Greene County’s decision to back a land development deal has turned south for tax payers.
The Wisdom of Devoting 27% of Transportation Funds to Streetcars
We have commented before on the possible deal between MoDOT and Kansas City officials to spend an incredible 27% of all regional funds ($210 out of $776 million) from a transportation sales tax on the streetcar expansion. Despite the fact that Mayor James introduced a resolution (140500) calling for just that, not a single traditional media outlet has bothered to ask if a deal exists and what impact that would have on the original, less streetcar-centric plan for the money.
Excluding the unlikely scenario in which MoDOT devotes more sales tax funds to the Kansas City region than originally planned, diverting $210 million dollars to the streetcar will have to come at the expense of other projects proposed for the region. As we commented before, if money for the streetcar comes from the portion of funds allocated to transit projects, little money would be left for anything else.
However, the Mayor’s resolution calls for the implementation of all non-road projects in the original plan ($316 million) along with the $210 million for the streetcar. The only place left to cut from would be road projects, reducing their share from $427 million to $250 million. The resulting policy would dedicate 53% of funding to public transit in a city where less than 2% of the population use it to get to work.
The Kansas City streetcar has very little transportation merit. The proposed streetcar lines can hope to lure 23,200 passengers per weekday at best. That estimate is likely overly optimistic, but let’s assume this is correct. Furthermore, assume that every passenger represents a commuter (although some won’t be) traveling either to or from work. 23,200 passengers would represent 11,600 commuters. Add in the starter line and streetcar commuters, which could total 12,950 per day. That would be impressive and more people than currently use to the entire KCATA bus system in Missouri. Still, even in that most optimistic case, the streetcar would serve only 2% of commuters. 2% of commuters, 27% of all regional transportation funds.
Streetcar supporters might counter that the streetcar’s primary goal is to move money to downtown Kansas City rather than move people around the city. This is all the more reason the state should be wary of giving transportation money to a development scheme. All the more reason people should consider whether the state needs, or can be trusted with, transportation sales tax revenue.
IFF Provides Map for “Quality” Charter Schools
IFF, a nonprofit community development financial institution based out of Chicago, released its latest widget last week. The widget is an interactive map, which allows St. Louisans to directly manipulate variable layers like educational attainment, non-English speakers, poverty, and age. The most stunning layer is zip code rank.
The zip code rank layer shows which St. Louis City zip codes have the most need for quality schools—the lighter the gray, the higher the need. Need is based on what IFF calls the service gap, or the difference between supply (capacity of districts designated as “Accredited” or “Accredited with Distinction”) and demand (students enrolled in district and charter schools). IFF found that St. Louis needs 18, 987 more seats in accredited schools to serve all of its K-12 students. IFF also found that 63 percent of the service gap was concentrated in six neighborhoods. With support from Mayor Francis Slay and St. Louis Public Schools superintendent Kelvin Adams, the institution made a few recommendations, including: Encourage district partnerships with charter schools like KIPP.
This is a recommendation we support. Research points to the effectiveness of quality charter schools in urban areas, but simply saying “we need quality charter schools” isn’t enough. The next step is to identify what a “quality charter school” is. Harvard economist Roland Fryer points to five qualities: frequent teacher feedback, data driven instruction, high-dosage tutoring, increased instructional time, and relentless focus on academic achievement. Schools like KIPP echo Fryer’s findings (KIPP teachers work Monday through Friday from 7:10 am to 5:00 pm and every other Saturday).
Studies like Fryer’s and real world examples like KIPP serve as a road map for building quality charter schools, but the path to quality education starts with parents. Parents need the right tools to make the best choices for their children, and IFF’s interactive map is one of those tools.
Show-Me Minutes
Listen to these minute-long audios from the Show-Me Institute about free-market ideas:
- Accounting: Missouri is behind in funding its public pensions because of flawed accounting assumptions.
- Alphabet Soup: Lawmakers offer favored corporations tax subsidies like TIFs, EEZs, TDDs, and many others. Let’s end corporate welfare.
- School Choice: We have liberty in America, but our kids are assigned to a public school based on where they live. Let’s change that and give school choice a try.
- Tax Credits: Elected officials gamble your money on their favored corporations. Let’s end corporate welfare.
- Privatization: Privatization—public services provided by private companies—can deliver needed services at lower costs to taxpayers.
Give Tax Cuts A Chance
Perched atop his ivory tower, Paul Krugman, a Nobel Prize winning economist, has declared that the tax cuts enacted by the Kansas legislature in 2012 are a failure. Writing in The New York Times, Krugman avers that “the Kansas debacle shows that tax cuts don’t have magical powers” and that “faith in tax-cut magic isn’t about evidence.” Is the all-knowing economist correct?
(As an aside, it was Mr. Krugman, writing in The New York Times in 2011 who stated that “the V.H.A. [Veterans’ Hospital Administration] is a huge success story, which offers important lessons for future health reform.”)
Mr. Krugman’s predictable protestations notwithstanding, there actually is a significant body of empirical evidence finding that, on average, states and countries with lower tax rates tend to grow faster. (See articles in this SMI study.) While economists, like any other group of scientists, debate their findings, there is real-world evidence to believe that reducing taxes can improve the economic lives of a state’s citizens.
Every principles of economics student, even those using Mr. Krugman’s textbook, learns that if you wish to reduce an activity, tax it. Since income taxes are derived from working, basic economic theory predicts that higher income taxes will reduce people’s incentive to work more hours. At the extreme, tax me 100 percent of my income and I’ll just stay home, thank you. So, lowering tax rates in income should reduce this disincentive to work.
Mr. Krugman does not seem to think that lowering taxes matters. The story that Walgreens is contemplating moving its headquarters to Switzerland to lower its tax burden belies that notion. Even if you find this proposed move disturbing, you cannot ignore the simple fact that Walgreen’s likely would not consider relocating if taxes were equal in the two countries. Tax rates really do matter in making economic decisions.
There is no denying the fact that since the Kansas legislature enacted the tax cut in 2012 (it became effective in 2013), the state’s economy has yet to achieve the economic take-off that some promised. Job growth is slower than the national average and, due partly to income shifting in response to the fiscal cliff, the drop in tax revenues in 2014 compared to 2013 has been larger than predicted.
Changes in the tax code cannot be expected to reverse years of weak economic performance overnight. Kansas, like many other states, is still recovering from the effects of the Great Recession. Like most medicines, changes in tax codes should not be expected to deliver immediate cures.
Before Mr. Krugman is anointed as the Cassandra of tax cuts, let’s give the experiment time to take hold. Time will tell, but basic intuition and existing evidence predicts that Kansas’ economic future is brighter today than it would have been without the tax cuts.
What’s in a name?
That which we call an unaccredited school by any other name would perform as well. William Shakespeare spoke of roses, but his four-century-old logic applies to Normandy Schools Collaborative’s “nonaccredited” status. The Missouri State Board of Education’s decision to give Normandy a “nonaccredited status” allowed the Board to take control of operations. It essentially gave the district a do-over, but left many with questions concerning the legality of subsequent decisions:
- Can the Missouri State School Board set a tuition ceiling?
- Can receiving schools reject transfer students?
- Can Normandy prohibit new students from transferring?
These questions stem from the transfer law’s wording regarding unaccredited schools. The law refers to a “district not accredited”. According to the state board, Normandy’s new unclassified status of “nonaccredited” is somehow different than “unaccredited” (even though, non is Latin for not, non making this up). Because of the new classification, schools like Francis Howell decided not to allow transfer students to return. Using the same rationale, Normandy Schools Collaborative might not receive extra money from the 2015 state budget. The additional funding is earmarked for intensive reading instruction and pre-K programs, programs meant to help low-performing, unaccredited schools like Normandy.
Normandy has a history of low-performance—low-achievement, high drop-out rates, and low college readiness. If the goal of the state Board of Education is to give Normandy students access to high-performing, quality schools, calling the district by another name is not the answer.
Don’t Forget the Streetcar is Bad Policy
The $500 million Kansas City streetcar expansion plan is back in the news. With the August 5th election on the streetcar’s proposed transportation development district drawing near, media outlets have exploded with anecdotes on the development potential of the streetcar and stories on the city’s (possibly illegal?) public information campaign. But whether the city’s plan to provide door-to-door information on the streetcar directly ahead of the election is legal or not, no one should forget the incredible waste and dubious benefits of a streetcar system.
Incredible waste: months ago, we pointed out that Kansas City could buy and operate 100 buses serving 130 miles of routes for the same price as the Kansas City streetcar expansion plan. While critics might claim that buses cannot be compared with streetcars (they can), the basic math is unchallenged. Streetcars, which provide only limited service improvement over buses, are many times more expensive and incredibly restricted in their range.- Dubious benefits: Streetcar supporters must have a hard time keeping a straight face when they claim that streetcars have any transportation benefit. Instead they rely on the argument that these projects bring billions in development. The evidence on this proposition is anecdotal at best, as cities with streetcars have heavily subsided surrounding development. Kansas City is already pushing ahead in this tradition, with anecdotes about new developments that are not so believable on closer inspection, and a raft of subsidies at the ready.
