Fears of Private Toll Roads Promote Government Control, Waste

Posted on by Joseph Miller

We recently commented on how a bill in the Missouri Legislature, SB 540, would allow MoDOT to lease part of the state highway system to private companies who could rebuild highways in return for the ability to toll the improved roadways. The provision, known as the Public-Private Partnership Act, presents an opportunity for Missouri to access both private-sector capital and expertise to improve and manage parts of our infrastructure.

I-70_MOHowever, some groups that claim to be opposed to higher taxes and government control have attacked privately leased toll roads. I will address some common critiques these groups advance:

Claim #1: Tolls are a “double tax” because we already paid to build roads and now we are tolled for their use. Furthermore, toll road users may pay for state roads twice, once with fuel taxes and again with tolls.

Response: If toll revenue is used to rebuild I-70, users will be paying for a new, better highway; there is no proposal to toll unimproved routes. As to paying both the fuel tax and the toll, with new technology it would be simple for the toll management to rebate toll users (done in other states) for the amount of fuel tax they pay while using the highway. That means no double tax.

Claim #2: New toll roads create monitoring opportunities for the government.

Response: While it is perfectly reasonable to be concerned with privacy, the correct approach is to promote transparent government and rigorous privacy protection, not to block new technology. Many aspects of modern life, such as cell phones, credit cards, and the Internet, allow increased government monitoring. We should not stop using these advances, or block a superior way of managing highways, because the government may take advantage.

Claim #3: Foreign companies might lease publicly funded roads.

Response: There is nothing wrong with foreign companies investing in Missouri’s infrastructure. Highway leases are always accompanied with stringent lease terms that specify how the highway must be maintained and what tolls can be charged. If the foreign private company goes bankrupt or does not fulfill its lease, the highway is either sold to another company or, if there is no buyer, simply reverts to state control. For example, an international consortium bought the Indiana Toll Road for $4 billion in 2006. After making hundreds of millions in upgrades to the toll road, the project went bankrupt and the road is now being sold to another company. Indiana taxpayers are unaffected by the bankruptcy, but they continue to enjoy the transportation improvements paid for by foreign companies.

Privately leased toll roads offer an opportunity for improvements to the state’s highway system. The risks regarding the toll road’s success are borne by the private sector (not the taxpayers), and only those who directly benefit from the rebuilt highway will have to pay. If that’s not a win for taxpayers and limited government, what is?

Legislature’s Gas Tax Increase Is Sound Policy

Posted on by Joseph Miller

As first appearing in the Columbia Daily Tribune:

How did you get to work this morning? How were the groceries at your local market delivered? If you are like most Missourians, you rely on the state’s highway system, like I-70, Manchester Road, and Natural Bridge Ave. Unfortunately for Missouri, the system’s funding is drying up.

The problem facing the Missouri Department of Transportation (MoDOT), which maintains state highways, has been building for almost two decades. For more than half a century, the main funding source for highways has been people who use roads. Through gas taxes, license fees, and vehicle sales taxes, the federal government and Missouri have invested billions in Missouri’s busiest roads. But this relationship has broken down.

Since the fuel tax was last increased to 17 cents in 1996, inflation has reduced its purchasing power by almost one-third, and the state now has the nation’s fifth-lowest gasoline tax and fourth-lowest diesel tax. In the early 2000s, these growing problems were papered over through bond proceeds from Amendment 3 and then by federal stimulus dollars. Now, the bonds and federal aid have been spent, and payments are coming due. Starting next year, MoDOT’s problems will quadruple, as MoDOT will no longer be able to match federal dollars. If Missouri cannot match federal funds, these dollars, which Missourians pay in federal gas taxes, will be parceled out to other states.

What should be done? Last year, the Missouri Legislature proposed a .75 cent statewide sales tax to pay for transportation. This proposal, known as Amendment 7 and rejected by voters, would have raised a lot of money, but it was not a sound policy solution for MoDOT’s funding crisis. Updating the user-funding base, not general taxation, is the fair and economically sound way to fix MoDOT’s funding problems.

