Diverting City Tax Dollars To Subsidize The Loop Trolley

Posted on by Joseph Miller

Earlier this week, a U.S. District Court dismissed a lawsuit against the Loop Trolley Transportation Development District (TDD), clearing the way for trolley construction in Saint Louis. Like all streetcars, the Loop Trolley will have high capital costs: $43 million for a 2.2-mile route.

While the federal government is expected to pay for more than half the project through an Urban Circulator grant and New Markets Tax Credits, local residents still will have to shoulder a hefty portion. One way Saint Louis residents will pay to build the trolley is through Tax Increment Financing (TIF).

According to Loop Trolley planning documents, $3.5 million of the Loop Trolley’s capital costs will come from TIF raised from the Delmar East Loop Redevelopment area. For those unfamiliar with TIF, the government allows a developer to use the additional taxes a development might generate as a revenue stream to finance bonds to get the development started. In order to receive TIF, the government usually has to declare a property “blighted,” meaning it damages the welfare of the area due to its condition.

But how can TIF, designed to subsidize new developments, be used to fund a transportation device?

First, the city previously passed an ordinance that allows TIF money to be spent on anything that can be seen as an improvement to an area, not just subsidizing new development. Second, the city entered into a redevelopment agreement with a non-profit corporation (Loop TIF Inc.), which would receive and distribute any TIF revenue instead of granting it to an actual property development.

Of course this still leaves a major problem: who in the area is going to generate the TIF revenue in the first place? If the city designated truly depressed areas as blighted, and the future TIF revenue goes to Loop TIF Inc., there would be no upfront TIF subsidies to lure development into the blighted area.

In other words, if a TIF is genuinely needed to subsidize development that will pay for the TIF bonds by increased tax revenues, how can it possibly work if the “development” is a non-profit streetcar that won’t generate any revenue that the TIF can use?

The solution? Include areas in the TIF that were going to be developed anyway. The largest part of the TIF area includes Washington University in St. Louis’ north campus, built on land the university acquired for that purpose two years before it was included in the TIF district. That project will generate plenty of employee earnings taxes that the TIF can capture. The TIF also includes parcels that contain the Pageant theatre and commercial property that houses restaurants such as Pie Pizza. Plenty of sales taxes already are available there. Blight must truly be within the eye of the beholder.

EDL TIF

TIF supporters claim TIF is necessary to spur economic development in areas where it would not occur otherwise. This TIF clearly does not do that, as the city purposely chose to use TIF for areas already being developed. Instead, it is, in fact, a bookkeeping tactic through which taxes that would have gone to the city are diverted to an unelected corporation to spend as it desires. And what it desires is a streetcar.

Missouri Charter Schools: Doing More With Less

Posted on by James V. Shuls

A new study gives Missouri an “F” when it comes to funding charter schools. The study, conducted by a team of scholars with the School Choice Demonstration Project at the University of Arkansas, systematically examined all funding, including private sources, and determined that Missouri charter schools receive $4,717 less per pupil than the district public schools. The graph below shows it all.

Despite receiving significantly less money, studies have shown that Missouri charter schools are outperforming their neighboring traditional public schools. The fact that charter schools are doing more with less is a testament to choice and competition in education. When schools are free from bureaucratic regulations (like teacher tenure) and students are free to choose their school, good things happen.

UARK Charter Funding Disparity Figure 1

Expanded Opportunities: A Discussion About Tax Credit Scholarships

Posted on by James V. Shuls

Many students in unaccredited school districts want and need better educational options. However, Missouri’s public school leaders do not want to provide those options through inter-district choice programs. They worry that inter-district choice would bankrupt struggling school districts and place an undue burden on the more successful ones. There is, however, an option that avoids these problems – private school choice financed through tax credit scholarship programs. These programs, which are in place in 14 states, expand educational opportunities for K-12 students by generating private investment in education.

The Show-Me Institute and the Hammond Institute for Free Enterprise at Lindenwood University hosted a discussion about tax credit scholarships, explaining what they are and how they might be beneficial to Missouri. During the event, Jason Bedrick and Jonathan Butcher presented information from their recent Show-Me Institute case-studies and Paul DiPerna presented the findings of a new poll. The discussion also included a legislative panel that included Missouri Senators John Lamping and Maria Chappelle-Nadal and Missouri House Speaker Tim Jones. You can view the papers and video of the presentations via the links below.

