharing. The commissioner also openly insulted Chris Sommers, a more pro-ridesharing commissioner, for criticizing the MTC’s decision. Aside from calling on Sommers to resign and “work 4Uber,” the chair used extremely inappropriate language to disparage Sommers over twitter, completely unbecoming of a public official.

To sum things up, we have a commission with a chairman who is publicly insulting another commissioner and using race-baiting language to attack Uber. We have another commissioner who, last week, intonated that we should regulate just about every job that exists and said that Uber is a want, not a need in Saint Louis. Worse yet, those two individuals are among those commissioners who don’t represent the taxi industry. How can we expect this body to come up with efficient, modern for-hire vehicle regulations? Might it be better at this point just to dissolve the commission and start fresh? 

The Lake Loves Local Subsidies

Posted on by Michael Rathbone

It seems you win some, you lose some. Just as soon as I was about to pop open a bottle of champagne concerning the halt to a proposed minimum wage hike in Saint Louis, bad news from the Lake of the Ozarks burst my bubble.

Last Wednesday, the Osage Beach TIF Commission approved Tax Increment Financing for the redevelopment of the Dogwood Hills Golf Resort. The total cost of the subsidy package is $55 million. The proposal now goes to the city Board of Aldermen for approval. There’s a chance the board could reject the proposal, but I’m not getting my hopes up.

It’s too bad that the TIF Commission voted to approve these subsidies. I submitted testimony that pointed out granting a TIF for this project would be bad policy. Not only does TIF not lead to economic growth, it can end up harming other entities (like school districts) who rely on growth in future tax revenue to finance themselves. Instead, counties and municipalities should let the free market work and decide which development, if any, should happen on the property. If Osage Beach believes that taxes are too high for development to occur at Dogwood Hills, why not grant a small tax cut to everybody? Why should one developer get special treatment?

As officials in Osage Beach toast to the prospect of a new development in their city, other cities should not follow their example. Development can occur without TIF. I hope more policymakers will realize that.

Group Pushes for Higher Downtown Taxes

Posted on by Joseph Miller

Last week, multiple news outlets reported that representatives of Downtown STL, a taxpayer-funded organization, wants to set up a transportation development district (TDD) downtown. That TDD would charge a 0.5 percent sales tax (on top of existing taxes) from the river to Compton Avenue. While this taxing district would raise almost $3 million annually, the plan for how the money would be spent amounts to little more than a “trust us” from an unelected body.

TDDs are small taxing districts that collect property or sales taxes and spend that money on transportation-related projects. We’ve been largely critical of TDDs in the past, because:

. . . TDDs are ad-hoc specially created taxing districts with idiosyncratic boundaries. They are created through what is not a normal democratic procedure (see “qualified voters” and flexible district boundaries), with boards that are not elected in the normal sense.

Most TDDs opt to collect sales tax dollars instead of property taxes, allowing the micro-districts to export taxation. However, as TDDs proliferate, it becomes increasingly difficult for a resident to know how much they are getting taxed and where that money is going, even in their own city.

There are situations where using TDDs or other small taxing districts may be appropriate. For instance, we wrote favorably about the use of a Community Improvement District (very similar to a TDD) to build a causeway in the Lake of the Ozarks. In that instance, the district had: 1. A clearly defined and much needed improvement (a causeway); and 2. Virtual unanimity among those who would be taxed.

As things stand, the downtown TDD fails to meet these criteria. What critical transportation improvement requires the TDD? According the chief executive of Downtown STL, “We don’t have a definite proposal but we know what the needs are. . . .” Reportedly, projects could include pedestrian improvements, security cameras, and/or supporting a “development spine” to Midtown. In addition, Downtown STL has long pushed for a streetcar; setting up a TDD is a common first step toward that goal.

Because the TDD will charge sales taxes, unanimity among taxpayers is already out of the question. City/county residents from outside the TDD who come downtown for a Cardinals game or Ball Park Village (both of which city and state taxpayers subsidize) will have no vote on the matter. But even within the district, business owners are not all on board. Cardinals ownership is opposed, and hotel representatives point out that they already have a very high tax rate—17 percent—and visitors’ complaints are mostly about safety, not transportation.