The Missouri Legislature finally may get serious about the fuel tax and tolling by considering a proposal that would increase the regular fuel tax by 1.5 cents and the diesel fuel tax by 3.5 cents, making the tax per gallon 18.5 cents and 20.5 cents, respectively. Such an increase could raise over $50 million for MoDOT and more than $20 million for our local roads. That’s not enough for major improvements to the state highway system, but it would provide enough funds to allow MoDOT to match federal dollars next year, staving off significant construction budget cuts. Furthermore, increasing the diesel fuel tax more than the regular gasoline tax makes sense. Interstate trucks, which do more damage to roads, buy the majority of diesel fuel. Twenty other states and the federal government have higher taxes on diesel fuel.

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.

The state highway system is critical to Missouri’s economy and the everyday lives of the state’s residents. The highways should not be allowed to fall into a state of disrepair. The limited measures moving through the state legislature are a sound policy response to the problem, and a good first step toward modernizing MoDOT’s funding base.

Joseph Miller is a policy analyst at the Show-Me Institute.

 

Passed: Direct Care Bill Moves On to the Governor

Posted on by Patrick Ishmael

On Tuesday, the Missouri Senate passed HB 769, which protects medical retainer agreements, or “direct care,” from undue regulatory interference from the state’s Department of Insurance. We’ve talked about the importance of the direct care issue before and highlighted HB 769’s progress. Its passage is a win for Missouri patients.

Removing barriers to care should be a priority over simply guaranteeing Americans “coverage,” which is the focus of Obamacare. The problem with prioritizing mere coverage over actual care is that in many cases being “covered” only provides the illusion of protection, like many Medicaid beneficiaries have found, and not much else.

If the doctor won’t see me, what good is any “coverage” I might have?

That’s where direct care agreements come in. Here, the care is contracted directly with a doctor, cutting out the middleman insurer whose networks may not actually fit my care needs. Can health insurance supplement direct care arrangements? Sure, but the arrangement itself is not insurance. And that’s what HB 769 reaffirms—that direct pay arrangements are care, not just coverage.

Kudos to the general assembly.

I “Think” We Have a Problem Here

Posted on by Michael Rathbone

When I read about the state’s decision to suspend one of its tax incentives to IBM because of low employment numbers at their service center, I felt it was closing the barn door after the horse had bolted. The state had already awarded IBM $10 million in incentives, so the fact that it was revoking the BUILD credits—one of many incentives IBM was receiving—leaves a sour taste in my mouth.

In 2010, the state and city combined to give IBM a sweetheart deal in order to lure them to Columbia. The BUILD incentives were just one of many carrots IBM received. The others included:

  • $14.7 million through the Missouri Quality Jobs program

  • $4.2 million in new jobs training

  • $300,000 for customized job training

  • $412,500 in recruitment assistance

  • Sales tax exemptions and tax abatements for personal property

The cherry on top of this deal was when Columbia leased a $3 million building on LeMone Industrial Blvd. to IBM for one dollar a year. IBM was supposed to create 600 jobs at this call center by 2013. As of March 2015, the center only has 453 employees. Hence the BUILD incentives, which required a minimum of 500 employees at the center, were suspended.

We wrote that these incentives to IBM were not a good idea back when they were originally awarded. Tax credits are not a good economic investment for the state to be making, and cities, including Columbia, should not be hollowing out their property tax base by buying buildings so they can lease them to favored businesses. If the state and its cities really want to help businesses, they should keep taxes low for everybody.

The failure of tax credits to deliver promised economic benefits is not isolated to Columbia. I hope policymakers can learn from these examples and stop trying to pick winners and losers with subsidies, but I won’t hold my breath.

Nixa Officials Dream of High-speed Internet, With Taxpayer Dollars

Posted on by Joseph Miller

As originally appearing in Springfield Business Journal:

Big dreams with other people’s money.

That’s how one participant at a conference on economic development in Missouri described most infrastructure improvement plans. Local governments are all too willing to lavish other people’s money on grand schemes of a this-changes-everything nature. An example of this misguided but common impulse is taking place in Nixa, Missouri.

