Let’s Fix The Transfer Problem ‘One Piece At A Time’

Posted on by James V. Shuls

“One Piece at a Time” is one of my favorite Johnny Cash songs. In the song, a young man goes to “workin’ on a ‘sembly line” in a Detroit auto plant. He devises a plan to build a car by sneaking parts out one piece at a time. In the end, he has created a “’49, ’50, ’51, ’52, ’53, ’54, ’55, ’56, ’57, ’58, ’59 automobile.” I was reminded of this song as I drafted my testimony for Missouri Senate Committee Substitute for Senate Bills 493, 485, 495, 516, 534, 545, 595, 616, 624. It wasn’t just the name of the bill that reminded me of the song, but the way that so many different parts that seemingly do not go together were crammed into one bill.

Though the bill touches on many different topics, I tried to limit my testimony to the crux of the bill — the student transfer issue. As I said in my testimony:

Ever since the Missouri Supreme Court upheld a student’s right to transfer from an unaccredited school district to a nearby accredited one, Missouri school leaders have coordinated efforts to put an end to the transfer law. Some concerns regarding the transfer program hold merit. For instance, the current law has the potential to lead to the bankruptcy of unaccredited districts or to lead to overcrowding in accredited ones. Unfortunately, these problems have led many to ask, “How can we end student transfers?” rather than, “How can we make the transfer law work for students?”

Missouri Sen. David Pearce (R-Dist. 21) reiterated this point, stating that this bill is intended to reduce the number of students transferring.

Allowing students to choose their school is a good thing and we can make this program work for students if we institute four changes.

  1. Give accredited school districts the right to determine how many students they will accept.

  2. Fix the tuition calculation so that unaccredited districts will not be forced to pay rates that are higher than they spend themselves.

  3. Expand choice to private schools in the same or adjoining counties.

  4. Establish a fund to provide transportation for transfer students. Appropriations from general revenue and donations from the public could fund this.

You can read more details about my suggestions in my full testimony.

Gas Taxes vs. Transit Fares

Posted on by Joseph Miller

In a post on NextSTL, the author points out that gas taxes in Missouri have not kept pace with inflation (the last time the tax went up was in 1996) while fares for transit have increased faster than inflation. The takeaway:

As you can see the value of the gas tax has been eroded by inflation while Metro fares have out-paced it. Of course this isn’t the whole picture. Property and local sales taxes and the Federal gas tax (hasn’t increased since 1993) and general revenues also fund streets, roads, and highways, and local sales taxes, Federal, and a minute amount of state money goes into Metro. But this puts into perspective just who is paying their “fare” share.

My position on the gas tax is pretty clear. I have written testimony arguing that Missouri should raise its gas tax, not general taxes, to pay for highways in Missouri. But the fact remains, indirect taxes on drivers mostly pay for roads while only a tiny sliver of the cost of transit in Saint Louis comes from fares.

First for the roads. In 2013, the Missouri Department of Transportation (MoDOT), which maintains federal and state highways in Missouri, took in $2.1 billion in revenue. Only 23 percent of that came from the state gas tax. But that’s not the end of the story. Forty-four percent of MoDOT funding came from the federal government, the vast majority of which the federal gas tax funds. MoDOT gets an additional 27 percent of funds from vehicle sales taxes and various forms of licensing fees. All told, approximately 80 percent of MoDOT’s revenue comes from taxes and fees on drivers. That’s too low, but adjusting the state and federal gas tax for inflation and controlling road spending would go a long way to making that number close to 100 percent. In addition, one should remember that the Missouri gas tax is split, with 4.5 cents of the 17.6 cents going to local governments, where it is a significant source for local road repairs.

The story is very different for transit. Taking the example of St. Louis Metro, from 1991 to 2012, fares covered only 14 percent of the costs of building and maintaining Metro. Just looking at 2012, fares covered only 16 percent of the system’s total costs. And while fare revenue has increased faster than inflation, the costs of operating Metro have increased even faster, as the chart below shows:

faregrowth

Essentially, fare revenue has covered less and less of Metro’s cost over time. The rest of the funding comes primarily from general local taxes and the federal government (much of which comes from the part of the federal gas tax that is designated to mass transit funding).

