The Overly Optimistic Estimates For The Kansas City Streetcar

Posted on by Joseph Miller

The latest plan for the streetcar extension in Kansas City has 7.6 miles of routes at a cost of $472 million. We have written before that for the same cost, the Kansas City Area Transportation Authority (KCATA) could afford to massively expand its bus service. But we have not addressed the very optimistic ridership projections in the new Transportation Development District (TDD) proposal.

According to the NextRailKC website, the 7.6 miles of streetcar could achieve anywhere from 13,700 to 23,200 passengers per weekday, based on modeling they have performed. With 7.6 miles of track, that is between 1,800 and 3,000 weekday passengers per mile. While models can be useful, at some point, someone should have checked what streetcars achieve in other cities.

Simply put, these ridership estimates are unrealistic. The high-end estimate would make it the most successful streetcar line in America according to ridership. It would have more riders than Seattle, the busiest streetcar line in America, which is only a mile long and is right in the heart of downtown Seattle. Do they really think that is going to happen?

If Kansas City achieved its low estimate of 13,700 riders per day, it would be performing about as well as Portland’s streetcar.  Portland’s system is considered highly successful in terms of riders, but there are reasons to think that Kansas City will have difficulty reaching Portland’s ridership levels. Portland has offered streetcar users low fares (originally there were free zones and the price eventually increased to $1) and used significant subsidies for transit-oriented development.  In addition, rail lines in Portland run through much denser population centers than what is proposed in Kansas City.

Of course, other streetcars see much less ridership than Portland’s and Seattle’s. Streetcars in Memphis, Tenn., and Kenosha, Wis., each had ridership below 1,000 daily passengers per mile. Why do Kansas City planners see no possibility of their streetcar performing at that level?

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It is possible that the Kansas streetcar will be wildly successful, and garner 23,200 passengers on an average weekday. But that is not something that is fair to sell to the public as a likely occurrence. The lower estimate, 13,700, is a more realistic maximum estimate given the performance of existing streetcar operations in other cities.

Further Remonstrances On Clayton Tax Increases

Posted on by David Stokes

Last week, I blogged about the Clayton economic development sales tax proposal. While that is a bad idea in and of itself, it is unfortunately part of a much larger package of tax hikes. There are four (four!) different proposed tax hikes for voters to consider on the April ballot. If you think that is a lot, well, . . . it is.

I want to focus here on the property tax aspect. The proposals call for two different bond issues, each requiring a separate tax increase. One is for neighborhood road improvements in Clayton, and one is for improvements to Shaw Park, mostly the ice rink. If they both pass, the property tax increase would be 24 cents per $100 of assessed valuation.

Supporters of this tax hike, and most tax hikes, like to make the numbers seem small. “Only 25 cents added to an average restaurant meal” or something similar. For this tax hike, I keep hearing it is less than $20 a month for an average Clayton home. Fair enough; that does not sound so bad. (Math is $500,ooo home x 24-cent tax increase per $100 of assessed valuation = $228 annually.)

However, Clayton residents benefit from the enormous business concentration there, and businesses don’t get a vote on the tax hike. (They can vote with their feet, metaphorically.) What is the tax hike here on a Clayton business?

Well, we don’t know it by business, but we can easily figure it out by building. Take one of Clayton’s nicest buildings: 7701 Forsyth. If these two property tax increases go through, it’s owners would pay $21,175 more each year. That is $21,000 more to support park and road improvements that will benefit the businesses far less than the residents. (The road bonds are all for neighborhoods, not the business areas.)

Take its sister building, 7733 Forsyth. That property would pay $32,000 more in property taxes under these proposals. This for a building whose owners already pay well over a million a year in property taxes. That means higher rents in Clayton. These higher rates would also apply to business property (factory equipment, copiers, computers) so there would be less capital investment in Clayton, though I admit that effect likely would be very small.

That is $53,000 per year from two buildings that already pay an extra downtown tax assessment that can be used for their central business district streets. (It usually isn’t, but it can be and likely has been in the past.) At some point, asking Clayton businesses to pay much higher property taxes that will primarily benefit the residents is a poor policy choice, in my opinion. At a minimum, the proposal to increase the property tax for park renovations should be shelved in favor of privatizing the rink’s operations (but not ownership) just like the Saint Louis City has done with Steinberg Ice Rink.

State Audit Recommends Sunset Of Historic Preservation Tax Credit

Posted on by Patrick Ishmael

You saw the original, and now here’s the sequel. Just weeks after producing an excellent report on Missouri’s Low Income Housing Tax Credit, Missouri’s state auditors have returned with a review of the Historic Preservation Tax Credit (HPTC) program. We have talked about the HPTC at length here on the blog and elsewhere, and I am delighted that the state’s auditors took a look at a program that has hemorrhaged taxpayer money for years.