When it comes to downtown Saint Louis, there are plenty of taxes in place to pay for necessary street improvements. There are also elected representatives who are empowered to manage those resources. Residents should think twice about giving an unelected group what amounts to a $4.5 million taxpayer budget without that group articulating a clear, non-controversial plan. 

Taxicab Commission Goes Rogue, Blocks Free Uber Rides on July 4th

Posted on by Joseph Miller

Recently, Uber announced plans to offer free rides for all Saint Louisans for the Fourth of July weekend. The free rides would have promoted UberX, which Uber is currently attempting to launch in Saint Louis. Free rides on a day when drunk driving rates are at their highest and when it can be hard to find a cab seems like it should be a big win for the city. Who could be against that?

The Metropolitan Taxicab Commission (MTC), that’s who.

The MTC regulates all for-hire vehicle services in the city of Saint Louis, including ridesharing. Problematically, half of its members represent the existing taxi industry, with vested interests in keeping out new competitors and new business models. As we’ve written before, their onerous and outdated taxi regulations are the reason Saint Louis has fallen behind the rest of the nation in getting ridesharing companies to set up in the city. In response to Uber’s petition to allow free rides in Saint Louis on the Fourth, the MTC said they would only allow it if all Uber drivers had gone through the MTC’s background checks (including finger printing) and drug tests. That stipulation effectively scuttles the promotion.

There is some question as to whether the MTC has any legal authority to ban free Uber rides, as the company is not technically offering a paid service. But the commission believes it does have the authority, and it has decided to use it to the detriment of Saint Louis. Moreover, the commission’s decision is in direct opposition to the position of Mayor Slay, who tweeted out on the promotion:

Uber has offered a free trial of its X service for the long holiday weekend. It is a positive gesture that we welcome.

With the MTC now swimming against both the tide of public opinion and the Mayor’s Office (which has hinted that they would not pressure police to enforce the MTC’s decision), it may be time to ask whom exactly this regulatory commission works for, Saint Louis residents or itself? 

Top Misconceptions About the Riverfront Stadium Plan

Posted on by Joseph Miller

As the fight over funding a new riverfront stadium, designed to keep the Rams in Saint Louis, plays out in the courts, many misconceptions about the plan have been allowed to take root. This blog post will try to set a few of them straight.

Myth 1: Professional sports teams generate development and boost regional economies.

The consensus among economists is that this is not the case. Nearly every study on stadiums finds no tangible impact on job creation or economic activity. As for redevelopment, economists Dennis Coates of the University of Maryland and Brad Humphreys of West Virginia University wrote:

“. . . strategically placed stadiums and arenas can sometimes ride existing redevelopment trends, but they are never the cause of these trends.”

Myth 2: A riverfront stadium plan will pay for itself.

Total subsidies to the riverfront stadium in Saint Louis will likely exceed $400 million, no small sum. Even so, public officials and respected news outlets like the Post-Dispatch claim that the stadium will pay for itself through increased tax revenue. The mass of scholarly literature rebuts this assumption. Most economists find that sports stadiums have very little impact on tax revenue and do not recoup large public subsidies.

A review of the literature suggests that the optimistic assumptions of stadium backers and local newspapers tend to rest on overestimated direct tax revenue from sports teams and underestimated opportunity costs for government expenditures. However they go wrong, when politicians claim an NFL stadium will pay for itself, they are ignoring clear economic evidence to the contrary.

Myth 3: The stadium will be built with no new taxes.

First, extending bonds (and the taxes that back those bonds) is an increase in taxation when those taxes would otherwise expire. Beyond that, the existing stadium plan does not account for the following costs:

1. New stadium maintenance

2. Renovations to the Edward Jones Dome

3. $150 million in state tax credits

Someone will pay for these policies, and it’s unlikely to be the Rams. Furthermore, according to the lawsuit the Regional Convention and Sports Complex Authority (RSA) filed against the city, officials plan to use other methods of funding that will result in more taxpayer dollars getting spent (or diverted). These include using public dollars to purchase land (which is already underway), setting up new downtown taxing districts (more TDDs and CIDs), and tax increment financing.

