Convention Hotel: Power & Light District v. 2.0?

Posted on by Patrick Tuohey

Just in case you thought the city actually had learned its lessons from the Power & Light District debacle, recent reports will disabuse you of that notion. We were initially told that there only would be a $35 million payout from the city, financed by bonds. The rest of the $150 million in city support would be made up of abatements, TIF, and a Commercial Improvement District (CID) tax.

Steve Vockrodt at The Pitch considers other costs that the city doesn’t seem to be including in their estimates:

The property upon which the hotel will be built (bound by Truman Road and 16th Street and by Baltimore and Wyandotte) is mostly city-owned, which means that it currently generates no property taxes. Troy Schulte, the city manager, has said the land is worth $13 million.

Assuming that valuation is correct, it means that the land—if the city sold it to a developer and it returned to the tax rolls—would generate $333,998 a year in property taxes. Under TIF, the development captures all that money.

Given these arrangements, then, the public subsidy for the hotel is going to be a lot more than $35 million. About half the cost of the $300 million project will wind up being paid for by public taxes.

But wait, there’s more. The Kansas City Business Journal adds:

In addition, the just-released copy of the memorandum states, the city will pay fixed annual management fees to the hotel owner through the 15-year catering agreement. The fees, ranging from $2.4 million to $5.4 million, have a net present value of $47.3 million, according to the [Memorandum of Understanding] MOU.

And if event gross revenues are insufficient to make the scheduled fee payment, the MOU states, “the city shall pay from any legally available city funds.”

In other words, if the project underperforms, taxpayers will make up the deficit. Sound familiar? The MOU also requires that taxpayers subsidize the construction of the hotel by forgoing tax income on the materials; income from the sale of the site to be used; and a cap on the fees required for construction. These costs likely are not counted in the project total, but they are real funds the city would forgo. The Journal continues:

In addition, the developers will receive a sales tax exemption on construction materials, and the city, which owns three-quarters of the proposed hotel site, will donate that land (though it will be due payment if the hotel is ever sold).

The MOU also calls for the city to cap the developer’s fees for zoning, permits, inspections and reviews at $800,000 and to provide no subsidies to any competing hotels for 10 years after the new Hyatt’s opening.

That last part is the kicker. Hyatt realizes that the deal it wants—with its myriad subsidies, tax breaks, and payouts—if directed toward other hotels, would hurt their business. It only follows that the deal they are asking for now will hurt the hotels already downtown.

Who on the City Council is going to stand up for (1) those existing hotels who likely will be hurt by this project and (2) the taxpayers who are being asked to underwrite something that will undercut previous subsidized investments?

Union President Agrees That Union Elections Lead to Greater Accountability

Posted on by John Wright

Bradley Harmon, president of CWA Local 6355—a union representing state government employees—recently testified before a legislative committee against a union election bill. Although he was there to offer his opposition to the bill, he ended up admitting that the elections he opposes actually make unions more accountable to the workers they represent. See the clip, recorded by Progress Missouri, above.

Holding elections for government unions is one of the most exciting labor reforms discussed in Missouri right now. Currently, if you work for the government and you’re represented by a union, you’re pretty much stuck with that union. If you can organize, gather signatures, and then win a “decertification” election, you may force the union out. But barring this, government employees, like teachers, social workers, and firefighters, are pretty much “married for life.”

Holding regular union elections addresses this issue. When employees of public institutions get the option to vote for their representatives every few years, union representatives are forced to be accountable to their members. When workers get a vote, a union executive’s job depends on representing workers well.

You can read more about government union elections in Missouri here, here, here, and here.

The Convention Hotel’s Tax Breaks and Gimmes

Posted on by Patrick Tuohey

Reviewing the Memorandum of Understanding (MOU) between the city of Kansas City and the developers who want to build a convention hotel, I see that the developers are asking to be exempted from all sorts of taxes. You can read your own copy of the MOU here:

It appears that, unlike most TIF projects, the developers want 100 percent of incremental economic activity taxes, including sales taxes and the earnings tax. Page 11 of the MOU states,

The City will . . . redirect through its annual budget the City’s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project’s tax revenue sources . . .

In  other words, they want the half that they get from the TIFs directly, and then they want the city to give them the rest through the appropriations process. Here is the tax revenue the developers want to keep:

  • Tax Increment Financing (TIF): as mentioned above, all economic activity taxes collected by and for the county, school district, library district, and the zoo will be redirected back to the project for 23 years.

  • A Super TIF that collects for 30 years the tax not captured in the TIF above, including the convention and visitors tax, and redirects it to the developers.

  • A 100 percent exemption on sales taxes on construction materials and real/personal property taxes.

  • The creation of a 1 percent Community Improvement District (CID) tax that will then be redirected back to the developers.

Here are some extra freebies the developers want:

  • A cash contribution of $35 million.

  • The city’s portion of the land, valued at $13 million.

  • Fees generated by zoning, permits, inspections, etc., capped at $800,000.

  • A management fee to the hotel for catering amounting to $62,363,816 over 15 years. Should the event fees be insufficient to cover this, the city will pay, “from any legally available city funds,” just like we do with the Power & Light District.