What did the auditors find? A lot. For starters, HPTC tax credits have cost the state nearly $600 million over the last five years alone and more than a billion dollars over the last 10. Missouri leads the country in “qualified rehabilitation expenses” (QRE) for historic preservation, which relates to the expenses against which the HPTC could be applied. Broadly speaking, the higher the QRE that rehabbers claim under the HPTC, the more money the state will be spending on it.

So, how big is Missouri’s QRE lead? Check out this chart from page 8 of the audit.

For perspective, Massachusetts, Virginia, Pennsylvania, and New York are all original U.S. colonies. Are we to believe that Missouri should have been subsidizing preservation spending at almost twice the rate as the next closest state… and not only that, subsidizing it at that level for more than a decade?

I can appreciate that we love our old buildings in Missouri, but if anything and everything can get the stamp of being “historic,” then we degrade the things that are, in fact, historic and waste limited taxpayer resources in the process. Could some projects be worthy of taxpayer support? Possibly, but those cases would be an exception, not a billion dollar rule.

To name a fraction of the examples that underscore this reality, Norwood Hills Country Club should not have received taxpayer money. A whole host of private mansions that the HPTC subsidized should not have received taxpayer money. Check out this story, from the audit:

In 2011, the DED issued about $296,000 in credits to an applicant who renovated a 3-story, 5,400 square foot home in an affluent neighborhood in a metropolitan area. The applicant purchased the home in 1993 for nearly $300,000 and reported about $1.2 million in qualified rehabilitation expenditures. The home has a fair market value of approximately $434,000.

So the owner buys a $300,000 house, drops $1.2 million into it, gets nearly $300,000 (almost what he paid for the house originally!) in credits from the state, and the value of the house rises… about $130,000? On what planet does subsidizing a private residence in a wealthy neighborhood make any sense for taxpayers? Why did Missourians have to effectively reimburse this person the purchase price of their home? Who’s looking out for the taxpayers here? And who in their right mind and looking at the numbers thinks this is a good “investment” for the state?

The HPTC is a mess of a program. The least the legislature could do is set a date for this madness to end.

Spending ‘Brewster’s Millions’ On Missouri Public Schools

Posted on by James V. Shuls

Brewsters Millions

Imagine your great uncle passes away and leaves you a huge sum of money, but there is a catch. To get the money, you have to spend $30 million on Missouri’s public education system and make a demonstrable impact on student achievement. Contrary to the plot of the 1985 comedy “Brewster’s Millions,” your great uncle demands results. Would you follow Missouri Budget Project’s advice and put the $30 million into the state’s foundation formula for public schools to make up for the funding gap?

If so, you could probably kiss your riches goodbye. You might be better off following Monty Brewster’s lead and organizing a baseball game against the St. Louis Cardinals. You could invite disadvantaged students to watch the game on a field trip. After all, one study has shown that “poor” readers with more knowledge about baseball outperformed “good” readers with relatively little knowledge about baseball.

All levity aside, there is little reason to believe that pumping more money into the funding formula will lead to improved results.

Let’s imagine that you do put the money in the formula to fill the “underfunding” gap. In the table below, I display how much Missouri schools would get from your great uncle’s generosity. In this graph, schools were sorted into deciles based on the percentage of students scoring proficient or advanced on the state’s math exam (districts were weighted for size). As you can see, you would be giving almost as much money to the highest-performing schools as you would to the lowest-performing schools.

If you would not invest your own money in this manner, why would you invest taxpayer money this way?

I have never denied that Missouri is underfunding the foundation formula; the state is. This does not mean that the formula is infallible. The formula is flawed and is in need of change. It is time to stop asking how much money we can spend on schools and start asking how we can spend our money more effectively, so that we can truly improve the lives of students.

Performance Decile (1=Low, 10=High)

Percent of Funds Received

Brewster’s Wasted Millions

1

11%

$ 3,268,083.78

2

11%

$ 3,408,597.58

3

9%

$ 2,633,148.34

4

12%

$ 3,562,383.35

5

9%

$ 2,742,869.50

6

10%

$ 3,107,064.16

7

10%

$ 3,026,888.02

8

12%

$ 3,545,048.73

9

8%

$ 2,407,816.09

10

8%

$ 2,298,100.43

Kansas City Streetcar Expansion Could Buy More Than 100 Buses

Posted on by Joseph Miller

For the same cost as the proposed streetcar expansion, Kansas City could buy and operate 105 additional buses, even with a planned Transportation Development District (TDD).

The TDD is intended to raise $471.9 million to complete the nascent streetcar system throughout the inner city. Our position is that these systems are less efficient at moving people than buses and that the promises of economic development from streetcars are without empirical basis. To their credit, most streetcar supporters spend their time arguing that the streetcars bring economic development and do not try to claim that streetcars are more efficient people movers.

Nevertheless, many proponents have the idea that it is cheaper in the long run to build a streetcar system than to expand bus service. This post addresses these arguments and asks how many buses the Kansas City Area Transportation Authority (KCATA) could buy and operate if it were given the resources of the $500 million streetcar plan.

