Shocking Support for Taxing Bed and Breakfasts

Bed & breakfasts (B&Bs) have a long history in this country. To many they are associated with comfort and an antique ambiance. To the taxman they are a prime opportunity to raise revenue.

Last week, the St. Louis Post-Dispatch reported that Saint Louis bed & breakfast owners are upset over the city assessor’s decision to assess their property (or at least the part used as B&Bs) as commercial properties. I can understand why these owners would be upset. According to the way properties are assessed for property tax purposes, if B&Bs were even partially assessed as commercial properties, the owners’ property tax bills would go up substantially.

I sympathize with any business owner that is facing a higher tax bill. However, I do not oppose this change. Saint Louis is doing the right thing here. If a property is engaged in commercial activity, the city should assess it as a commercial property. The situation is trickier with people renting rooms through airbnb. These lodgings are not necessarily full-time establishments, and so some mechanism needs to be in place to make sure they don’t get a tax advantage compared to traditional B&Bs.

Having a large property tax base is important. It’s especially important in Saint Louis because it can serve as a way to reduce (or even eliminate) the earnings tax. The Show-Me Institute released a paper arguing that the earnings tax could be replaced by a two-tier property tax (this differs from a traditional property tax in that the two-tier approach taxes the land more heavily than any improvements on the land). Even if the city sticks with a traditional property tax system, a wider base can generate more revenue to offset any reductions in the earnings tax.

Paying more in taxes is never fun, but low taxes for some shouldn’t come at the cost of a hollowed-out property tax base.

No, Transparency Benefits the Academy

University_of_Missouri_-_Memorial_UnionMizzou Professor of Spanish Literature Michael Ugarte recently wrote an op-ed published in the Columbia Daily Tribune where he voiced his opposition to a bill that would require public universities to post course information online.

From Ugarte’s commentary:

[T]he reason I’m against SB 465 is that I don’t trust the motivations of those who are proposing it. It’s a bill with an agenda that goes far beyond a desire for transparency. It provides an opportunity for those determined to question, debunk, attack and diminish the pedagogical and research projects of university professors. I don’t think the effects will be positive; rather, we will have more of the same: animosity and lack of understanding.

As someone who has written on and testified in support of curriculum transparency for Missouri’s public universities, I can tell you that my motivation for supporting proposals like this comes from a conviction that public universities—and all public institutions—should be candid and open with the public about their affairs. Members of a public university should abide by the same transparency laws as everyone else who works in our public sector.

My motivation for supporting this bill doesn’t stem from a desire to “question, debunk, attack or diminish” the university, but I find it odd that a scholar would view someone questioning his work as a problem. Scholarship thrives on debate and challenges. As a student at Mizzou, you can bet I questioned my professors. They questioned, attacked, and debunked me right back. And I got a great education because of it.

I disagree with Professor Ugarte’s contention that an open academy will breed animosity and lack of understanding between it and the rest of society. On the contrary, I believe an open and honest discourse is the way you build trust and understanding. And there’s no reason why open and honest discourse can’t involve questions, debate, and, yes, sometimes even debunking.

Millennials Prefer Suburbs . . . and Cars

If you live in Kansas City, you’ve doubtlessly heard breathless paeans to millennials from city leaders and how we must spend public money to attract them. From entertainment districts to apartment buildings, airports to convention hotels, restaurants to streetcars, everything has been sold on the premise that we must cater to the creative class.

Nevermind.

Millenials-in-AdulthoodResearch featured in Business Insider tells us that millennials aren’t much different from their parents’ generation.

“They still want good restaurants, but now it’s also about space, affordability and being able to send their kids to a good public school,” said Paternite, 45, who added that about 70% of her business now comes from young families who are making the move from Brooklyn or Manhattan.

Millennials, typically defined as those born between 1981 and 1997, may be turning into their parents after all. A generation that’s been stereotyped as urban, single, and aghast at the idea of a car-based life in the suburbs is starting to age, prompting fund managers to bet on companies that should benefit if the US birth rate reverses a six-year slump.

Oh, and their supposed desire to get away from cars? Also false:

The generation once seen as shunning cars accounted for 27% of new auto sales in the US last year, up 9 percentage points from 2010, according to a recent study by JD Power and Associates.

The stereotype was probably never true, yet it has driven so much of the policymaking, rhetoric, and spending from City Hall. Readers of this blog see nothing new here. We’ve been debunking the millennial myth here and here and here.

In the meantime, the rest of the city—where people are actually living—has been neglected and left to dry up. Rather than chase mythical populations of the future, we need to fix the real problems that impact the quality of life for millennials—and everyone. This means streets, sewers, schools, crime, and we need to do so efficiently while keeping taxes low.

Investment at Lambert Could Bring Mexico Hub to Saint Louis

This week, the St. Louis Airport Commission approved a plan to lease airport property that once housed the McDonnell-Douglas complex to Bi-National Gateway Terminal LLC. This company would invest $77 million in the property to create a new freight terminal. In addition, another private company (owned by the same person as Bi-National) has already successfully petitioned for a dual-customs facility at Lambert. The plan is to create a cargo hub in Saint Louis for freight from Mexico.

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Leasing airport property to a private company for aviation-related business makes good sense. Most airport land is virtually impossible to sell because of federal grant assurance restrictions. Allowing private companies that would benefit from access to the airport to lease adjacent property (rather than letting the land lie fallow) is a win for the private business, the airport, and the local economy. As things stand, far from spending money, the airport should receive about $13.5 million a year in lease payments. There are currently no plans to spend any airport money for the facility.

