The Kansas City Streetcar Expansion: Policy Breakdown

Posted on by Joseph Miller

Voters in a section of Kansas City will go to the polls on Aug. 5 to decide whether the city should form a Transportation Development District (TDD) to raise money for a $471 million streetcar project. The arguments for and against this project are as follows:

o   Opponents: The idea that streetcars create development is tenuous at best. Streetcars are nearly always coupled with subsidies to developers and corridor improvements that may be the prime factor for any development. In addition, that subsidized development might have been diverted from other areas in the city. Many examples of streetcar development in Kansas City are, on closer inspection, fatuous. For instance, a company (whose owner publicly supports the streetcar) moved from one part of the proposed streetcar line to another two blocks away, and this was counted as streetcar-induced development.

  • Proponents: Streetcars will increase transit usage. Most people prefer rail and fixed transit to buses, so the streetcar can expect high ridership. In addition, the streetcar’s improvements to the overall transit network will increase transit ridership across the city.

o   Opponents: Streetcars are among the most wasteful methods of boosting transit ridership. As their capacity and speed is not significantly better than a bus, even popular streetcar lines do not carry many riders. Furthermore, as the Kansas City streetcar will run on routes that multiple bus routes already serve, we can expect a good deal of streetcar riders to be former bus users, not new transit riders. The Kansas City streetcar will duplicate, rather than complement, the existing bus network. This means minimal system-wide mobility improvements, and hence, little new system-wide ridership. With a cost of more than $470 million (which could pay for more than 100 buses), the transportation benefits of streetcars are not worth the cost.

o   Opponents: Kansas City needs new jobs that will enrich the city, not jobs that act as a drain on the public purse and the taxpayer.

Put simply, streetcar proponents argue that streetcars drive economic development, improve public transportation, and create jobs, while opponents counter that development claims are unproven, that the costs of the project far outweigh any transportation benefits, and Kansas City needs jobs that bring money into, not extract money from, the city.

Show Me Better (Part 4): Certificate Of Need And Market Power

Posted on by Christien West

How far are you from the nearest hospital? Maybe you wonder why there is a single mega-hospital 10 miles away but aren’t any smaller ones nearby. Part of the explanation may be certificate of need (CON) regulations.

A 2004 report by the U.S. Department of Justice and Federal Trade Commission found that CON programs “pose serious anticompetitive risks that usually outweigh their purported economic benefits.” So far, I have written about how CON regulations can limit access to care and have been shown to not effectively control costs. CON regulations have the potential to stifle competition and grant existing hospitals monopolies over certain regions. Some existing hospitals may even attempt to use these regulations to prevent competition from entering the market.

How does this play out in Missouri?

In the past, any time a new hospital wanted to open up in Missouri, it had to apply for a CON – irrespective of its size and cost. A revision to Missouri’s CON rules changed the criteria for review from every new hospital to every new hospital whose cost is at least $1 million.

In April 2010, Patients First Community Hospital expressed its intent to build a small hospital in Saint Louis County that did not meet the new threshold for certificate of need review. Shortly thereafter, a regional rival, St. John’s Mercy Health System, filed a lawsuit against the Missouri Health Facilities Review Committee and Patients First. St. John’s challenged the legitimacy of the new $1 million amendment and construction of the new hospital. In 2012, the Missouri Supreme Court ruled that the new criteria for review was perfectly legal, thus giving Patient’s First the green light for the project.

Despite the ruling against St. John’s, this is an excellent example of a hospital using the legal system in an attempt to stomp out the competition, all under the pretense of CON regulation. It took about two years for Patients First to have its plan approved. These sorts of delays can deprive patients of new, much-needed medical facilities.

The state should not allow such an environment to exist.

Amendment 7: The Policy Breakdown

Posted on by Joseph Miller

As the vote on Missouri Amendment 7 approaches, proponents have gone to the newspapers, airwaves, and television screens to argue for the necessity of a 0.75 percent statewide transportation sales tax. Their main arguments, and opponents’ arguments in responses, are as follows:

The Missouri Department of Transportation (MoDOT) will not have enough money to maintain the current highway system by 2017, and the infrastructure is in immediate need of repair. Many of the state’s roads and bridges are currently in poor condition.

o   Opponent Argument: Missouri’s state highway system has specific needs, such as improving I-70 or replacing deficient bridges. However, the system is not crumbling. In fact, the Reason Foundation and the Chamber of Commerce Foundation have ranked Missouri’s highway system among the best in the nation. Missouri just completed a decade of unprecedented spending on the highway system, adding lanes, repairing bridges, and smoothing roads. The highway system is in better shape than it has been in decades and MoDOT’s funding problems are not evidence that the system is about to collapse.

  • Proponent Argument: A 0.75 percent statewide sales tax is a reasonable method of paying for roads and bridges.

We all benefit from transportation, so we should all pay. Many products are exempt from the sales tax, shielding the poor. In addition, gas taxes and tolling either cannot or are too unpopular to implement.

o   Opponent Argument: A statewide sales tax is an unfair, economically unsound way to pay for highways. Those who drive little will pay as much or more for new roads as truckers and people with long commutes. Using sales taxes to pay for roads subsidizes driving, which increase congestion and pollution. All Missouri consumers, even the poor, can expect to pay much higher taxes from this 17.75 percent state sales tax increase. Furthermore, user fees, such as higher gasoline taxes or tolls, can continue to provide adequate funding for MoDOT, as they have already done for decades. Spending more time educating Missourians about the best way to fund highways, and less time heralding the imminent collapse of Missouri’s roads and bridges, might demonstrate that gasoline taxes and tolls are more popular solutions.

