We Get Results

Posted on by Patrick Tuohey

An April 23 post titled Kansas City Streetcar Economic Development Claims Don’t Add Up . . . Literally pointed out that a NextRailKC document detailing the economic development that resulted from the streetcar was poorly considered and even mis-tabulated.

Not only does the information provide no detail on how it was collected, but the table attached isn’t even properly tabulated. Simple arithmetic (we used a calculator) indicates that their table yields $791 million in development and 1,984 housing units. (The summary they provide is $879 million and 1,997, respectively. They even mis-tabulate the numbers provided in their legend. What did Kansas City pay for this?)

We noticed this morning that the link on NextRailKC has been taken down. So we’ve edited our post and provided the original flawed NextRailKC document here. We’re glad that streetcar supporters read this blog, and we hope that the corrections they make to the original document not only include correct tabulation but sound economic analysis as well.

Airport Terminal Advisory Group Decides To Make A Recommendation

Posted on by Joseph Miller

Despite a recent interview stating the contrary, the MCI Airport Terminal Advisory Group (ATAG) will make a recommendation on the proposed $1.2 billion new terminal plan for Kansas City International Airport (MCI). On May 7, the group is expected to advise whether officials should build a new terminal, renovate the existing terminals, or build a new central building to connect the three terminals.

We have long been critical of the new terminal plan. We have pointed out that the plan is costly and unnecessary. As for ATAG, the group received all of its “airport schooling” from the Kansas City Aviation Department (the same people who created the new terminal plan) and were never presented any real alternatives. We criticized the wildly varying estimates for repairing MCI’s existing terminals, a sentiment that ATAG Co-Chairman David Fowler shared. “Any dollar amount placed on any alternative is almost pretty random,” Fowler said.

Precisely because ATAG has not been presented with real alternatives to the new terminal plan, many ATAG members feel they do not have enough information to make a recommendation, and rightfully so. How could one expect ATAG to select an alternative such as repairing the existing terminals when it could cost anywhere from $240 million to $785 million?

From the beginning, the Kansas City Aviation Department has pushed its preferred plan for MCI, supplying the public with alternatives that exist only in a few PowerPoint slides and contradictory quotes in newspaper articles. If the Aviation Department insists on a referendum between its plan and a straw man, ATAG should do the sensible thing and send the planners back to the drawing board until they present legitimate alternatives.

Don’t Want Your Taxes Funding the Streetcar? Too Late

Posted on by Patrick Tuohey

Kansas City collects a 1-cent sales tax to fund the Public Improvements Advisory Committee (PIAC). According to the city’s website:

If a business, organization or neighborhood has a need for capital improvements (sidewalks, water and sewers, road improvements, storm water runoff, etc.), they are encouraged to submit a project request form.

An article in the Kansas City Business Journal stated:

According to documents from Kansas City’s Public Works Department, the city’s 3rd and 4th districts have committed a combined $1.89 million of their capital improvement sales tax revenue for fiscal 2014 to fiscal 2016 to conduct the corridor planning study for the second phase of the streetcar.

The documents, signed by Kansas City Council members Jermaine Reed and Melba Curls of the 3rd District and Jan Marcuson and Jim Glover of the 4th District, commit $270,000 from the 3rd and $360,000 from the 4th each year for the next three fiscal years.

That is $270,000 for the streetcar from the 3rd District for a project that barely run in the district (approximately 30 blocks exclusively in the 3rd). And $1.2 million that won’t be spent on 4th District “sidewalks, water and sewers, road improvements, storm water runoff, etc.” Some argue that a problem with the streetcar funding scheme is that it taxes some people in order to build something for everyone. That same criticism could be leveled against PIAC, which divides funds up by council district rather than taking a holistic look at city needs. Councilmembers may be tempted to think of their PIAC allotment as a type of political slush fund.

Aside from how the money is divided up, it is wrong that money earmarked for important and necessary capital improvements is being diverted to support a planning study for the streetcar.

The city is already planning to raise sales taxes by 1 percent in most of the 3rd and 5th Districts to pay for the construction and operation of the streetcar extension that likely won’t serve any of those taxpayers’ needs. And it is doing so with money taken from things that will serve their needs. If voters think opposing the streetcar tax will save tax dollars for projects that are important to them, they’re too late.