Using data from the National Transit Database, KCATA, and actual performance of streetcars in Portland, I estimated yearly operating costs and revenue streams for the streetcar and an expanded bus system. While any such calculations on an unfinished system require some estimation, my calculations are streetcar-friendly by assuming high ridership, elevated farebox recovery, and controlled capital and operating costs.

The findings were that KCATA could buy and operate 105 additional buses for the same cost of building and operating 7.6 miles of streetcar lines.  To satisfy objectors who might claim huge life cycles for streetcars, I also made a calculation assuming the streetcars were not replaced and that only buses were replaced. This reduction in streetcar costs meant KCATA would only be able to buy and operate 100 buses.

To put that in perspective, KCATA currently only operates 257 buses for 61 bus routes that serve the entire Kansas City region. Adding 105 buses would significantly improve regional services and would utterly transform bus service if they were bound to the TDD meant to serve the streetcars. The chart below shows what type of bus service 7.6 miles of streetcar lines buys:

Matt Transit Graph

The case is clear. Whatever one believes about the economic development promises of streetcars, in terms of providing mobility, buses are far more cost-efficient than streetcars.

Does An Underfunded Formula Really Hurt Schools?

Posted on by Michael Rathbone

Does “underfunding” have a detrimental impact on Missouri school districts? The people at the Missouri Budget Project think so. According to their recent study examining Missouri school district funding, “The vast majority of school districts throughout Missouri have been significantly hurt by Missouri’s inability to fully fund the state’s education funding formula, which is the key to our kids receiving the world-class education they need to compete in today’s global economy.” However, Show-Me Institute Director of Education Policy James Shuls and I find that there is no correlation between how much a school district is “underfunded” and its actual performance.

I agree with Shuls when he says that, on principle, the foundation formula (which is the state’s method of determining how much of its annual appropriation to district aid goes to each school district) should be fully funded. The people at the Missouri Budget Project would have you believe that the more underfunded the school, the worse its performance will be. Shuls and I were skeptical that this was actually the case so we tested the Missouri Budget Project’s claim.

In our analysis, we used the Missouri Budget Project’s numbers for the amount each district was underfunded per student. In the past, I have raised issues with the Missouri’s Budget Project’s methodology (or lack thereof) in their work. However, for the sake of argument, Shuls and I decided to accept their results at face value. To measure a district’s performance, we used each district’s English and math MAP (Missouri Assessment Program) test scores and the percentage of students who scored proficient or advanced. We then ran the numbers through STATA to determine if any correlation existed between a school’s academic performance and their level of “underfundedness.” We found none (for more on our results, please see the comments section).

The underfunding of Missouri’s school districts “hurts” school districts if you define hurt as not getting money. If, however, you define hurt as having a negative impact on performance, these results indicate that is not the case. Even if these schools were fully funded, it would not guarantee that their performance would improve. A growing body of evidence suggests that increasing funding for schools will not necessarily lead to an improvement in educational outcomes. We believe in adequately funding our schools, but the state should first make sure that taxpayer money is spent wisely before asking taxpayers for even more.

All Hail The Taxi App

Posted on by Joseph Miller

The Saint Louis Taxicab Commission recently approved its first multi-company taxi-hailing app, allowing customers to book cabs from the airport. While this is a step in the right direction, Saint Louis should move aggressively toward allowing more ride-hailing apps and deregulating the taxicab industry.

Taxi service in Saint Louis City and County, like most metropolitan areas in the United States, is regulated in terms of both price and entry. This despite the fact that most economists find that this regulation reduces the total number of cabs, raises prices for customers, and increases rents for taxicab companies. They find that cab companies end up using regulatory bodies to reduce competition and increase prices. A prime example: Not long ago, the chairman of the Saint Louis Taxicab Commission said he suspects there are too many cabs in Saint Louis. Residents have to question whose welfare is protected when a cab commission official believes that.

One of the traditional defenses of the regulated taxi industry was that a free market would allow too many different pricing schemes. This would lead to price gauging of less-informed customers and, in the long term, deter ridership.

Enter ride-hailing apps, which allow anyone with a smart phone to set up a ride whenever needed. Carmel, the app that the taxicab commission approved, only partners with existing companies. However, services such as Uber and Lyft in other cities can work with individual cabs.

The approval of Carmel did not come without opposition. Some cab owners fear that eventually Carmel will start to work with individual cab owners, cutting out traditional dispatches and devolving control. As St. Louis Public Radio reported, one owner stated:

“Right now, there’s other operators that operate illegally within St. Louis, sedan operators, and they’re not able to control that, so how are they going to be able to control and monitor this?”

Why is this a bad thing? If new apps allow customers to find a cab they want at a price they are willing to pay, what “problem” is the taxicab commission solving by controlling prices and market entry?

If the only answer to this question is “control,” it is clear that the taxicab commission should not regulate entry or market prices. They should focus instead on simple cab registration and safety inspections.

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