For the last couple years, Nixa officials have become more and more interested in building a public fiber network. The city commissioned a feasibility study from SiFi, a British fiber optic network developer, on building a network that would provide 1 gigabit–speed Internet to households and some businesses. The cost to Nixa could be almost $30 million, more than the city’s total 2015 budget.

The vast majority of broadband infrastructure, in Nixa and elsewhere, is privately built and operated. But increasingly, cities are treating Internet, and high-speed Internet, as a required utility. Indeed, having limited Internet availability or little private-sector competition may severely limit a locality’s ability to attract new residents and high-paying jobs. It may be reasonable for a city to step in where the private sector can’t (or won’t) provide competitive Internet access.

This is not the case in Nixa. A number of Internet service providers—AT&T, Comcast, Timer Warner, Charter, and Suddenlink, among others—serve the city. Internet pricing and speeds are competitive with many other cities. It is not as though, without government involvement, Nixa would never get super-high-speed Internet. One company operating in Nixa, Suddenlink, already has announced plans to provide gigabit Internet.

Nixa’s plans for government fiber are born of preference, not necessity. City officials have stated that they want to shed Nixa’s image as a bedroom community for Springfield; the city needs a special edge to make that transformation. Waiting for private companies to bring higher speed Internet at some time to some segment of Nixa at some price is, therefore, unacceptable.

The business strategy is interesting. Nixa, however, is not a business, it’s a city. Officials are not experienced telecom developers, and their money comes from taxes, not investors or customers. And there are risks. If Nixa goes forward with an arrangement with SiFi, the city will be responsible for millions in yearly payments. If there is not sufficient demand for the new gigabit Internet, the system could quickly become a drain on the city’s budget. Furthermore, by providing public broadband infrastructure at low prices, it may dampen the incentives for private Internet providers to invest their own money improving Internet in Nixa. With technology rapidly changing, Nixa might quickly find itself with an outdated and money-losing public Internet infrastructure, which nonetheless discourages private companies from building services of their own.

Having quality Internet access at affordable rates is important for all localities in Missouri. If the private sector truly cannot provide it in some of the more rural areas, local governments may be justified in providing it. But in the case of Nixa, and cities like it, need is simply not there. Instead, the problem seems to be that the pace with which private-sector companies are improving Internet service does not fit the dreams of local officials. These grand plans, and the government’s ability to be an effective broadband provider, should make taxpayers suspicious. Because when Nixa officials dream big, they do it with other people’s money.

Joseph Miller is a policy analyst at the Show-Me Institute.

 

Obamacare Expanders’ Emergency Room Claims: Still False

Posted on by Patrick Ishmael

emergency

Supporters of the Affordable Care Act’s Medicaid expansion have claimed for many years that implementing Obamacare would reduce emergency room visits. In a press release distributed on New Year’s Eve 2013, Missouri Gov. Jay Nixon suggested that by expanding Medicaid fewer people would show up to emergency rooms.

Tomorrow, businesses in these states [that expand Medicaid] will have a significant competitive advantage—because as more people get health coverage, fewer people show up in emergency rooms, putting downward pressure on private health premiums. [Emphasis mine]

We’ve noted before that this isn’t true, and news released yesterday from the American College of Emergency Physicians confirms this yet again.

A survey of 2,098 emergency-room doctors conducted in March showed about three-quarters said visits had risen since January 2014. That was a significant uptick from a year earlier, when less than half of doctors surveyed reported an increase. The survey by the American College of Emergency Physicians is scheduled to be published Monday.

Medicaid recipients newly insured under the health law are struggling to get appointments or find doctors who will accept their coverage, and consequently wind up in the ER, ACEP said. Volume might also be increasing due to hospital and emergency-department closures—a long-standing trend.

“There was a grand theory the law would reduce ER visits,” said Dr. Howard Mell, a spokesman for ACEP. “Well, guess what, it hasn’t happened. Visits are going up despite the ACA, and in a lot of cases because of it.” [Emphasis mine]

Obamacare didn’t fix what was wrong with Medicaid. It simply doubled-down on a broken status quo—adding beneficiaries to a limited and narrowing network better known for its terrible health outcomes and dysfunction than for its care. If we want to make health care for the neediest in this state better, then we have to actually reform the current Medicaid program, not repackage Obamacare’s expansion and overlay it onto actual reform proposals.