Has the government been irresponsible with the gas tax? Many would say yes. But that does not mean that people who use transit are paying more for transit than drivers pay for highways, because they are not.

New On Show-Me Sunshine: School District Collective Bargaining Agreements

Posted on by Michael Rathbone

In 2007, the Missouri Supreme Court overruled 60 years of case law and determined that teachers have the right to organize and collectively bargain. At the Show-Me Institute, we wanted to determine how many districts have entered into collective bargaining agreements (CBA), so we requested CBAs from every public school district in Missouri with more than 1,000 students. Approximately one-fifth of the districts we contacted have a formal CBA. In the interest of transparency, we have posted those agreements online here.

Kansas City Streetcar Robs Poor to Pay … Rich?

Posted on by Patrick Tuohey

Taxes Icon

The Robin Hood of legend was renowned for robbing from the rich to give to the poor. Liberals have heralded the story as an example of social justice and ethical redistribution. Conservatives see him as a hero of the trodden-upon taxpayer, cruelly set upon by wealthy and entitled elites. It is perhaps because of this dual view that the legend has survived so long.

Officials in Kansas City crafted a bizarro Robin Hood streetcar taxing plan that takes from the poor to give to the rich.

The city has created a Transportation Development District (TDD) encompassing much of the city in order to fund a significant portion of the rail line. The TDD will levy a “special assessment” on homes, businesses, and charities within a one-third mile of the proposed tracks and a 1 percent sales tax everywhere in the district.

While we have argued that claims that streetcars cause business development are completely unproven, streetcar supporters counter that there is some evidence that the project will increase property values along the route. And indeed there is some evidence that property values will increase, especially if the city pours money into the corridor, as NextRail KC officials hope. But while values may go up, property and sales taxes are guaranteed to increase as well. Even then, those increases in value primarily benefit the property owner when selling the property. (If you rent your home or apartment, your rent will go up but you won’t benefit from any property value increase.)

In other words, some of the poorest parts of Kansas City — those already in dire need of transportation and infrastructure improvements — will be paying more in taxes so that the already developed parts of Kansas City can get new sidewalks, landscaping, streetcars, and the increased property values that go with it. Those outside the TDD will also pay more through sales tax and the special assessment levied on government property, and by however the city decides to close the $30 million to $50 million gap in financing.

Seriously, that is Kansas City Mayor Sly James’ plan.

To make matters worse, non-profit organizations along the route will pay a special assessment that will impact their ability to serve those same communities in need. Not only is the city throwing the east side into the deep end of the pool, they’re pulling up all the ladders. That is why Fr. Ernie Davis, pastor at both St. Therese Little Flower and St. James, wrote a letter to his colleagues at other churches (emphasis added):

But most frightening is the proposal to assess churches, schools and charities within the corridor. That will literally take bread out of the children’s mouths and books out of students’ hands in order to fund a streetcar…. I hope you will study the issue and to the extent that you are able, lend your support to efforts that would derail the streetcar until there is a different funding formula that would not impose such a heavy burden on those who are least able to afford it.

Here at the Show-Me Institute, we are not totally opposed to some types of charities making property tax payments. But we have never included churches in that, and our argument has always been focused on true public needs, not pricey public toys such as a streetcar.

The Kansas City streetcar robs from those who don’t have to give to those who don’t need, or even want.

Terminals For T-Shirts

Posted on by Joseph Miller

Over the weekend, the Kansas City Star quoted me in an article regarding concessions at Kansas City International Airport (KCI). The article reported:

Even if Kansas City builds a new terminal and begins to perform as well as peer airports in raising retail revenues, conservative policy analyst Joseph Miller calculated the airport should only expect another $1 million or $1.5 million per year in extra funds.

