Kansas City’s Reverse Robin Hood

Posted on by Patrick Tuohey

The poor in Kansas City face a double hit: We are generally a high tax city, and development policy ignores the poorer east side. To make matters worse, the taxes in the poorer part of the city are higher than they are elsewhere. Aldi-map-w-taxesThe map to the right shows a portion of Kansas City from Crown Center to the north, Waldo to the south, State Line Road to the west, and Interstate 435 to the east. The location of the three Aldi grocery stores are marked with a shopping cart. The sales tax charged at each location—gathered from shopping receipts and Jackson County—is listed next to each store.

The Aldi in Gladstone, Missouri, just outside the city limits to the north, is not shown on the map. It charges only 4.725 percent sales tax. Again, that was no surprise because Kansas City is generally a high tax city.

The stores in Waldo and East Brookside to the south both charge 5.85 percent sales tax. The Aldi to the north, supposedly in the middle of a food desert but definitely in the poorer part of town, charges 6.35 percent sales tax.

The reason for this higher rate is the Independence Avenue Community Improvement District (CID), which collects an additional .5 percent tax on top of the existing sales tax. This means that the tax rate on unprepared food such as groceries is 6.35 percent; for restaurants it is 11.35 percent. According to their website, the purpose of the CID is:

to provide for enhanced and reliable improvements, security, services and activities, such as general maintenance of public areas, continued efforts to address area beautification related issues, as well as other concerns within the Independence Avenue corridor not already receiving such services.

It used to be that security, general maintenance, and beautification were addressed by the police, public works, and the parks department. As the city fails to provide these basic services, neighborhoods step in and do it themselves. As a result, the poorest neighborhoods, where the need is greatest and the ability to pay lowest, pay higher taxes.

Saint Louis Has Plan B if Stadium Plan Fails

Posted on by Joseph Miller

Recently, the Post-Dispatch reported on what the city plans to do with the Near North Riverfront, the proposed site of an open-air football stadium, should the current plan fall through. Apparently, local leaders have been presenting ideas to developers and businesses for months. Some ideas include:

. . . residential towers, hotels, shops, a high-tech business incubator, plus wetlands, green space and parks stretching more than a mile, from the Gateway Arch grounds to the new river bridge. The plan even proposes floating-barge beer gardens and playgrounds.

In essence, this plan would be an extension of the Archgrounds revitalization, with the ultimate goal of turning the Mississippi riverfront into a first-class destination for residents and visitors. Subsidies for this development are pretty much a forgone conclusion.

The first thing to point out is that the very existence of a plan B for the riverfront contradicts some bombastic statements from new stadium supporters. For example, Gov. Nixon said at a press conference supporting the stadium plan, “If we do nothing, 10 years from now that will look exactly as it looks now. . . . This is our chance.” It turns out that not building a stadium is not necessarily the same as doing nothing.

But turning to plan B itself, it is disappointing to see that complete lack of originality of the strategy. A high-tech business incubator? Cortex (the existing subsidized innovation hub) is far from bursting at the seams. Residential towers? Saint Louis has some of the lowest rent in the nation, and the city has to subsidize nearly every new development; this does not indicate a lack of supply. Beer gardens and playgrounds? We’ve already seen how a new subsidized playground (Ballpark Village) has cannibalized the business of not only local bars but other subsidized bar districts (Washington Avenue). At this point, publicly backed residential-cum-entertainment districts are second only to building new stadiums as the city’s favored (if failed) strategy for reinventing downtown. Let’s not even get started on hotels.

Policymakers need to come to the realization that we are not one brilliant central plan (stadium or otherwise) from propelling sustained growth in Saint Louis. A turnaround is only likely when the city creates the underlying conditions that allow for bottom-up development and make the city a competitive place to do business. If Saint Louis can do that, private companies will build the floating beer gardens all on their own.

Senator Proposes Transparency for Government Unions

Posted on by John Wright

At the Show-Me Institute’s latest Policy Breakfast, Sen. Bob Onder talked about the need for the dealings of government unions to be out in the open. Not only can state and local government agencies, such as school districts, make deals with unions in closed-door sessions, but government unions also get away with keeping their spending hidden. Here’s what Sen. Onder had to say about government union transparency…

Nobody Benefits from School Buildings Sitting Vacant

Posted on by James V. Shuls

I joined Kelly Jackson and McGraw Milhaven on “The McGraw Show” this morning to discuss my new paper, “Vacant School Buildings: An Examination of Kansas City and Saint Louis.” Check out the discussion below.