‘Tis Time For TIF Reform

Posted on by David Stokes

That title would make a pretty good protest chant, if you ask me. Although the use of “‘Tis” to help with the alliteration would require the protest be held in Britain. But I digress.

If you follow the work of the Show-Me Institute, you are aware (assuming you agree with us) how badly our state needs Tax Increment Financing (TIF) reform. TIF is severely damaging our state. It weakens the tax base, empowers government planners, encourages crony capitalism, encourages eminent domain abuse,  favors certain types of businesses over others, damages governments that depend on property taxes and have limited say in the decision (i.e., school districts), and all this for something that, in the end, does not succeed in growing the economy. But other than all that, TIF is great.

There are some important pieces of TIF reform legislation in Jefferson City right now. One of the better pieces is Missouri Senate Bill 774. The bill has passed out of the Senate and is now before the House. The most important thing the bill would do is further restrict how TIF dollars are spent in cases where local municipalities in Saint Louis, Saint Charles, and Jefferson counties override a county TIF commission’s decision against a TIF proposal. According to current law, the three above counties have county TIF commissions that make the choice on TIF, but cities have the ability to easily override the county TIF commission’s rejection. Small cities overriding the county TIF commission happens frequently in Saint Louis and Saint Charles counties (not so much yet in Jefferson County). The counties have tried to exercise discipline on TIF use, but small cities keep overriding their choice (Ellisville [initially], Shrewsbury, Saint Charles, etc.) and harming the larger community. Those new limits that SB 774 would enact are needed and would greatly benefit those counties.

The other good thing in the bill is that it adds Boone County to the list of the prior three where these tighter TIF rules would apply. There are great groups fighting corporate welfare in Boone County, and adding Boone to this list of counties is terrific.

Missouri needs TIF reform for all the reasons listed above and several more. Here’s hoping that the legislature will make this extremely important policy change for our state.

Lyft, The Taxicab Commission, And The Level Playing Field

Posted on by Joseph Miller

Lyft, a ride share app, has caused quite the stir in Saint Louis. Because Lyft passengers make donations, not set payments, to drivers, the company does not believe the Metropolitan Taxicab Commission (MTC) has the authority to regulate its operations the same way it regulates cab service. MTC and the City of Saint Louis think differently. The MTC has filed and won an injunction against Lyft to halt its Saint Louis operations.

MTC officials claim Lyft is not competing with cabs on a level playing field and that its unregulated drivers endanger public safety. However, Lyft drivers have to pass background checks, have vehicle inspections, and carry insurance (MTC requires cabs to have $200,000 of insurance while Lyft requires $1,000,000). If it is true that cabs are disadvantaged when competing with Lyft, it may have something to do with the competition stifling regulations that the MTC itself imposes. Just a few of these include:

  • To receive a license, a person or company requires a Certificate of Convenience and Necessity (CCN). This means the MTC (where existing cab companies are represented) can decide whether the demands of the public require the additional cab service. They also can decide that more cabs will increase traffic congestion or parking demand too much to grant a CCN.

  • A CCN holder must have and maintain a non-residential office address, telephone, and email. The phones must be answered at all times of the day. (Obviously, this essentially prohibits most individuals from obtaining a CCN.)

  • If someone meets the first two hurdles, it does not matter because the MTC has issued a moratorium on applications for CCNs for airport taxis, on-call taxis, and premium sedans until a study on demand is completed.

  • Drivers have to pass MTC-approved courses, in addition to obtaining a state chauffeur license.

  • A for-hire car either can be an airport cab, an on-call cab, a handicap-accessible vehicle, a non-emergency medical transport vehicle, or premium sedan. A car cannot receive more than one type of registration or perform the activities allowed by more than one type.

  • Cabs must use taxi meters with set fare maximums.

  • Cabs can be no older than nine years and will not receive a permit if they are older than six model years.

  • Drivers must wear a uniform (black baseball caps, no writing on it, bill forward).

If Lyft is allowed to operate in the Saint Louis area, traditional cab drivers may find it difficult to compete. But the answer to that problem is to eliminate the ability of the MTC to control entry, restrict how cabs operate, and set prices. That would put Lyft and traditional cab companies on a level playing field and provide more options to Saint Louis residents, if that is truly what the MTC wishes to accomplish. But we all know that the taxi commission, which is dominated by the larger taxi companies, is far more about limiting competition than actually protecting consumers.

Truth And Falsehoods

Posted on by Michael Rathbone

The Missouri School Boards Association (MSBA) is doing some pretty lousy work in its efforts to scare people into opposing Senate Bill 509. The MSBA’s “fact sheet” highlighting the harms the tax cut would supposedly do to the state’s foundation formula and individual Missouri school districts is chock-full of errors and mistakes.

First, the “fact sheet” uses the Governor’s Executive Budget recommendation in the analysis of the potential cost impact of SB 509. This is a mistake because the governor’s recommendations are just that, recommendations. The figure used is not the actual appropriation amount for the upcoming year. That has yet to be finalized.

Let’s just grant, for the sake of argument,  that SB 509 will reduce foundation formula funding to $3.13 billion next year. If you look at this year’s budget, you will notice that funding for the foundation formula is actually $3.08 billion. So even if the MSBA’s numbers are correct, the foundation formula will be getting more money next year.

However, this whole exercise is pointless because the first year that the tax cut would go into effect is 2017. Fiscal year 2015 ends in June 2015. This means there won’t even be a tax cut for two-and-a-half years. No revenue will be lost next year (or even the year after that) because of it.

I welcome healthy debate concerning major public policy issues, but people shouldn’t be scared with false facts, and that is what the “fact sheet” from the MSBA is: scare mongering filled with plainly false information.

Kansas City Streetcar Economic Development Claims Don’t Add Up . . . Literally

Posted on by Patrick Tuohey

Perhaps in reaction to the Show-Me Institute’s assertion that there are no studies supporting the claim that streetcars alone cause economic development, NextRailKC hurriedly compiled a list claiming to prove the opposite. (NextRailKC removed the original list, but we’ve saved it here.) We say hurriedly because not only does the information provide no detail on how it was collected, but the table attached isn’t even properly tabulated. Simple arithmetic (we used a calculator) indicates that their table yields $791 million in development and 1,984 housing units. (The summary they provide is $879 million and 1,997, respectively. They even mis-tabulate the numbers provided in their legend. What did Kansas City pay for this?)

Light Rail Icon

One of the development projects that indicated the streetcar was a “key reason” for their development was the Centric Projects Headquarters, and the project is listed at $2 million. According to Centric’s website, it is a general contracting firm. Kansas City Mayor Sly James appointed the founder, Richard Wetzel, to the streetcar advisory group to consider the Country Club Right of Way. In a blog post on the Centric website, Wetzel wrote, “For years, I have been an advocate of fixed-rail transit in Kansas City.” Wetzel is not a disinterested party; he is a self-described advocate for the streetcar.

As for the so-called economic development that Centric and Wetzel provided Kansas City, for which the streetcar was a “key reason,” it’s not so impressive. The Kansas City Business Journal reported on May 22, 2013, that:

Centric Projects LLC is moving its offices two blocks up Main Street to accommodate rapid growth at the Kansas City commercial general contractor.

The 3-year-old firm is moving from its current 3,000 square feet of space at 2024 Main St. to a new 5,500-square-foot space at 1814 Main St. by the end of July.

The building was previously occupied by Western Blue, which left Kansas City for Kansas City, Kan., in 2010, and is undergoing $1.5 million worth of renovations ahead of the relocation.

So there you have it. Centric’s $2 million economic impact supposedly due to the streetcar is a $1.5 million remodel to a space that likely would have required remodeling regardless who, or why, it was occupied. The company moved two blocks up Main, meaning that they didn’t even move to the streetcar line from somewhere outside the Transportation Development District (TDD). They simply moved to a different point on it. Kansas City officials want you to think this is all due solely to the uncompleted downtown streetcar.

It gets better. That same Business Journal piece goes on to state that Centric is receiving tax incentives for staying in Kansas City, Mo.:

Centric also is receiving tax credits from Missouri for keeping jobs in the state. Kounkel did not say how the tax credits are oriented but said the credits are tied to the number of employees the firm hires and will help “offset expenses.”

Representatives of the Missouri Department of Economic Development, which typically handles the state’s tax credit programs, were not immediately available for comment.

Whatever the amount, the money was wasted, as Centric’s founder said they never considered a move out of state:

“We never considered a move to another state or municipality,” Richard Wetzel, partner at the firm, said in a release. “While we do work all over the metropolitan area, Kansas City, Missouri — and specifically the Crossroads (Arts District) — is where we want to continue to hang our shingle.”