Here are some possible problems for the city, based on past issues:

Not mentioned in the MOU is any exemption from the streetcar Transportation Development District (TDD). Apparently, funding the downtown streetcar is more important than funding the city, county, schools, libraries, and zoo. What does that say about the City Council’s view of the rest of Kansas City?

Kansas City’s Convention Hotel Memorandum

Posted on by Patrick Tuohey

The City Council of Kansas City is considering subsidizing half of a $300 million downtown convention hotel adjacent to Bartle Hall. There is a lot to be considered in the deal, the least of which being whether the city should be using taxpayer dollars to build hotels when the city seems unable to provide basic services.

As we examine the deal, we wanted to share the Memorandum of Understanding with our readers. You can find a copy of it here.

KC Convention Hotel Memorandum of Understanding (Text)

Next Gen Event: The Uber Effects of Ridesharing

Posted on by Joseph Miller

When it comes to ridesharing companies like Uber and Lyft, too often our policymakers and the media highlight conflict: fights with existing cab companies, battles over regulation and deregulation, disruption between ridesharing companies and drivers, and safety and privacy issues for consumers.

The immense opportunity that ridesharing, as a technology for transportation, provides for cities both in terms of added mobility and new employment, however, gets short shrift in these conversations. In cities that allow ridesharing, getting around town has become significantly easier (and in some cases cheaper). Plus, ridesharing has provided hundreds (if not thousands) of new jobs in these cities, all by making better use of the resource most Americans already own: a personal vehicle.

On June 18, I’ll detail the current impact of ridesharing companies on urban transportation, their future potential, and some of the roadblocks preventing Missourians, and Saint Louisans in particular, from taking advantage. Come for the talk, stay for the BBQ:

Next Gen Invite

Highway Dollars: Does Washington Give Missouri Its Fair Share?

Posted on by Joseph Miller

Often, when discussing the impending funding crisis at the Missouri Department of Transportation (MoDOT), many residents are skeptical of the need to increase state user fees like the fuel tax. Why should Missouri raise fuel taxes or implement tolling when the federal government takes money from the state? The argument is that if the federal government just returned Missouri’s share of federal fuel tax revenue (among other user fees), the state would have more than enough money.

Unfortunately, the idea that Missouri is getting the short end of the stick on federal fuel taxes is mistaken. In fact, since 2000, Missouri has gotten more from the federal highway trust fund than it put in. The latest official data shows that in 2013 Missouri got back about $1.17 for every highway user dollar it sent to Washington. In fact, in 2013 only one state (Texas) did not receive what amounts to a federal subsidy for its highway spending, as the map below demonstrates:

map13

There have been years, specifically in the 1990s, when Missouri put more into the federal highway trust fund than it got out. But, since the inception of the state highway system in 1956, Missouri has gotten back about $1.06 for every $1.00 it sent to Washington in terms of fuel taxes and other user fees. Only Texas, Indiana, North Carolina, and South Carolina can claim to have given more than they have gotten back over the last 60 years. The map below shows this in detail:

map56

Simply put, the federal government cannot be accused of precipitating a funding crisis at MoDOT and will not be able to solve Missouri’s problems by remitting fuel tax dollars. The fact is that Missouri already receives federal subsidies for its highways, and any more assistance likewise would be a subsidy to highway users.

House Bill 42, You Can’t Please Everyone

Posted on by James V. Shuls

Nearly everyone recognizes that the transfer program, which allows students to transfer from unaccredited school districts, is unsustainable. If the law is not changed, it will likely bankrupt the Normandy and Riverview Gardens school districts. That is why the legislature has worked for the past two sessions to “fix” the transfer program. Last year’s attempted “fix” was vetoed by Gov. Nixon, primarily because it contained a small voucher component. This year’s bill, House Bill 42, does not contain a private school option. It does, however, expand charter schools. Immediately after the bill’s passage, education groups began urging the governor to veto the bill. Some have even gone as far as saying the bill makes matters worse.

So, why has fixing the transfer program become such a complicated mess? The problem is that we cannot agree on what problem needs fixing. Some want to end the transfer program altogether, some want to simply make the program sustainable, while others want to expand options for students. These three things are not all compatible, and they cannot all be accomplished. For example, Missouri’s commissioner of education wants to rein in tuition costs by instituting a cap. That would help make the program more sustainable.

That proposal is met with opposition from superintendents, such as David McGehee of Lee’s Summit School District. His argument is that it forces taxpayers in the receiving district to subsidize the education of the transfer students. (Never mind that the marginal cost of the additional students is extremely low, but I digress.)

McGehee and many other public school officials would like the transfer program to end all together. They simply do not believe that allowing students to leave their district is the right answer. Of course, others believe that students should not be trapped in underperforming schools.

Lawmakers have had to navigate this field and try to come up with a bill that satisfies all. Once again they have failed, not for lack of effort, but because it is impossible to satisfy everyone. The question then is whether, on balance, the bill does more good than bad. Those who oppose school choice would say, “No.” Those who support choice would say, “Yes.”

For more on the transfer program, I suggest you read my latest paper, “Interdistrict Choice for Students in Failing Schools: Burden or Boon?”

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