Hardly much to offset the cost of building a new facility, he said.

“Remember that debt service for a $1.2 billion new terminal is likely to be close to $70 million a year,” said Miller of the Show-Me Institute, a free-market think tank based in St. Louis. “In terms of making a new airport affordable, retail sales are not a well-thought-out argument.”

It seems that the Kansas City Aviation Department and other supporters of the proposed $1.2 billion new terminal plan for Kansas City International Airport are still arguing that increased retail sales at the airport is a valid reason for opting for a new terminal. In reality, the amount of revenue that retail would bring to the airport is minimal and dwarfed by the cost of the new terminal plan.

First, let’s be clear about what retail we are discussing. Concessions at airports are usually defined as either food service or retail (e.g., Kansas City trinkets, Dan Brown’s latest mass-produced masterpiece, luggage for people who by definition already have luggage). The Star states that retailers at KCI drew $29 million in revenue last year, but only if we include food service. In fact, retail and duty-free shops usually generate less than $7 million a year in total revenue.

But KCI does not get to keep all the revenue from those shops, only a cut. From retail, KCI only received approximately $900,000 in 2013. Combine retail with food sales, and revenue to KCI from all concessions climbs to just less than $3 million per year. When we remember that KCI’s total operating revenue is $104 million in 2013, we see just how miniscule the retail source of revenue is.

KCIchart

If we assume that with a new terminal KCI will perform as well in sales/pass as other airports with new terminals, at best, KCI will increase retail sales by $1.5 million and food sales by $2.5 million. Certainly they must have a better argument to build a $1.2 billion terminal.

2013 Missouri Public School District Collective Bargaining Agreements

Posted on by Michael Rathbone
In the 2007, the Missouri Supreme Court overruled 60 years of case law and determined that teachers have the right to organize and collectively bargain. We at the Show-Me Institute wanted to determine how many districts have entered into collective bargaining agreements (CBA), so we requested CBAs from every district with more than 1,000 students. About 1/5 of the districts we contacted had a formal CBA. In the interest of transparency, we have now posted those agreements online.
 

Show-Me Institute Research Discussed On Ruckus

Posted on by Joseph Miller

On Thurs., April 3, the Show-Me Institute’s research about the Kansas City streetcar and the proposed $1.2 billion new terminal plan for Kansas City International Airport (MCI) was featured prominently on the program Ruckus. That program aired on public television station KCPT-TV in Kansas City. Show-Me Institute Board Chairman Crosby Kemper III argued that both the new airport terminal plan and the streetcar are wasteful projects, the result of Kansas City becoming a “fact-free city.”

On the video below, discussion of the future of MCI starts at 1:15 and goes to 7:00. The streetcar discussion, directly addressing our writings about the streetcar expansion’s cost-effectiveness and ridership estimates, starts at 12:24 and goes to 18:40.

Airport Advisory Group Not Really Interested In Input

Posted on by Patrick Tuohey

A previous post detailed the Kansas City Airport Terminal Advisory Group’s effort to avoid open records laws in their meetings with Kansas City public officials. This post deals with the group’s unwillingness to even hear from those skeptical of a new terminal. On Jan. 30, I wrote the following email to Airport Terminal Advisory Group leaders Bob Berkebile and David Fowler:

I was able to attend the Advisory Group presentation before the Hispanic Chamber of Commerce last week, and the slideshow contained four statements that are either incorrect of very misleading. These include (1) the ‘firewall’ between airport funds and the city, (2) whether city funds can be used by an airport, (3) that all city bonds require a public vote and (4) that no airport has ever defaulted and that the city is not a guarantor.

The Show-Me Institute has conducted a great deal of independent research into the Aviation Department’s claims and the wisdom of large airport projects in general. We would welcome the opportunity to present our findings to the Advisory Group, so that they need not lean so heavily on presentations from the department whose claims they are investigating.

That same day, Fowler forwarded the message to a city staffer with this addition:

Can you have your folks at the city look into these matters, please ?