Centric’s example only serves to confirm the Show-Me Institute’s claim that there is no evidence that streetcars alone lead to economic development. Centric did not move from outside the streetcar taxing district so there is no net new development. The $2 million (actually $1.5 million) economic impact it claims would likely have been required of anyone who occupied the space, and Centric received other economic incentives to relocate within the TDD.

We learned all of this in the course of a few hours searching online. Is Kansas City really this inept at calculating economic development, or is this a concerted effort to mislead voters?

Cape Girardeau Should Think Twice Before Establishing CID

Posted on by David Stokes

As first appearing in the Southeast Missourian:

Over the past two decades, Missouri has seen an explosion of new, alphabet soup-like taxing districts that increase tax rates to fund new services of questionable public purpose. These districts include the use of Tax Increment Financing (TIF), Transportation Development Districts (TDD), Community Improvement Districts (CID), and more. Cape Girardeau currently is considering imposing a CID to support its downtown area. Cape Girardeau city officials should think twice before they embark on this course of action. These types of special taxing districts often fail basic good-government principles of transparency and management. In fact, a CID in Lake Lotawana (outside Kansas City) failed and defaulted on its bonds in 2010. Lake Lotawana should serve as the canary in the coal mine for Cape Girardeau.

CIDs are independent taxing districts created to collect sales and property taxes and spend money to improve an area in a wide variety of ways, including beautification, infrastructure, security, and much more. There are two primary problems with the use of CIDs. The first problem is one of transparency. The state auditor’s office has consistently issued reports documenting deficiencies in the management and accountability of public dollars by CIDs, TDDs, and other special taxing districts throughout Missouri. These districts fail to comply with state laws in a number of areas, including the transparency of the special taxes, use of competitive bids, and filing of annual financial reports. If Cape Girardeau chooses to enact the downtown CID, the city council should carefully oversee the CID to ensure it complies with all state laws and any additional local requirements.

The transparency problems often include the lack of an independent board of trustees for existing CIDs. Generally, these boards consist of representatives from the businesses involved with establishing the district, in this case Old Town Cape, Inc. Too often, these boards treat the collected taxes as a private fund instead of what they are, public tax dollars. The Cape Girardeau City Council should insist on instituting a CID board of directors that will primarily answer to the taxpayers of the city and county, and not just the property owners.

Furthermore, Cape Girardeau city officials should place a maximum cap on the level of property taxation allowed for the CID. Unlike most other types of property taxes, CIDs have no legal cap. TDDs have a maximum tax of 10 cents per $100 of assessed valuation, but there is a CID in Lake of the Ozarks with a tax rate of $4 per $100. Nobody is proposing anything near that high for Cape Girardeau. The rate in the petition is set at 67 cents per $100 of assessed valuation, but local government should address the fact that CIDs have no statutory rate limit by making certain the final legislation caps the tax rate at the level set in the current proposal.

In a related issue, businesses and city officials should take steps to inform residents and shoppers about the extra sales taxes they will pay within the CID. If shoppers are aware of the increased taxes and still choose to shop within the district, that is their choice.

The larger issue is that these special taxing districts often fund primarily private goods with public dollars, such as better parking lots for businesses. The proposed Cape Girardeau CID is not as bad in this case as many other taxing districts. The proposal at least states that the new sales taxes will be used in the downtown area to fund public improvements, such as trash and security. However, taxpayers should be concerned that these promises to fund legitimately public concerns are not altered over time and end up funding private aims with tax dollars.

The CID in Lake Lotawana mentioned previously failed on just about every count. The board often did not take minutes. It operated in secrecy, including lending CID money to a company that board members controlled. It spent more money than it should have and did not even properly collect the taxes it was owed. It was a prime example of what can happen when little-known taxing districts like CIDs are given so much authority.

The Cape Girardeau City Council should take a very careful look at the transparency issues with CIDs and the possible tension between public and private interests in this proposal. If officials determine that a CID is an appropriate application in this instance, all possible steps should be taken to make certain the new taxing district is responsible to the people. Many similar taxing districts in Missouri have failed both of those tests – producing what is best described as a non-nourishing alphabet soup.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

 

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