If the plan to use Lambert as a Mexico Hub succeeds, it could mean lower landing fees for commercial airlines, which can attract more flights. The public at large would benefit from more travel options, as well as from any jobs that a cargo hub would create. In the worst-case scenario—the private company fails—the airport would not be worse off financially. If anything, it would be better off, as the airport would have a new dual-customs facility and freight terminal to attract more business.

However, Saint Louis residents should keep an eye on the project, because all too often local governments will shift the risk of these investments from the private sector to taxpayers. The plan to make Lambert a “China Hub” just a couple years ago is a prime example of this tactic. There is no talk of local subsidies yet, but that could change.

Lambert-St. Louis International Airport, as Saint Louis’ only large airport, is vital to the local economy. Allowing the private sector, rather than local governments, to make the investments and take the risks of building a freight hub is a strategy that the airport, and the public at large, would benefit from.

Courts Should Avoid Setting Policy in Columbia Schools

The Columbia Public School District (CPS) and the union representing teachers in the district, the Columbia Missouri National Education Association (CMNEA), are embroiled in a labor dispute. The union wants a labor agreement with a pay increase for its members, while the district, in a tight place financially, wants to keep costs down. Unfortunately, because of recent court decisions, the courts might get involved here, substituting their judgment for that of the negotiators.

In 2012, the Missouri Supreme Court expanded its jurisdiction by reading a duty of “good faith” collective bargaining into the state constitution. The words “good faith” do not appear in the text of the constitution, but the supreme court has spoken and lower courts will follow the supreme court’s lead. As a result, courts throughout the state may now intervene in government labor relations if they determine this duty is not being honored.

The new “good faith” standard could affect the labor situation at Columbia Public Schools. The union and the school board met several times this year but did not come to a final agreement by the last scheduled bargaining session. Oddly enough, even though there are no more bargaining sessions scheduled this year, CMNEA is showing up to the school’s administrative building and “waiting” for a CPS bargaining team to arrive. In the Columbia Daily Tribune, one union official described the district’s refusal to continue negotiating after the last scheduled bargaining session as a failure to negotiate in good faith.

If the courts get involved here, it would be bad news for Columbia citizens. Columbia voters elected a school board to manage their public schools. Not a union. Not the courts. If a court steps in and forces a binding labor agreement that the duly elected school board didn’t agree to, the court would be setting school district policy against the will of the people.

Shocker! Airlines Want to Keep Costs Down

It was gratifying to read reports in the Kansas City Star and the Kansas City Business Journal that Southwest Airlines is still interested in maintaining the low-cost competitive advantage that our airport, MCI, currently enjoys. This is levelheaded clear economic thinking, especially welcome after the Sturm und Drang of the mayor’s year-long Airport Terminal Advisory Group (ATAG) that amounted to a vacation from reality.

Now that a year has passed we can return to the plain facts. The CEO of Southwest Airlines, the carrier with the largest MCI service, was recently in town to showcase a Missouri-themed airplane. While here, as the Star reported, he said of the MCI terminal:

“I agree and Southwest agrees we definitely could stand to make some improvements. The question still remains exactly what is the best way to do that in the most cost-efficient manner,” Kelly said.

Air travelers are sensitive to price, something Kelly said is evident each time oil prices climb and the cost of flying jumps.

“It absolutely kills traffic,” he said.

airplanePeople use airports to get on and off planes. They do not go to airports to eat at fancy restaurants or to buy socks or baseball caps. MCI is a highly regarded airport by passengers exactly as it is, and any changes need to be sensitive to the costs and convenience to airlines and travelers.

MCI is a relatively cheap airport for airlines to serve. One benefit is the many morning flights out of MCI because Southwest parks their planes here overnight. If airport fees rose to cover the costs of a new terminal, these planes might find cheaper accommodation elsewhere. Same for those midday direct flights to LaGuardia that originate from the West Coast. They stop here because MCI is a cheap place for them to fuel up and collect passengers. If fees rise, they may choose to connect in other cities and cost us the direct service.

Going forward, it is still tough to know who to believe on even the simplest details of the negotiations. Aviation Department Director Mark VanLoh recently told a Northland chamber group that he expects to have a recommendation before the city council by the end of summer. That seems unlikely. According to Austin Alonzo, Southwest’s CEO said, “We’ll get there, and I think patience is probably the right thing because it is a pretty complicated question.” The Star reported that the deadline for a final recommendation is May 2016.

Commentary: Gas Tax Increase Is Sound Policy

Recently, the Columbia Daily Tribune published our op-ed on how the plan for a small increase in the fuel tax, along with tolling on major state projects, is sound policy. Here is an excerpt from the article:

Aside from giving policymakers breathing room to come up with more long-term solutions, the current proposal would create a public-private partnership authority that could, with the approval of the Missouri Legislature, allow the private sector to build and toll an expanded I-70, along with other infrastructure projects. This is a major opportunity for Missouri, which simply does not have enough tax revenue to rebuild our most expensive highways. In other states, leasing toll roads has resulted not only in better, less congested roads, but also significant upfront payments to improve the transportation system in general. Using tolls is also the fairest way for rebuilding major roads; only those who directly benefit will have to pay.

To read the full op-ed, click here to go to the Columbia Daily Tribune.

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