I am sure this group is looking for exceptions to the general rule and will try to discredit what we have heard in testimony from the Aviation Department and the City finance group.

These are certainly policies and broad statements about the legal ramifications of the airport revenue bonds. Whether there are exceptions, loopholes, etc may be called into question.

Maybe have [the City Attorney] look into potential exceptions, etc.

A few days later, on Feb. 2, Fowler forwarded my note to one of the consultants at Frasca and Associates, who is working with the advisory group, with this addition:

Please see the email we received from a special interest group contesting certain facts we have heard from either the Aviation Department and/or representatives of Kansas City.

Which one of these points would you be credentialed to respond to or could research without much additional time (so we don’t blow our Frasca budget) and which ones would you suggest are more legal issues best handled by independent attorneys ? In other words, are some of these questions Kansas City airport-specific, Missouri law-specific or are they all generic facts around most public airports ?

I would like to discuss this during our planned call on Feb. 4, but wanted to give you advance notice that we need answers on these asap either from you or someone else who is independent. We may be able to get our FAA representative to clarify as well and we intend to pose to him too.

Two weeks after that, on Feb. 17, Fowler sent this note to the same city staffer to whom he initially forwarded my email:

Can you please confirm back to me that someone from the City has followed up with Patrick Tuohey on his email below so he feels like we are paying attention to his messages.  I don’t want him ever saying he reached out to us and nobody ever responded.

Let me say loudly that we reached out to them and nobody ever responded. On March 24, I again sent to advisory group leaders Berkebile and Fowler the following note:

On January 30, I sent the note below indicating that the Show-Me Institute has compiled a good deal of independent research on the proposed new terminal. This research includes matters that ATAG has never covered, including financing and the impact of debt servicing.

My note received no response. Therefore, I am asking that the original January 30 email be considered testimony and be distributed to all members of the Advisory Group and included in whatever testimony is made public.

As of this writing, we have heard nothing. They received our note but apparently were more interested in circling the wagons — and seemingly protecting the Aviation Department from being contradicted — than actually collecting information on the new terminal proposal. Perhaps as a result of failing to accept pertinent testimony, Kansas City Mayor Sly James stated falsely in his State of the City address that funds raised at the airport must remain at the airport.

We cannot know what other groups have asked to present information to the Advisory Group and been rebuffed or ignored. We do know that some groups, such as airport concession operators, have not been heard from and we know that the consultants downplayed important testimony from Southwest Airlines. Observers of the advisory group have complained that it gives the appearance of being one-sided and uninterested in legitimate public dialogue. These internal communications only confirm those fears.

The Myth Of The ‘No Tax Increase’ Bond Issue

Posted on by James V. Shuls

“There’s no such thing as a free lunch,” is a common phrase in economics. It is a phrase that people must remember when considering “no tax increase” bond issues.

Bonds are one of the most common ways for school districts to fund construction of new buildings. They are essentially a loan and are a form of debt. To pay for this debt, school districts levy property taxes. Sometimes districts must levy new taxes to finance a bond and other times they are able to refinance an existing bond and hold the tax levy at the same rate. The latter often are labeled as “no tax increase” bond issues; but make no mistake, there is no such thing as “no tax increase” bond issue.

As I explain in this edition of “Show-Me Now,” a “no tax increase” bond issue is a lot like a home equity loan. Your mortgage company can refinance your loan to give you access to cash right now. Often, they are able to do this while holding your payment the same, but extending the length of your repayment. So instead of your payments ending in 10 years, they may be extended to 30 years. Whether you refinance or not, your monthly payment remains the same.

Bonds work in much the same way and school districts can “refinance” to extend the term of the bond. They market this to the public as a “no tax increase” bond issue and claim that your payment will not go down or up whether the issue passes or not. Your tax payment will not change, but you will be paying for a longer period of time.

There is no getting around it, paying the same rate for a longer period of time is a tax increase. Therefore, it is more appropriate to call these a “no tax levy increase” bond issue.

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