 

  • Bedrick case study:
  • Bedrick presentation:
  • Butcher case study:
  • Butcher presentation:
  • DiPerna presentation:

Highway Robbery: Missouri Senate Passes Sales Tax Hike For Transportation

Posted on by Joseph Miller

Yesterday, the Missouri Senate passed a bill that would use an increase in sales taxes to pay for transportation projects, mainly state highways and bridges, throughout the state. As we have discussed in op-eds and in testimony before the Missouri Senate, this sales tax is the wrong way to solve the Missouri Department of Transportation’s (MoDOT) funding problems. A few of many criticisms:

  • The bill will create a bonanza for new major road construction as well as significant dollars for whatever transportation project local planners see fit. Don’t drive much, if at all? Now you get to pay to expand urban highways. Don’t live in Kansas City? Now you also can pay for the city’s $500 million streetcar. The amount of money Missourians pay will have nothing to do with how much they use or benefit from the project. The lack of a connection may be necessary in other areas of government, but a connection is imperative for transportation funding.

  • The tax is regressive and unfair. While the sales tax will hit people of all walks of life, the main beneficiaries will be those who use the highways most, chief among them interstate truckers. According to an industry representative, 45 percent or more of the traffic on major Missouri highways is trucking, many of whom might be transiting the state and not paying the sales tax. A poor family that uses transit in Saint Louis should not be paying more for the I-70 rebuild than a semi headed from Denver to Indianapolis.

  • It is unsustainable, bad economic policy, and not temporary. MoDOT is driving off the funding cliff because Missouri has not made the necessary alterations to its user tax base to pay for state roads and bridges. The bill, far from fixing those problems, specifically does not allow alterations to that tax base while proposing a non-user tax that will encourage overuse of roads, pollution, and sprawl. Ten years from now, all of MoDOT’s underlying tax base problems will be worse, meaning an indefinite extension of the sales tax hike.

  • A 1 percent or .75 percent sales tax would be one of the largest tax increases in recent state history (taxing Missourians to the tune of $534 million per year), and almost nullify the effect of the proposed income tax cut, should that ever come into force.

If the state legislature and the people of Missouri seriously wish to fix transportation funding in this state, they need to look for economically sound policy solutions and not short-term fixes that cause greater problems down the road.

Kansas City Streetcar’s Economic Development Claims Just Seem Silly

Posted on by Patrick Tuohey

Light Rail Icon

We wrote recently about NextRailKC’s poorly compiled and even more poorly considered claims of economic development resulting from the streetcar. NextRailKC corrected the original chart after we pointed out some basic mathematical errors. But the new chart’s claims of economic development still contain some very questionable assumptions.

For example, the chart claims that the streetcar “impacted” the General Services Administration (GSA) decision to move downtown. We were skeptical and a quick Google search confirmed our suspicion. A Dec. 10, 2013, story in the Kansas City Star suggests otherwise:

The location of Two Pershing Square near the new downtown streetcar line scheduled to open in 2015 was an added benefit. It’s also close to bus routes and a rental bicycle station.

The building has parking for 1,700 vehicles, but the GSA will use only 28 for official vehicles. The federal government does not pay for employee parking but does reimburse workers using public transit.

“The streetcar is a bonus,” [GSA Regional Administrator Jason] Klumb said.

That doesn’t sound to us like the streetcar had any “impact” on the decision, but was considered after the fact. Yet city officials consider this to be $50 million of the $900 million in so-called economic impact, “wholly or partially influenced by the streetcar project.”

It is clear that the streetcar wasn’t really a contributor to GSA’s decision to move. What’s more, it is likely that very few of the GSA employees will use the streetcar to get to and from work. Judging by the size of the parking garage (to repeat – 1,700 vehicles), GSA clearly expects them to drive.

But streetcar proponents seem to think that GSA employees will relocate into the Columbus Park apartments at the northern end of the streetcar line. According to a story in the Kansas City Business Journal:

A few months later, the General Services Administration will begin moving 900 employees to Two Pershing Square, which will be adjacent to the southern end of the new streetcar line. [Senior VP for Zimmer Real Estate Services LC, Dan] Musser said that means the Columbus Park project’s initial apartment construction could be filled by GSA employees alone.

This is how streetcar economic development works: when a large employer moves a few miles north to the yet to be built streetcar line, you claim credit for the move. Then you suggest that all those employees will sell their homes and relocate to another point on the streetcar line. We’re tempted to write this off as Musser just being silly, but given other economic development claims that streetcar supporters have made, those very well may be the assumptions they are making.

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.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging