Saint Louis City has offered to help fund a new stadium for the Rams, but urban revitalization projects, like a new stadium for the Rams, don’t bring the economic development promised by politicians, notes Policy Analyst Joseph Miller.
The Myth of the Urban Millennial
The debate over what millennials want continues to rage in Kansas City and elsewhere. City leaders are spending gobs of taxpayer money on entertainment districts, streetcars, and subsidized housing in hopes that the so-called creative class will flock there. But the evidence to support such efforts is weak and growing weaker with time.
The New York Times published a column recently about where young college-educated people are choosing to live. The author wrote:
[A]s young people continue to spurn the suburbs for urban living, more of them are moving to the very heart of cities — even in economically troubled places like Buffalo and Cleveland. The number of college-educated people age 25 to 34 living within three miles of city centers has surged, up 37 percent since 2000, even as the total population of these neighborhoods has slightly shrunk.
Yet a Wall Street Journal piece, published just last week, reports:
A survey released Wednesday by the National Association of Home Builders, a trade group, suggested otherwise. The survey, based on responses from 1,506 people born since 1977, found that most want to live in single-family homes outside of the urban center, even if they now reside in the city.
A recent article in Business Insider suggests that the era of young professionals living in urban areas has peaked:
But a decade from now, the landscape will look very different. Millennials will pair up and have kids and want space. Cities, particularly the megacities like New York and Chicago, aren’t likely to become more affordable.
Demographics are destiny. That big bulge of younger millennials visible in the population pyramid is going to be hitting the prime age range for marriage and having kids in the next few years, and it’s likely that many of those new families will move out to the ‘burbs (or further!).
The true cost of revitalizing downtown may be more than the city can bear. Kansas City cannot afford to operate its own fountains and is cutting funds to public safety services. It cannot cover bad investments without taking money from the airport, it neglects the real urban core, and it relies on charity to meet basic city services. Kansas City needs to have a debate on these economic development assumptions, especially because there is so little money left to give away.
When Will Missouri Lawmakers Hear a School Choice Bill?
Last week, the St. Louis Post-Dispatch ran a headline declaring, “Plenty of talk, scarcity of answers when it comes to school choice in Missouri.” While I appreciate the coverage of the National School Choice Week event the Show-Me Institute co-hosted with the Children’s Education Alliance of Missouri, the Missouri Charter Public School Association, and StudentsFirst, the headline got it all backwards. What it should have said was: “Plenty of answers, scarcity of talk when it comes to school choice in Missouri.”
When it comes to school choice, the answers abound. Here are a few:
How do we improve educational options for students in unaccredited school districts? Allow charter schools to enroll students across district boundaries. This would give students whose needs are not being met, in unaccredited schools or otherwise, the opportunity to attend a charter school. It would also increase the likelihood that charter schools would open in unaccredited school districts.
How do we increase educational services for students with special needs? Emulate the education savings account programs created in Arizona and Florida. These programs provide the funds and flexibility that parents of special needs students need. The accounts function like a debit card that parents can use to pay school tuition, purchase educational resources, or pay for therapy.
How do we leverage greater private investment in education, expand options, and empower parents? Create a tax credit scholarship program. Seventeen tax credit scholarship programs exist. While the specific features vary from state to state, each program incentivizes individuals or businesses to support education, and they provide families with options. These programs empower parents to take charge of their child’s education and typically save taxpayers money.
Like I said, there are plenty of school choice answers. What we seem to lack in Missouri is school choice talk, especially among state policymakers. To date, not a single school choice bill has received a hearing in Jefferson City. Indeed, the “Equal Opportunity Scholarship” bill (a tax credit scholarship) seems to be collecting dust.
It’s time for Missouri lawmakers to have more conversations about school choice and hopefully take more action.
The Good and Not-So-Good News from Missouri’s Labor Market
The Bureau of Labor Statistics (BLS) recently released its report on state employment (see Table 5) allowing us to see how Missouri’s labor markets have fared.
The good news is that between December 2013 and December 2014, seasonally adjusted nonfarm employment in Missouri increased by 44,700 jobs to a preliminary estimate of 2,795,000 jobs. This amounts to a 1.62 percent increase. Compared with our neighboring states, in terms of percentage increases, in 2014 Missouri did better at creating jobs compared to Kentucky, Iowa, Kansas, Illinois, and Nebraska. Missouri’s rate of job growth lagged that in Tennessee, Arkansas, and Oklahoma.
Although Missouri did relatively well when comparing percentage growth rates for 2014, the not-so-good news is that the state’s economy has not been generating jobs at a pace that would return employment to levels seen at the onset of the Great Recession.
The table below ranks Missouri and its neighboring states by their ability to create jobs over the past six years. The first column of numbers reports the most recent estimate of nonfarm jobs (seasonally adjusted) in each state in December 2014. The second number column includes the peak number of jobs and the date of the peak. The final column reports the difference between the peak employment number and that for December 2014. Based on this comparison, Missouri has lagged neighboring states in job production over the past six years. The current number of jobs in five states (Kentucky, Nebraska, Tennessee, Iowa, and Oklahoma) is above their previous peak, while Arkansas and Kansas are relatively close to their peak. Missouri shows a substantial lag of 15,700 jobs. The silver lining? It isn’t as bad as Illinois.
Trying to explain the differences in job creation would require more space than we have here. Still, possible candidates are the mix of industries in each state; the migration of companies (and people) to better economic climates; and the states’ taxes and spending policies. Whatever the reasons, the Missouri economy is still looking for the answer.
Don’t Ban Tesla, Let It Compete
We wrote last year about the attempt of Missouri Car Dealers and their lobbyists to prohibit Tesla from directly selling its vehicles to consumers. The Missouri Department of Revenue granted Tesla a dealership license in 2013, and the company now has stores in University City and Kansas City. But according to the Missouri Auto Dealers Association (MADA), Tesla is breaking Missouri’s Motor Vehicle Franchise Law and creating unfair competition through its manufacturer-direct sales. Legislative action to shut down Tesla failed last year, so MADA has sued the Department of Revenue.
However, MADA’s claims hold little merit. The Motor Vehicle Franchise Law bans manufacturer-direct sales for franchisors (meaning those with franchises in the state). Tesla does not use the franchise model to sell its cars, and hence is not banned from direct sales. And this is not a loophole. The Franchise Law was designed as a series of protections to prevent large car companies from undercutting their own franchisees. It was not written to enshrine the independent car dealerships as the only method to sell cars in the state.
That is an important distinction, because whether or not Missourians believe car companies need to be legally prohibited from cannibalizing their own marketing and sales outlets, there is no economic justification banning a manufacturer-direct car sales model. As I wrote in a recent op-ed:
. . . vehicle distribution through dealerships can be costly to the consumer. The 2009 Department of Justice paper “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” reported that as much as 30 percent of the cost of a new car is due to auto distribution. Enshrining the car dealership model in law has limited the ability of car manufacturers to both reduce inventory costs and increase customization, practices common in other markets. In Brazil, where GM can engage in direct sales, cost savings from order to delivery averaged 8.6 percent through direct sales.
Car buyers . . . might prefer directly buying from manufacturers for lower prices, customization, or simply to avoid bargaining at a dealership. A J.D. Power and Associates poll found that half of Americans profess a desire to buy manufacturer-direct, even if the prices are equivalent.
While that does not mean the dealership model would or should disappear, the government should not stop Tesla or any other car company from trying something different. That freedom to innovate is essential for a competitive market.
Union Cronyism and the Board of Aldermen
I was driving home from work the other day and listening to “Back Stabbers” by the O’Jays on 88.1. At the end of the song, the DJ gave some commentary, “The back stabbers. They smile in your face. It could be the milk man, it could be one of your friends, or it could be the St. Louis Board of Aldermen.”
I didn’t catch why my DJ was upset with the Board of Aldermen, but one reason Saint Louisans are upset with the board right now is their decision to consider a bill that purportedly limits minority businesses from bidding on county government contracts.
The bill mimics regrettable legislation passed by the county in 2012 that requires bidders on construction contracts of $25,000 or more to maintain their own Department of Labor-approved apprentice program. The catch is that union contractors are often the only bidders who can meet this requirement.
When the county council adopted its bill in 2012, my colleague David Stokes wrote,
While some non-union companies do participate in apprentice programs through industry organizations, union-affiliated companies still have a decided advantage in meeting the requirements of this new bill. This is a blatant ploy to guarantee that union companies will win all county bids. . . .
Using the council’s authority to prevent non-union contractors from even attempting to participate in county projects is an egregious misuse of power. It is bad enough that this will increase costs to taxpayers, but the use of government for political favoritism is simply indefensible and immoral.
Just as it was two years ago, this type of legislation still appears to be a naked attempt by elected officials to please a powerful special interest.
Law should facilitate open access, such that access to public institutions is not contingent on personal relationships and political connections. Law should be structured to apply to everyone equally. By favoring unionized contractors over non-unionized contractors, this bill fails in providing a neutral rule. It reeks of cronyism, and it is the sort of thing Saint Louisans are right to be upset about.