Missouri residents should understand that if they subsidize a stadium, they may get an NFL team, but they aren’t likely to make their money back. There also isn’t any reason to think that it will create significant economic benefits for the region. The plan’s high costs and limited public benefit should make some sort of public approval a necessity. Unfortunately, depending on how the courts rule, public involvement might be sidestepped altogether.

You Don’t Say

Posted on by Michael Rathbone

Telling people “I told you so” is probably not a good way to win friends and influence people. However, when you debate something contentious (like stadium subsidies), it’s tempting to gloat when the facts vindicate you.

Hence my struggles after reading this new story in the Post-Dispatch. The story reports that, according to emails from Budget Director Paul Payne, the St. Louis Rams are not generating enough tax revenue to cover the debts associated with the construction of the Edward Jones Dome. Due to the fact that Saint Louis City only collects taxes from the Rams during home games, the players and staff barely pay anything in earnings taxes to the city. This is something we’ve been talking about for months now. The Rams do not pay for themselves and to say otherwise is simply wrong.

Consider these three things:

1. The Dome has not lead to revitalization of the surrounding area.

2. Subsidies for sports stadiums do not generate economic growth.

3. The taxes generated by a new stadium project cannot offset the amount of the subsidy.

Given these points, what economic justification could there be to subsidize construction of a new stadium?

The truth is there is no economic justification for public money being spent on constructing a football stadium. If people want to make the case that football is a luxury good that residents can enjoy, they are free to do so. However, I don’t think it’s good policy to force people in Springfield, Kirksville, and Joplin to pay for a luxury good in Saint Louis.

Sometimes it isn’t fun to be right. Still, when the facts bear you out, it’s worth mentioning. I hope policymakers consider this when deliberating on whether more subsidies is the way to go.

Indiana Toll Road Sold to New Company for $5.7 Billion

Posted on by Joseph Miller

On May 28, Industry Funds Management, an international infrastructure investment firm, purchased the lease (with 66 years remaining) of the Indiana Toll Road from the bankrupt Indiana Toll Road Concession Company (ITRCC) for $5.7 billion. The purchase, along with additional investment the firm plans for the toll road, is good news for the Indiana residents and states looking to use private capital to improve infrastructure.

We’ve written about the privatization of the Indiana Toll Road before. Long story short, in 2006 an international consortium paid Indiana $3.8 billion to operate the toll road for 75 years. They also agreed to make hundreds of millions of dollars in upgrades to the toll road. The consortium set up the ITRCC to manage the lease. When the recession hit, highway users fell far below projections and the company eventually went bankrupt. But all was well for Indiana residents, who saw their toll road improved and the $3.8 billion from the sale used for state highway upgrades.

Some critics of toll road privatization have used the example of the Indiana Toll Road to claim that privatization does not work. After all, companies can go bankrupt, and then what happens to the highway? In the case of the Indiana Toll Road, it has simply been bought by another company that agreed to abide by the original terms of ITRCC’s lease. Even better, the new company, Industry Funds Management, plans to invest at least $260 million into the toll road, modernizing toll plazas and repaving worn-out roadway.

For states like Missouri, the resolution to the Indiana Toll Road Concession Company’s bankruptcy should be a convincing example that privatization can work even if a particular private partner fails. What’s more, the sale price of $5.7 billion demonstrates that there is still significant private capital available for valuable infrastructure investments, if Missouri goes down that road.

Choosing a Major, Picking a Winner

Posted on by Brittany Wagner

As first appearing in the Southeast Missourian:

Several decades ago, earning a college degree—almost any college degree—was all it took to get a job. Now, many college students must strategically choose the right major in order to break into the field with the greatest growth potential. Experts say that majors in STEM (science, technology, engineering, and math), health care, and agriculture offer the surest path to rewarding careers. But how good are these “expert” predictions? Should state governments direct tax dollars toward these winning degrees?

For years, states have incentivized the pursuit of certain majors through grants and scholarships. Gov. Nixon signed a bill in April, for example, which will grant 80 $5,000 scholarships to agriculture majors who agree to work in the agricultural industry in Missouri after graduation.

“The overwhelming argument now for education—at all levels and from government—is that it’s a preparation to make you a better factor of production,” Hillsdale College President Larry Arnn told the Wall Street Journal recently.

It’s certainly true that students are no longer attending college to learn for the sake of learning, but before we continue our practice of picking winning and losing majors, there are a few things we should consider.

First, 80 percent of college students switch majors at least once. Though a student may pursue a degree through the assistance of a grant or scholarship, there is no guarantee the student will remain in that major, complete the degree, or pursue a job within that field of study. In many cases, students must repay loans for coursework they never use in their actual career.

Even if scholarship programs hold students accountable through loan repayment agreements, employment trends change. According to Will College Pay Off? author Peter Cappelli, “The odds of predicting correctly are zero to none.” By the time students graduate and enter the job market, a prediction might not pan out, or new “hot” jobs will replace old “hot” jobs. Cappelli cites the increase in the demand for petroleum engineers due to fracking. Ten years ago, the word “fracking” bore little significance to the public. Now petroleum engineering graduates have the highest projected median starting salary for the class of 2015.

Just as it’s not always clear which fields are expected to experience job growth, it’s also unclear if any of our attempts to attract specific students to certain fields have paid off. For example, Missouri offers the Minority Teaching Scholarship to students who agree to teach within a Missouri school for five years after graduation.

While attracting minority students to the teaching profession is a concern in schools everywhere, there are a lot of unknowns. How many students remain in the profession beyond five years? How many students decide to pursue a different career and become burdened with student debt? Do these students teach in high-need schools? Do these students become effective teachers?

We don’t actually know, because we aren’t tracking these investments. At this point, the state is about as good at predicting the future of the economy as an 18-year-old is good at picking a major.

This is not to say that investing in education isn’t worthwhile, but we should be cautious about expanding our practice of picking winning majors, especially if investing in certain degrees does not result in net gains for taxpayers and college graduates.

And the Top State Is . . .

Posted on by Rik W. Hafer

Well, it wasn’t Missouri. CNBC recently released its annual America’s Top States of Business ranking. The ranking is based on 60 different measures grouped into 10 broad categories, such as Workforce, Infrastructure, and Technology and Innovation, among others. So how did Missouri fare?

In 2015 Missouri came in at number 26. Invoking the “well, it could have been worse” mentality, Missouri ended up, yet again, in the middle of the pack. In fact, Missouri has claimed this relative position in nearly every ranking since its inception in 2007. Except for a brief dip to the mid-teens during 2009-2012, Missouri and mediocre are becoming synonymous.

To put a positive spin on the news, where did we rank the highest? In 2015, as in 2014, Missouri took the 11th spot in the category Cost of Doing Business. This area accounts for factors such as a state’s tax climate, utility costs, wages, office and industrial rent, and state-sponsored incentives to lower the cost of doing business. If the last measure includes items such as TIFs and tax breaks, maybe being highest in the CNBC ranking isn’t actually a good thing.

Where did the state rank the worst? Scored on aspects such as crime rate, antidiscrimination protections, quality of health care, overall health of population, environmental quality, and other “livability” factors, Missouri came in at 47th in the Quality of Life category. In fact, since 2013 Missouri ranked 47th or 48th in this area. Doesn’t make us look like a real destination, does it.

I do not know if the CNBC ranking drives decisions by businesses, households, or policymakers. But achieving a lackluster performance on yet another ranking of business climate is becoming the norm for Missouri. Perhaps it helps explain why the state continues to record one of the slowest economic growth rates of any state and achieves at best mediocre predictions of future economic success.

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