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Yesterday, the residents of Arnold voted to privatize their wastewater system by an overwhelming margin (70 percent of voters approved). While some of the larger local and state results may have captured Missourians’ attention, the result in Arnold is a step in the right direction for efficient, responsible government in that city.
Over the last couple months, we have written how privatizing the wastewater treatment facilities will be able to leverage the expertise and capital available in the private sector to provide better services and keep prices down. The sale price, $13.2 million, can be spent to retire debt and to create a rainy-day fund.
But as with all privatizations, effecting a sale should not be the end of public engagement. Arnold residents must ensure that the money from the sale is spent or saved in a wise manner. They also must ensure that city officials hold the private company, Missouri American Water, responsible for providing safe and efficient services.
Should the city be diligent in these areas, the privatization of Arnold’s sewer system has the opportunity to become an example to Missouri of how water treatment, like many public services, can be effectively provided through the private sector.
Listen to these all new audio clips from the Show-Me Institute about free-market ideas:
Recently, Jackson County Executive Mike Sanders announced that the county had received a $10 million federal grant to buy just under $60 million of right-of-way from Union Pacific. The county wants that right-of- way for a $490-600 million commuter rail system. Jackson County officials are eager to move forward with the purchase, but they have not secured a funding source for the plan or resolved issues with freight rail companies over access to downtown Kansas City.
Jackson County and Union Pacific came to an understanding on purchasing the 15.5-mile Rock Island Corridor and two smaller spurs between Kansas City and Lee’s Summit for $59.9 million earlier this year. With the $10 million federal grant, the county residents will still need to fund a $50 million purchase.
But as the map above demonstrates, those purchases still leave the county well short of functioning commuter rail lines, without additional right-of-way or agreements with freight rail companies.
It is not simply a matter of purchasing track. The city has an ongoing dispute with freight companies over how commuter trains will arrive in downtown Kansas City. Regional planners are pushing for a connection with the streetcar at River Market, but Kansas City Southern Rail (KCSR) opposes this idea because it would jeopardize operations at Rock Creek Junction. KCSR suggests a connection at Union Station, but that could raise construction costs to $1.5 billion.
Using freight rail lines to get commuter rail into downtown Kansas City is no small problem, as the city is the country’s second largest freight rail hub, and rail lines downtown are already congested. Aside from providing a source of employment, having such a large freight rail hub has positive benefits for Kansas City’s manufacturing competitiveness. It would not be economically sound for the county to jeopardize freight efficiency to heavily subsidize the commutes of fewer than 4,000 residents.
While the county does not know how it will connect commuter rail to the city center, it is clear how it will pay for it: higher taxes. The county already has a plan to implement a county-wide 1 cent sales tax. But sales taxes are already very high in Kansas City. With the city still not giving up on a more expansive streetcar network, also to be funded with sales taxes, the increased tax burden may harm the city’s competitiveness. A yes vote is certainly not guaranteed.
The county does not yet have a plan for a functioning commuter rail system, and implementation depends on a tax that voters have not yet accepted. County officials should recall this before spending $50 million on right-of-way. They should also consider that Saint Louis is implementing Bus Rapid Transit, which can easily handle 4,000 commuters a day, for under $40 million. As for Kansas City residents, they should ask why city planners waste millions of dollars planning rail plan after rail plan without the approval, or even in the face of explicit disapproval, of voters.
Whither Kansas City? According to local media outlets, the city is clearly on this rise. Millennials are moving downtown, residential developments are multiplying, and new sources of employment are entering the city. Capping it all, the Royals had a fantastic season, which was enough for the Kansas City Star to roundly praise past public subsidies for Kauffman Stadium. The story is clearly growth.
But census data paints a different picture of the metropolitan area and the city itself; a picture of falling income, rising poverty, and slow population growth. Kansas City was hit hard by the recent recession, and simply put, the city has not seen a recovery in terms of income.
Census data shows that employment is increasing in Kansas City since the recession, but total employment is still significantly below prerecession levels. That may be partially explained by lower labor force participation and fewer households. The income data is more troubling. The median household income from 2010 to 2013 is still almost $3,000 lower than it was from 2007 to 2009, not accounting for inflation. When that adjustment is made, real income has been on a continuous decline in the city since 2009.
A similar trend exists in Johnson County and the metropolitan area as a whole.
The recession caused poverty levels in Kansas City and surrounding areas to spike, and they have yet to significantly recede. Poverty levels were actually higher from 2011 to 2013 than they were from 2009 to 2011 (which includes the recession). As with income, Kansas City has yet to see anything that could be described as a healthy recovery. The following chart demonstrates recent trends:
There’s plenty of excitement and optimism in Kansas City, and that’s no bad thing. But much of the excitement seems to be for prestige projects, entertainment venues, and young people in the downtown area. If that attitude allows people to forget that for most people in Kansas City there really has not been a recovery, much less a renaissance, then the optimism may be counterproductive.
When the St. Louis Metropolitan Taxicab Commission (MTC) altered its regulations in the past month to allow Uber, we warned that the rule changes did not go nearly far enough. We wrote:
. . . the MTC still plans to tightly control the supply of premium sedans available to Uber through the issuance of permits. Initially, the MTC will only issue 26 permits for premium services, and only five will be rewarded to new, single-vehicle operators. The rest will go to existing sedan companies that can afford three or more sedans. These smoke and mirror tricks, designed to make it appear that the MTC is becoming friendlier to other services and companies, are in reality reinforcing the restrictions on the entry and pricing of the taxi market.
As a result, Uber cannot hire new drivers as demand dictates; it can only use the limited pool of existing MTC-approved premium sedans.
The result, predictably, is that people who want to ride Uber’s premium service are often unable to. This mismatch between supply and demand hurts both Saint Louis residents hoping to use a service they want as well as Uber. MTC Director Ron Klein is unconcerned, stating, “We’re very flexible. . . . We just didn’t want to go out there and say, ‘Let’s add 100 [permits for black cars],’ and then have 75 guys standing around.” He stated that the MTC will vote on adding 26 cars next month, and might add more if Uber can prove there is a demand.
It should be readily apparent that demand exceeds supply if people are demanding Uber and there are no cars to send. Furthermore, why should the MTC, like a cabal of Gosplan apparatchiks, think it is appropriate for them to attempt to match supply and demand? Why should Uber have to prove demand before the MTC will consider allowing more black cars? When does it become obvious that MTC policies, far from ensuring safe taxi service, are limiting consumer choice and making the city a less attractive place to live?
If the MTC is so concerned about the quality of for-hire vehicle service in Saint Louis, they should limit the supply of regulations, not the number of premium sedans in the city. And if they can’t do that, perhaps residents should reduce the area’s supply of taxicab commissions. To zero.
A look at the latest American Community Survey data confirms that income growth in Saint Louis City has been lackluster for the past decade. Since 2005, median income growth has lagged inflation by 6 percent, indicating falling real wages. But at the same time, some are proclaiming the return of the city, with new developments on Washington Avenue, Ballpark Village, and the Central West End pointing to a bright future.
These contradictory accounts of the city’s performance point to a more complex reality, a tale of different populations and neighborhoods. The bad news is that wages are stagnant and the poor and middle class continue to leave the city. From 2005 to 2013, Saint Louis City households whose income was less than $75,000 per year (more than twice the city’s median income) fell by 7.8 percent. But the good news is that wealthy households (earning more than $100,000 per year) increased by 78 percent. Households earning $200,000-plus per year more than doubled over the same period.
But as the map below demonstrates, lower income residents are most predominant in North and South Saint Louis City, while the very wealthy are most populous in the central corridor. That means increasing growth where growth is most visible, and stagnation and decline where it is out of sight, out of mind.
Saint Louis City’s planning strategies may have contributed to this bifurcated outcome. We have written before about the city’s attempt to generate density, walkable neighborhoods, and a vital downtown through lopsided investments to the central corridor. The city also uses tax incentives to subsidize high-end living and entertainment districts. Instead of fostering economic opportunity, which draws residents who will generate local culture from the bottom up, the city instead will become an entertainment machine, which will draw the creative class, who in turn will create jobs.