The Return of the Transportation Sales Tax
Last year, Missourians soundly rejected Amendment 7, which proposed a 0.75 cent increase in the state sales tax to fund transportation improvements in the state. Its main purpose was to head off an impending funding crisis for the Missouri Department of Transportation (MoDOT), which will not have enough funds to maintain the highway system in its current state by 2017. But it turns out Missourians might not have seen the last of that transportation sales tax.
Whatever the reasons Amendment 7 failed, it was good for Missouri that it did, because it was not wise policy. Using a general sales tax to pay for highways is both unfair and economically unsound. Instead, the state should modernize the user-tax base that currently funds MoDOT. That could mean increasing the fuel tax, raising the motor vehicle sales tax, indexing licensing fees to inflation, implementing tolling, or some combination of those methods. That way, those who use the roads would pay for them, and in proportion to their use. Using general sales tax to fund roads subsidizes driving and interstate trucking that passes right through Missouri. As we wrote before:
… the fact is the vast majority of trucking freight in Missouri is not bound for Missouri. For example, of the 500 million tons of freight traffic in 2011, only 39 percent of that freight is either inbound or intrastate trucking. Forty-six percent of traffic by weight simply passes through Missouri. In terms of value of the goods transported, only 26 percent has a destination within Missouri while 61 percent of goods by value transit the state.
Unfortunately, a new bill in the Missouri House (HJR 33) would simply revive Amendment 7, albeit in a different form. Instead of raising the state sales tax by 0.75 percent, the bill would divert 0.10 percent of the state sales tax into the road fund for five consecutive years until the amount diverted reached 0.50 percent (two-thirds of Amendment 7). If that came to pass, it would mean that 12 percent, or $233 million in 2014 numbers, of state sales tax revenue would be diverted to the state road fund. That is likely to lead to budget cuts in other state programs or higher taxes for Missourians.
As we have written before, the defeat of Amendment 7 opened the door for sound, user-based policy solutions to MoDOT’s funding problems. HJR 33 is not one of these.
Show-Me Now! National School Choice Week
This week is National School Choice Week. The Show-Me Institute participated in events in Kansas City and Saint Louis. James Shuls, Ph.D., gives an overview of the event in Saint Louis.
It’s Groundhog Day for Saint Louis and NFL Stadiums
The story is everywhere: Saint Louis is in danger of losing its NFL team because the city’s current stadium is outdated. With the team on the verge of moving, state officials have developed a plan for a new publicly financed state-of-the-art stadium, but it may be too late. The owner sees greener pastures out west, and, after year upon year of subpar play on the field, fan support is tepid. They may not support using public dollars to finance a new domed stadium.
That’s right, this story is not about the Rams; it’s about the St. Louis Football Cardinals circa 1988. But the stories are so similar that, if the Post-Dispatch were to change the date, a few proper nouns, and replace “dome” with “open-air stadium,” they could easily republish articles written decades ago.
If Saint Louis’ position is analogous to the one it experienced in 1988, there is much reason for caution. Back then the conventional wisdom was that domed stadiums were the future and open-air venues were a thing of the past. As one Post-Dispatch writer put it, “A domed multi-purpose building, involving an enlarged convention center, would not be the white elephant of an isolated, open-air athletic stadium.”* Despite the last-ditch stadium proposal, the Cardinals moved anyway.
But that did not stop plans for a dome. Then, as today, regional leaders claimed that having an NFL team was a boon for the local economy and city pride. Thus, building a new stadium was the “progressive” action, and it was needed to “compete for sports, convention and political bucks.”* In the area of urban development, the Post-Dispatch published articles about how the RCA Dome transformed downtown Indianapolis, hinting at similar results for Saint Louis. In a demonstration of an uncritical, keeping up with the Joneses mindset that too often guides municipal governance, one prominent stadium plan supporter commented, “You know, the other cities that have built domes are not totally stupid.”* When state and local residents voted to go forward with a publically financed dome, one Post-Dispatch columnist claimed that it “all sounds like a dream.”*
Now the dream is over. While Saint Louis eventually lured the Rams in 1995, it did so with a sweetheart deal that has been described as the “worst lease ever,” part of which frees the Rams to leave the city after only 20 years. The dome, which was described as “cutting-edge” and even “intimate”* in 1995, is regularly maligned. In fact, talk of the dome being out of date began as early as 2007, just 12 years after it was completed. As for urban regeneration, other than the heavily subsidized developments on Washington Avenue, progress has been limited and certainly not centered on the dome.
The history of the Edward Jones Dome demonstrates the pitfalls of using public dollars to chase the NFL. Perhaps that will cause Missourians and public officials to be more skeptical of the new stadium proposal. But then again, you know, the other cities that have built open-air stadiums are not totally stupid.