- Everyone will be paying: Even though supporters freely admit that a streetcar is a development scheme limited to a small section of Kansas City, everyone else still gets to pay for it. After all, building a half billion dollar streetcar line can be financially difficult. The proposed transportation development district’s 1% sales tax and new property taxes will cover less than half of the streetcar’s total cost. The rest will come from the federal government, Kansas City residents outside the TDD, and if the proposed 0.75% statewide transportation sales tax passes, the whole state.
Streetcar supporters often make groundless statements about illusive millennials and streetcar economics, but they do make perfect sense when they say that now is a “once-in-a-generation opportunity with the streetcar project.” That’s because once the shine is off the new rails and promises of citywide transformation are unfulfilled, the streetcar will be seen for what it is: just another transit system. Another transit system that is as slow as a bus, but ten times the price. Perhaps that explains the rush to get as much money as possible, as quickly as possible.
Vetoes, Vetoes, And More Vetoes
There has been a lot of consternation in the Missouri Legislature about Gov. Jay Nixon’s vetoes and withholds (withholds differ from vetoes in that withheld money can be released if state revenues are available later in the year, while vetoed funds are just not spent) from the fiscal year 2015 budget. Many legislators are upset with the governor for claiming that their budget is out of balance while his own executive budget was larger than the one the legislature passed. To be fair, a lot of the difference is due to the governor’s budget including funds for expanding Medicaid, but the governor’s budget also was relying on revenue growth that was higher than even the legislature was expecting.
All that said, there actually is a lot to like in these vetoes. For example, the governor vetoed more than $7 million in funds for biodiesel incentives. The state should be eliminating these types of incentives and it is a good thing that Gov. Nixon is cutting back on them. The governor also is vetoing $2 million in funding for the Rolling Stock Tax Credit. The Show-Me Institute has published numerous writings about the desirability on cutting back on these types of tax credits. It is good to see Gov. Nixon trying to do so.
Gov. Nixon’s vetoes could go further. For example, he withheld $5 million from efforts trying to lure the Republican National Convention to Kansas City. There has been a lot said about using government money to try to lure big events, but in this case, the money isn’t necessary because the Republican National Committee has already narrowed its search down to Cleveland and Dallas. Gov. Nixon should have simply vetoed this specific appropriation.
There was a lot to like in the governor’s vetoes. If the legislature was more disciplined, many of the vetoes would not have been necessary. Hopefully, state spending can be controlled going forward.
Blame Canada Washington!
Austin Alonzo, of the Kansas City Business Journal, recently reported that Kansas City Mayor Sly James argued that a door-to-door public outreach effort that Burns & McDonnell will conduct is necessary to meet federal guidelines:
On Monday, Mayor Sly James said the work being performed by Kansas City’s Parson & Associates LLC and Scott Hall & Associates will help the city fulfill a federal requirement to incorporate an environmental assessment into the expansion routes so the city is eligible to receive federal funding.
“If this assessment is not completed, then the city will have no opportunity to receive federal funding,” James said in the statement.
The effort is the subject of an ethics complaint that opponents to the streetcar sales and property taxes have filed, claiming it is electioneering. Alonzo followed up with the federal agency awarding the grants and found there is no such requirement.
No federal mandate requires Kansas City or its contractors to hold door-to-door meetings before part of the city votes on a proposed extension of the streetcar project, according to the Federal Transit Administration.
This is not the first time the mayor and Kansas City officials have been caught trying to blame federal regulators for forcing the city to adopt questionable policies. Steve Vockrodt, at The Pitch, just penned a piece pointing out that the EPA has never cited the Kansas City airport for environmental shortcomings:
City officials distributed a fact sheet in April 2013 that said KCI couldn’t meet U.S. Environmental Protection Agency guidelines for capturing de-icing runoff.
“The current terminal infrastructure does not allow the airport to meet the EPA’s new standards for capturing deicing fluids, which require capturing about 30 percent of the run-off,” the fact sheet reads. “The new single terminal will capture nearly 100 percent of the runoff and resolve Environmental Protection Agency issues the airport is currently facing.”
But there is no such EPA guideline.
Two EPA officials contacted by The Pitch could not identify any published guidelines that call for the capture of 30 percent of de-icing fluids.
And let us not forget the recently ended bid for the GOP convention, in which Mayor James argued that it was necessary to spend hundreds of thousands of dollars, in secret, just to keep up.
The Show-Me State’s Harry Truman once famously quipped, “The buck stops here.” But in Kansas City, Mayor James and Kansas City government officials point the finger elsewhere and the bucks don’t stop at all.