Even where this upended model succeeds (and there is no guarantee of that), there are questions as to whether this actually helps middle-class or poor residents, or simply makes them former middle-class or poor residents. Urban “renewal” in boutique cities like New York City and San Francisco has resulted in a displacement of the poor and middle class and rapidly rising income inequality. Although Saint Louis City is not NYC, income inequality is rising quickly. From 2005 to 2013, the city’s median income fell from 75.3 percent to 69.6 percent of the city’s mean income, indicating an increasingly top-heavy income distribution. This trend, compared to that of Saint Louis County, is shown below:
If leaders focus on making the city a safe, affordable, and easy place to live and do business, it is possible Saint Louis City could enjoy an expansive resurgence. But as things stand, the city is pushing more publicly supported bar districts, luxury apartments, and expensive amenities to draw the rich into the city center and hope the wealth trickles down to the rest. For areas like North Saint Louis, that could be a long wait.
Recently, Ray Mundy, a professor at UMSL (also the head of a consultant group that works for the nation’s top taxi companies and part of the staff of Airport Ground Transportation Association, an airport taxi lobbyist group), was interviewed on a local radio station. While Mundy failed to state his conflict of interest, he lost no time accusing ridesharing companies like Lyft and Uber of having improper background checks, using inadequate insurance, price gouging, and destroying the cab industry that the needy rely on. But in reality, his statements are misleading, and his recommendation to ban these services will only serve to hurt Missouri residents. I will take his issues point by point:
This statement may have had validity a few months ago, but this is no longer the case. In July, both Uber and Lyft changed their insurance policies so that cars operate under liability insurance whenever the ridesharing apps are activated. Commercial insurance becomes primary (not secondary as Mundy stated in the interview) when a passenger has been accepted. Both Lyft and Uber detail their policies, and no driver or customer needs to use these systems if they find them inadequate. But regulators and those of Mundy’s persuasion would rather legislate additional insurance (shown not to improve safety) or ban ridesharing.
This statement is empirically false, as a Reason study demonstrates.
Mundy claims Uber and Lyft drivers might be dangerous because they do not use the same type of background check as most cab companies. Peruse Uber’s qualifications for yourself:
According the Mundy, these tests do not go back as far as taxi checks and do not include arrests where there are no convictions. That seems like a contrived standard, and once again, customers can decide whether they feel Uber or Lyft drivers are safe. But Mundy and other regulators would rather residents did not have such options.
Mundy, and other defenders of taxi regulations, do not like Uber and Lyft using variable pricing, such as charging more money at different times of night or when demand is higher. In reality, allowing for higher fares means drivers have a larger incentive to take fares at 2 a.m. or on New Year’s Eve. It allows the price mechanism to match supply with demand. But Mundy and other regulators would rather Saint Louisans wait hours for cabs that don’t come rather than have the choice to pay a higher fare.
It is well known that, despite stringent regulations, taxis around the country refuse fares and avoid depressed neighborhoods. The best protection against fare refusal and more service is a large, diverse supply of for-hire vehicles, which ridesharing can help provide. And what’s more, cities like Saint Louis spend hundreds of millions of dollars a year on extensive public transit and para-transit services to serve the poor and the disabled. The for-hire vehicle market should not be regulated in order to duplicate those efforts.
If there is a common theme to Mundy’s and regulators’ arguments, it is that city officials, and not city residents, should decide whether ridesharing companies are safe enough, charge the right amount, and provide the right kind of service. But in reality, the corrective action of riders and drivers making their own decisions regarding Uber and Lyft are a far better test of all those criteria, and even Mundy admits the popularity of ridesharing where it has not been quashed by city government. The reality is that most Saint Louisans don’t see cabs as an option, because the service does not meet their needs. That’s a shame, because that hurts residents and hurts the city. But Mundy and the taxicab commission would rather keep it the way it is than let residents make their own choices.
Show-Me Institute Policy Researcher Joseph Miller notes that Uber Black is now operating in Saint Louis. Unfortunately, Uber’s other ridesharing services are prohibited in the region by the taxicab commission. Saint Louisans would benefit from the increased competition.
