Show-Me Institute Research Fellow Rik Hafer, Ph.D., discusses how Missouri’s economy has performed since 2000 relative to its neighbors and the country. Hafer and Show-Me Institute Policy Researcher Michael Rathbone outlined the details of Missouri’s competitiveness with its neighbors in a recent essay: Missouri’s Economic Record in the 21st Century.
I want to follow up briefly on the pieces recently published in The American Spectator and here on the blog about entertainment district subsidies in the Show-Me State. Michael Rathbone’s review of Saint Louis’ Ballpark Village is worth your time if you haven’t read it yet. But I want to highlight again Kansas City’s own tax incentive sinkhole, the Power & Light District. The Wall Street Journal video below is an oldie but goodie that captures how expensive the city’s entertainment district gamble has been — and how expensive it will continue to be in the years ahead.
The cost of the city’s plan has actually gotten worse since the Journal published this video in 2012. Just a few months ago, the Kansas City Council actually voted to refinance the district’s debt to help pay for pensions, extending the term of the repayment period and adding tens of millions of dollars to the district’s cost.
The refinancing calls for adding seven years to the Power & Light entertainment district’s debt payments, from 2033 to 2040. It lowers the payments from 2015 through 2019 and frees up cash to help pay for pension reform, especially in the 2014-15 budget. But it bumps up the debt payments between 2020 and 2040, a net increase in overall debt of $36 million.
Who’s going to pay for all of these costs? Kansas Citians, of course, most likely through higher taxes, lower services, or a combination of the two. Businesses that have to compete with the newly subsidized competitors will also be paying for it not only in tax dollars but in customers, too, as their clientele are diverted to new taxpayer-funded developments. If these massive projects were going to work, they should be able to make it on their own, and as the Spectator observed:
The forbidding economics of these projects should be evident from the start, since their need for subsidies shows that they have inadequate market demand. Yet they continue to open, representing the fallout that occurs when officials speculate with public money.
That chronic speculatory impulse of Missouri’s public officials must stop. If our local and state governments can afford to massively cut taxes for some, they can afford to cut taxes for all. That’s the direction in which tax policy in this state must continue to move.
Saint Louis City officials released their wish list for the anticipated $260 million from the proposed 0.75 cent statewide transportation sales tax. Many of the projects on the list propose reasonable improvements to streets, bike routes, and pedestrian paths. However, two of the largest ticket items, namely, a Downtown-Central West End Streetcar and Transit Oriented Development (TOD) at the Forest Park-DeBaliviere MetroLink station, are examples of government waste in the extreme.
We have written many times about the boondoggle that is the modern streetcar movement. Streetcars are incredibly expensive, often with a price tag of more than $50 million per mile, and do little to improve mobility. Claims that streetcars induce economic development are anecdotal at best, as streetcar lines are always paired with significant subsidies for developers and related investment.
Despite the very real costs of streetcars and their dubious benefits, Saint Louis City officials propose spending $35 million on Phase I of a streetcar from downtown to the Central West End. If the whole downtown to CWE Streetcar could actually be built for that amount, perhaps my objection would be less vehement. However, the total cost of the plan is estimated to be $540 million. That makes this Phase I investment less than 7 percent of the plan’s total costs. Even if the city can convince the federal government to unwisely pay for half of the total, the city still has to raise another $235 million. If the experience of other cities is any guide, Saint Louisans are in store for higher sales taxes, property taxes, and parking fees to pay the balance.
Another wasteful request is a plan to make “improvements” to the Forest Park-DeBaliviere and Delmar MetroLink stops. These improvements will waste taxpayer dollars to subsidize Transit-Oriented Development near MetroLink stations and accompanying aesthetic improvements. We have written about the empty promises of TOD, and this project is no exception. TOD often is nothing more than corporate welfare enabled by urban planners, succeeding only in diverting development at taxpayer expense.
TOD rarely succeeds in greatly increasing transit ridership, even if it can attract residents in the first place (not a given). If the MetroLink and the planned Loop Trolley are not enough incentive to bring more housing or new businesses near MetroLink stations, there is little reason spend $14 million of transportation sales tax money to make it happen.
Saint Louis City’s transportation wish list is just another example of why the proposed 0.75 cent sales tax is not good policy. Supposedly necessary because the Missouri Department of Transportation (MoDOT) cannot fund necessary highway improvements, the money instead will be spent on projects (or 7 percent of a project) with political support, not transportation merit.
During good times and bad, Missouri is failing to keep up economically with its neighbors. In the Show-Me Institute’s new essay, “Missouri’s Economic Record In The 21st Century,” by Rik Hafer and me, see why we give Missouri’s economic performance during the current century a grade of “D” and how such a record could mean serious trouble for future Missouri residents. Please give it a look.
With all the political rhetoric floating around Kansas City, one would think the city is embracing high technology and forward-looking, well, everything. A closer examination reveals just the opposite. The city is using 19th-century politics and policymaking, and hoping for 21st-century results. It is as anachronistic as those future-looking movies of the past.