Missouri needs Medicaid reform, both for beneficiaries and for taxpayers. Expanding Obamacare doesn’t get us there.

Surprising No One, Big Government Union Wants State to Spend More

Posted on by John Wright

The American Federation of State, County and Municipal Employees Council 72 (AFSCME), a big government union representing various health, service, and maintenance personnel employed by the state government, is complaining about state employee compensation. The claim that Missouri ranks 50th for state worker pay is at the crux of their argument. This point is wildly misleading.

Missouri has nearly the lowest cost of living in the country. Each dollar I spend in Missouri goes quite a bit further than it would in a high cost-of-living state, such as California or Maryland. As a result, residents of low cost-of-living states, even if paid less, might be able to afford more than people working the same job in a high cost-of-living state. A comparison of pay among the states that does not adjust for regional differences in the cost of necessities like rent, food, and gas is not very meaningful.

A better way to determine whether state employees are underpaid would be to compare state employee compensation with the pay of people performing similar jobs in the private sector. How much do maintenance workers, office clerks, and lawyers make working for the government versus working for a private business located in Missouri?

Andrew Biggs and Jason Richwine of American Enterprise Institute looked at state employee compensation this way. They found that in Missouri state employees often make more—by an average of 7 percent—than comparable private-sector workers when the value of benefits is factored in. In other words, Missouri state workers are not in urgent need of an across-the-board pay increase; in fact, they’re often compensated more generously than their private-sector counterparts.

Perhaps we shouldn’t fault AFSCME for using misleading information to suggest that Missouri state employees are underpaid. It’s not AFSCME’s job to conduct a serious study of the adequacy of public employee pay; AFSCME’s job is to get more for its members. Members of the public should keep this in mind any time a government union issues a statement on public policy.

Fuel Tax Increase, P3 Bill on Verge of Passing Senate

Posted on by Joseph Miller

Last Thursday, SB 540, a bill languishing on the Missouri Senate floor that would increase the state fuel tax two cents, was amended and gained that body’s approval. The amendments, which will tier the fuel tax increase and create a board to look at tolling major transportation infrastructure projects, is an improvement over previous versions of the bill and should be given due consideration by policymakers.

The first major change to SB 540 is that instead of raising both regular and diesel fuel taxes by two cents the regular gasoline tax will only increase by 1.5 cents and diesel tax will increase by 3.5 cents. This type of change makes sense, because the vast majority of taxable diesel fuel is bought by trucks, which can do much more damage to the roads per gallon consumed. In fact, both the federal government and 20 other states have higher diesel taxes than regular fuel taxes. This change will have little impact on the total amount of new revenue raised, which will be just under $80 million given current fuel consumption in Missouri. However, this should provide enough funds to MoDOT (around $60 million) to maintain federal matching funds and give a much-needed boost to municipal road improvement budgets.

Aside from these tiers, another change to SB 540, named the “Public-Private Partnership (P3) Authority Act,” may provide more long-term opportunities for improving the state highway system. Even if fuel taxes increase, the state still will not have sufficient revenue to make expensive but necessary improvements to our state roads. A prime example of this is I-70, which will need to be rebuilt from the ground up at a cost of billions of dollars. A reasonable method of solving this problem is to use modern toll roads to pay for better infrastructure, as many states already have.

However, there are constitutional issues with MoDOT tolling the state highway system, which have to do with the dispersal of State Road Fund money. A way to avoid this problem is to have private companies take over the job of financing, building, and maintaining state highways as toll roads. Missouri already has a federal waiver to rebuild I-70 as a toll road, and an amendment to SB 540 would create a board that would look for public-private partnerships to do just that. This bill also includes a check, in that any tolling proposal would have to be approved by the legislature.

The amended SB 540 is a sound policy solution to MoDOT’s funding problems and would be a great step forward for Missouri. However, the bill still requires final senate approval before going to the house and the governor. We’ll keep you updated.

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