After our on-air discussion, McGraw brought up the similarities between the district and the Saint Louis Land Reutilization Authority (LRA), or what I refer to in the segment as the Land Bank. He offered a good baseball analogy. It seems the LRA and the St. Louis Public School District are looking to hit home runs, but they need to focus on getting hits. The district regularly receives reasonable proposals from charter schools, which the district may not consider a home run, but they are certainly hits.

The district certainly needs to do something with these buildings, because nobody benefits from school buildings sitting vacant.

How Will the Convention Hotel Help Taxpayers?

Posted on by Patrick Tuohey

Let’s assume for the sake of argument that the planned convention hotel in Kansas City does increase convention business. How much more convention business will the city need to repay the investment? No one is saying.

liabilities-assetsThe Power & Light District plan was put together by City Manager Wayne Cauthen, and it was done largely out of the sight of the public. It was too late to make changes when the subsequent city manager, Troy Schulte, told us that in order for the Power & Light District to be self-sustaining, as voters were promised, “You needed Plaza-level holiday-level sales every day of the year.”

Seeking to avoid that same mistake, the 2010 convention hotel effort received lots of scrutiny, including reports from consultants and financiers. Bill Lucas, then president of the city’s hotel steering committee, said, “We’d about have to double our convention bookings” to make the hotel feasible. The project did not go forward because people were skeptical we’d make the goal.

This time the city is rushing a vote on the project to meet an arbitrary political deadline. There are no reports from consultants; no reports from financiers. One councilmember even complained about the short time available to make a decision.

While no one is saying how much convention business will have to increase to repay the investment, consider the impact of TIF giveaways to developers:

  • Visitor money spent in the convention hotel itself won’t help us, as we’re giving all the taxes generated from those sales to the developers through Tax Increment Financing (TIF).

  • If convention visitors wander to the Power & Light District for dinner and drinks, they’ll pay a high tax rate, but the city is already giving that tax money to Cordish through their TIF. The city won’t see much from it.

  • If visitors head north to the River Market, the same will apply—we’re giving at least half of the tax revenue there to the developers.

  • Maybe they’ll ride the streetcar. The streetcar will be free, so we won’t see any tourism dollars there (although it appears visitors who stay at the convention hotel will be paying 1 percent to the streetcar Transportation Development District).

  • Maybe visitors will go to Country Club Plaza. That will be great, but half of the tax revenue generated from their purchases will go to the developers named in the Plaza TIF.

Therein lies the problem with Kansas City’s frequent use of TIF; we’re hollowing out our tax base. We claim that these developments will help the city, but in order to get the developments, we give away the tax revenue. Kansas City will likely need to more than double our convention bookings to make this financially sound, but no one is saying. This is no way to run a city.

The Streetcar’s Economic Development Shell Game

Posted on by Patrick Tuohey

Despite the fact that all serious economic research on streetcars indicates that they do not drive economic development, Kansas City streetcar supporters keep providing misleading or contradictory numbers. They’re at it again.

kcstarmapJust after we published a post lampooning claims about economic development downtown, the Kansas City Star upped the ante by publishing a list of developments along the streetcar line.

The Kansas City Star continues to update  an interactive report that displays about 79 downtown projects totaling more than $1.7 billion that either have been announced, are in progress, or have been completed since the start of 2012, with the exception of some major civic projects.

Meanwhile, Sandy Smith over at NextCity provides us with more made-up numbers on the impact of streetcar development, quoting Downtown Council CEO Bill Dietrich:

“Since we began construction on the line, $900 million of new investment is coming into town,” he says. “We’ve been surveying the people creating these new developments and asking them how much the streetcar was a factor in their thinking. We found that about $250 million of that figure represents developers who said that either they would not be here without the streetcar or that the streetcar was important in influencing their decision to invest.” (According to the city, the latest numbers now total $1 billion in new investment, with $381 million owed to the streetcar.)

So there you have it. Kansas City streetcar supporters keep coming up with conflicting numbers from $250 million to $1.7 billion and everywhere in between. The serious research still remains: Streetcars do not drive development, unlike the myriad subsidies such as those given to Centric and 1914 Main.

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