What old-timey look at the past would be complete without a monorail light trail streetcar? Kansas City politicians are determined to employ 19th-century fixed rail transit, thinking wrongly that it will solve our problems. We’ve written extensively about why rail is bad for Kansas City. You can read about it here.
The most jaw-droppingly insipid claim is that such policies will draw the creative class. Never mind that there is no research to back up this claim — Kansas City already is rapidly becoming a fact-free city. In fact, a vocal proponent of streetcars who claimed to speak for millennials just announced that he is leaving Kansas City for the East Coast to seek greater opportunities. This supports the writings of my Show-Me Institute colleague: the so-called creative class goes where the jobs are, not to streetcars or airports.
Meanwhile, city officials view actual future-looking technologies such as those that Lyft and Uber provide with hostility because officials are mired in 19th-century protectionist cronyism. How are Kansas City officials going to react to the inevitable arrival of driver-less Google cars? Demand that cars undergo a background check? Require that each one contain a detailed street map? This is not forward-thinking; in fact, it’s not thinking.
Speaking of Google, Kansas City Mayor Sly James and others love to extol Google Fiber, as if Kansas City, Mo., won that national bidding war to bring them here a few years ago. We didn’t. We lost to Kansas City, Kan. We were just lucky enough to be next door. Kansas City, Kan., won because they demonstrated small and efficient government, not heavy-handed regulation and federal money.
In looking to create density downtown, city officials are falling over themselves to offer up any sort of taxpayer subsidy, handout, or corporate welfare package to bring density — sometimes just to move jobs two blocks. Yet they are unable or unwilling to deliver basic services to the rest of the city. This is not forward-thinking, it is urban cannibalism.
If Kansas City officials are serious about building a brighter future, they need to shed the city’s knee-jerk tax-and-regulate policies and start doing the few things a city can do well: maintain the streets and parks, fight crime, provide quality education, and do so while keeping taxes low. Then the city won’t need to pick winners — because the winners will come to the city on their own.
Recently, an opponent of school choice wrote a piece arguing that conservatives should not support school choice. His arguments were vapid and lacked evidence. I wrote a full response on the Friedman Foundation for Educational Choice’s blog. Here is my response to his claim that school choice is less efficient than the current system:
When you examine the evidence it is clear that cost savings are almost universally realized through school choice programs.
A recent study by the School Choice Demonstration Project at the University of Arkansas found that the “average public charter school student in the U.S. is receiving $3,814 less in funding than the average traditional public school student.” Despite that fact, public charter schools perform just as well as, if not better, than their traditional public school counterparts. This isn’t rocket science: less funding + equal (or better) outcomes = cost savings and improved efficiency.
The same can be said for private school choice programs. In a comprehensive study for the Friedman Foundation, Greg Forster reviewed the empirical literature on the fiscal effects of private school choice programs. All six studies on the subject found significant savings for taxpayers. In Washington, D.C., for example, it is estimated the Opportunity Scholarship Program saved taxpayers $135 million.
Of course, school choice programs were specifically designed to provide cost-savings. It is possible the savings could disappear over time as choice programs grow in popularity and become more generous. This is not new to publicly financed education systems. Traditional public schools have faced growing costs for decades. Over the past 40 years, inflation-adjusted education spending has increased by more than 180 percent. During that time, the traditional system has offered no hope of reigning in costs; school choice has. They are called education savings accounts (ESAs).
ESAs allow individuals to direct their education dollars to one or multiple schools and service providers. Unspent money remains in the account for parents to use on a host of educational expenses or to be saved for higher education purposes. That ability to save money from year to year puts a downward pressure on prices because it empowers parents to shop cost-consciously and it encourages schools to keep prices competitively low.
You can read my full response on the Friedman Foundation’s blog.
More than a year ago, I sat down with Suzanne Johnson and Matt Hoehner to discuss the charter school they were planning to open – EAGLE College Prep. Yesterday, I finally had a chance to visit the school and I was very excited about what I saw. Students were actively engaged with teachers, in both learning centers and on computers. I am a big fan of the school’s blended learning model, which incorporates technology and individualized instruction.
The best thing, however, had little to do with what students were doing in the classroom and much to do with what parents were doing there – shopping.
While I was waiting in the office for Hoehner, the executive director, I met a couple waiting for Johnson, the school leader. The couple has a son who will be entering kindergarten next year. They were waiting to take a tour. This may not seem like a big deal, but it is a fundamental shift in how we operate our public school system.
In the past, most parents simply accepted the school to which they were assigned. Sure, some expressed choice by purchasing a home in a good school district and some chose to send their children to private schools. The vast majority of parents, however, had very little ability to shop for their child’s school. That is changing thanks to charter schools.
Approximately 25 percent of public school students in Saint Louis attend charter schools and 40 percent in Kansas City attend charter schools. These schools offer parents the opportunity to choose the school that will best meet the needs of their children.
I have no idea if the couple will end up choosing to send their children to EAGLE College Prep, but I am excited to see parents empowered to choose through school choice.
As first appearing in the Columbia Tribune:
Winston Churchill chided the British government for inaction at a time of growing peril, saying (in 1936): “So they go on in strange paradox: decided only to be undecided, resolved to be irresolute, adamant for drift.”
I would make the same point about the Missouri Legislature. Once again, at the close of another session, our lawmakers (supposedly a fiercely conservative group) frittered away their time in producing a series of half-measures – with an excess of caution in trying to do the right things and a deficit of courage or common sense in failing to address key issues.
Take the school transfer bill (Senate Bill 493) passed on the second to last day. This bill was supposed to expand school choice. And so it might – in the long term, in setting up a process that would lead to the limited use of public money to support private (non-sectarian) education for some children.
However, if signed into law, the bill will pull a rug – or, to speak more dramatically, a magic carpet to better education – out from under more than 2,000 children in the Saint Louis area.
In revising the 1993 school transfer law, the new bill eliminated language that required unaccredited school districts to provide transferring students with paid bus transportation to schools in higher-performing districts. This means that many (and probably most) of the students who transferred out of the unaccredited Normandy and Riverview Gardens school districts last fall will suddenly be without the public transportation they need to continue their education at distant schools.
Lawmakers overrode Missouri Gov. Jay Nixon’s veto and passed into law the first reduction in our state’s income tax in almost a century. I will give them one cheer for that, and another cheer for refusing to be bull-rushed into accepting billions of dollars in federal subsidies to expand the wasteful and deeply troubled Medicaid program as part of implementation of the much-delayed and ever-changing Affordable Care Act (also known as Obamacare).
But it is impossible to give our lawmakers a third cheer given the gross deficiencies of both the school transfer and the tax cut bills.
For parents of students who transferred out of Normandy and Riverview Gardens last year, SB 493 is a cruel piece of legislation – marking a sudden removal of the freedom to choose a new school for their children.
Though long overdue, the tax cut bill proceeds in baby steps – beginning in 2017 with the first of a series of one-tenth of 1 percent cuts in the tax on personal income, from 6 percent to 5.5 percent in 2022, and with the phasing in of a 25 percent cut in taxes on pass-through income for entrepreneurs and small business owners.
What the legislature totally failed to do, however, was pave the way for deeper, broad-based cuts for all Missourians through the elimination or substantial reduction in targeted tax credits for economic development. That is money (about $400 million a year) that supposedly goes to promising business ventures and commercial developments. But the return on this investment of taxpayer money is not just bad; it is appalling. Again and again, the would-be great success stories (think Mamtek in Moberly and the Citadel in Kansas City) have turned into disappointments.
Instead, our legislators went in the exact opposite direction in approving a flurry of last-minute tax breaks for selected businesses – once again trying to pick winners and losers.
That was a shameful conclusion to another five-month legislative session that did little or nothing to advance the growth and competitiveness of our state. But maybe our representatives did their best, and that is the real tragedy.
Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.
This week, in expectation of new revenue from a proposed statewide sales tax, the Mid-America Regional Council (MARC) voted to approve a plan to replace Broadway Bridge in Kansas City at the price of $200 million. The proposed bridge rebuild should act as a reminder to Missourians that the proposed sales tax will mainly subsidize deferred road and bridge projects throughout the state.
The Broadway Bridge is one of four major bridges that span the Missouri River in Kansas City. Built in 1954 and operated as a toll road until 1991, the bridge is heavily traveled. The Missouri Department of Transportation (MoDOT) had considered rebuilding the aging bridge and replacing its interchange at 6th street, but the $200 million price forced a cash-strapped MoDOT to defer the project.
With the proposed 0.75-cent statewide sales tax, the funding might be made available for the bridge. However, some in the media have pointed out (correctly) that the project will consume much of the new sales tax money set aside for the Kansas City area, leaving less for transit.
That should not surprise anyone. After all, it was MoDOT’s growing highway funding needs and dwindling revenues that prompted the call for the statewide sales tax in the first place. And in terms of mobility in Kansas City, it is clear that the Broadway Bridge has a greater impact than any conceivable transit project. The bridge carries more cars per day (approximately 41,000) than the entire Kansas City Area Transportation Authority (KCATA) bus system’s number of passengers each day, plus significant freight. It is far more cost effective than the half billion dollar streetcar expansion plan, which is likely to carry only 13,000 passengers per day.
While we might disagree with Kansas City’s transit supporters about priorities, they are right to think that using a sales tax to subsidize highway and bridge projects is unfair. After all, the thousands of drivers and truckers using the Broadway Bridge stand to benefit from a new bridge far more than the Kansas City residents who bike or walk to work, but they will pay for it equally.
And there is a better way. From 1956 to 1991, the Broadway Bridge operated as a toll bridge. That toll should be brought back (without the booths) to finance the construction and maintenance of the new bridge. If the toll were variably priced, the new bridge could guarantee congestion-free travel across the Missouri River.
Whether it is the Broadway Bridge or any other highway project, people should pay for them based on how much they actually use the route, which means gas taxes or tolls. Implementing a statewide sales tax is an unfair and economically unsound policy. The most likely result will be a highly political allocation of sales tax dollars and disappointment for transit supporters.