Sales tax proponents essentially argue that Missouri’s transportation is in crisis and that a .75 percent statewide tax increase is the only reasonable and available solution to that crisis. However, skeptics of the proposed amendment counter that Missouri’s highway system is not in a crisis situation and there is time to select fair and economically sound policy solutions to MoDOT’s funding problem.

Show Me Better (Part 3): Certificate Of Need And The Cost Of Care

Posted on by Christien West

As consumers, we like to get more for less – especially when it comes to our health. Usually we feel ripped off if we receive a lower-quality service for the same (or higher) cost of a better service. In a previous blog post, I discussed how, in some cases, certificate of need (CON) programs can be the very reason patients are forced to receive inferior care from less-skilled doctors. Additionally, CON regulations likely do not save patients much money, if any.

In a world of limited resources and virtually unlimited wants, we are forced to make trade-offs. A decrease in the quality of health care might be acceptable if CON led to lower costs. Proponents of CON argue that this regulation does contain the cost of care by preventing the “duplication of services” in a given geographic area. To illustrate this chain of reasoning, let’s say that Barnes-Jewish Hospital and Saint Louis University Hospital buy “too many” MRI machines – as a result, many of the new MRI machines go unused. Because of the outlay, CON proponents assume the two hospitals will probably charge higher prices for MRI scans to make up for the mistake.

There is evidence to suggest that theory is not well founded. One evaluation of Illinois’ CON program found that “there is little direct broad proof that overcapacity duplication leads to higher charges.” CON regulations may result in “tangible savings on the actual costs of specific medical technologies” but these programs tend to “redirect expenditures to other areas.” In other words, CON may actually prevent hospitals from spending too much on a certain type of medical technology, but any savings will be spent on other items instead of being passed onto patients. One study even suggests that strict CON programs may actually increase health care costs by as much as 5 percent.

What use is a program that can be delivering sub-optimal health care without cutting costs?

Do We Need Amendment 7 To Match Federal Highway Dollars?

Posted on by Joseph Miller

Representatives from the Missouri Department of Transportation (MoDOT) often warn that without more money, be it from a transportation sales tax or elsewhere, Missouri will not be able to match federal dollars for highways. Essentially, they are saying that if the state does not raise more money, it will leave eight to 10 times that amount in federal dollars on the table. However, these statements fail to clarify that: 1.) the federal dollars going to Missouri are limited, and 2.) the amount Missouri needs to match those funds is nowhere near $534,000,000 per year (the annual amount Amendment 7 would raise).

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Federal dollars for highway improvements is a fixed amount that comes for the federal Highway Trust Fund, which the federal fuel taxes mainly support. The amount that Missouri currently receives is fixed by federal obligation limitations and the proportion that the state received in the past. State lane mileage and vehicle activity mostly determined the portion the state received in the past. Simply put, the amount of money available for state highway projects is mostly fixed, and currently, Missouri does not leave any money on the table. If Missouri decided to spend an extra billion dollars this year, it is unlikely that federal money to the state would increase.

According to MoDOT’s cautious projections, in which the federal government reduces its support to Missouri, the state will begin failing to match federal funds in 2020, leaving $186 million on the table. But to meet that match (of 80 percent federal, 20 percent state) Missouri would only have to increase local revenue by just less than $50 million, nowhere near the current $534 million proposal.

If we assume that the federal government fixes the federal highway funding problems and support does not decrease, the problem of matching funds is larger. By 2022, Missouri would be leaving about $530 million of federal dollars unmatched. However, under that scenario, Missouri would only have to increase local revenue by $130 million per year to get that money.

When it comes to federal dollars, unless there are major policy changes in Washington, the amount Missouri could get for the highways is relatively fixed whether or not Missouri raises taxes. While Missouri may lose the ability to match those dollars in the future, Missouri will eventually need to raise annually between only $50 million and $130 million. If Amendment 7 passes, the federal government will not make it rain; if the amendment fails, the sky is not going to fall.

Decline In Catholic School Enrollment: Is Sector Switching The Answer?

Posted on by Brittany Wagner

In urban communities such as the City of Saint Louis, parents are able to send their children to magnet, charter, or public schools at no cost. All the while, tuition-driven Catholic schools are facing record low enrollment. The graph below illustrates the decline of Catholic school enrollment in the U.S. from 1960 to 2010 at the elementary and secondary levels.

catholic school enrollment

With rising costs of private school tuition and concerns about public school quality, parents choose free alternatives to public schools, often charter schools. These parents do not necessarily prefer non-secular education. As Carnegie Mellon University economics professor Maria Ferreyra showed, the number of parents who want to enroll their children in private [Catholic] schools is greater than the number of parents who can afford it.

For this reason, some Catholic schools “convert” to charter schools in order to continue serving low-income communities. In “Sector Switchers,” authors Mike McShane and Andrew Kelly analyzed this phenomenon.

They found that Catholic schools that become charter schools somewhat maintain their brand. They keep “…discipline, high expectations, and formation of moral values in students,” and throw out, “the financial issues that have plagued Catholic schools…”

The authors reached two conclusions: (1) switching leads to higher enrollment, and (2) switching increases minority student enrollment. Still, questions remain about how this practice will affect cities such as Saint Louis.

If you want to take part in the discussion, join the Show-Me Institute for the Friedman Legacy Day Policy Breakfast this Thursday. The event will include a presentation from McShane and panelists Matt Hoehner, Educational Enterprises regional executive director, and Corey Quinn, president of De Le Salle Middle School.

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