Racing To The Wrong End Zone – In Transportation Funding

Posted on by Joseph Miller

 As first appearing in the Columbia Tribune:

In the 1929 Rose Bowl, the speedy Roy Riegel of the University of California football team achieved immortality in the annals of college sports when he picked up a fumble, bounced off a tackler, and raced 69 yards – in the wrong direction.

In picking up another loose football — namely, what to do about a sudden decline in revenues for transportation infrastructure — it now seems Missouri policy-makers may be about to duplicate “Wrong Way” Riegel’s feat. In hoping to correct a severe budgetary problem at the Missouri Department of Transportation (MoDOT) through a statewide 10-year, 1 percent sales tax, the Missouri Legislature is pointed in the wrong direction from a policy viewpoint — one that can only result in inefficiency and waste and undermine the department’s ability to maintain and improve the road system.

How bad is MoDOT’s funding situation? Just a couple of years ago, MoDOT had $1.3 billion annually to spend on road and bridge improvements. In 2014, after closing three district offices and 131 facilities, MoDOT has just $685 million. Because of that drastic decrease, MoDOT can only maintain, not advance, Missouri’s road and bridge system. By 2017, that number will fall to $325 million, which is less than the $485 million the director claims is necessary to maintain the existing transportation system.

MoDOT did not get in this position overnight. Historically, the bulk of the department’s revenues came from fees imposed on drivers, most importantly, the 17-cents per gallon state gas tax. However, there has not been an increase in the gas tax since 1996. Meanwhile, cars have become more fuel-efficient — decreasing MoDOT’s revenue stream — while the cost of labor and material has increased. Despite all that, MoDOT was able to increase construction spending in the recent past due to increased borrowing (with several big bond issues) and a sudden influx of federal stimulus dollars. In effect, Missouri drivers received new roads and bridges without creating the tax base necessary to pay for them. With the bond money spent and the stimulus finished, MoDOT must continue to downsize, or find other sources of revenue.

At a Jan. 23 conference in Jefferson City, MoDOT’s director, Dave Nichols, joked that while he used to be an engineer, now he is in sales, marketing, and fundraising — doing whatever he can to postpone financial Armageddon. He did not propose a specific fix, but others did — voicing overwhelming support for the 1-percent sales tax.

Through House Joint Resolution 68 (HJR68), the Missouri Legislature is prepared to take the same approach — proposing a vote on a constitutional amendment next fall to implement the sales tax. While some of the money from the tax would go to localities to use as they wish, the vast majority would go to bailing MoDOT out of its continuing financial crisis.

A 1 percent sales tax is not an economically sound way to fund roads and bridges because it disconnects the cost of the roads from the use of the roads. Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as daily commuters and interstate trucking companies.

There is a better solution: Raise the gas tax to adjust for inflation and implement tolls on major highways. These user-generated fees greatly reduce the free-rider problem inherent in a transportation sales tax. Increasing the gas tax to its inflation-adjusted level would increase road funding in Missouri by up to $300 million per year while simultaneously reducing MoDOT’s long-term costs. Tolling major highways and bridges, such as I-70, would enable major improvements financed through public-private partnerships. Toll roads can also control congestion through variable pricing systems. By charging drivers for the roads they use, tolls and gas taxes are a fair and economically sound solution to MoDOT’s funding problems.

If the Missouri Legislature and voters approve a statewide 1 percent sales tax, it will only be a temporary fix. When the tax expires, Missouri will face an even worse problem than it does today — after 10 years of running in the wrong direction.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

 

Streetcars (Still) Do Not Reduce Miles Driven In Cars

Posted on by Patrick Tuohey

NextRailKC.com is the website promoting the streetcar/lightrail extension in Kansas City. The site is supposed to present information, but more often than not, it offers data so cherry-picked that it can only be considered intentionally misleading. This is a shame, because people are eager to understand the very complicated issues at hand.

Here we will address the site’s claim regarding Vehicle Miles Traveled (VMT). Previously, we have explained that rail transit does not remove cars from the road. But NextRailKC persists in making claims that, well, confuse people who honestly seek information.

NextrailVMT

The almost indecipherable graphic, which was produced for the Charlotte Area Transit System (CATS) and reposted on the NextRailKC site, seems to suggest that rail transit results in fewer vehicle miles traveled per person. But this is wrong on several points.

First, just as with economic development claims, there is absolutely no peer-reviewed data to support the claim that rail reduces VMT. None. As written in Reason Magazine, “VMT is influenced by a host of factors. Density is the most important but land-use, development patterns and politics also matter. The prevalence of transit is maybe the 25th most important factor.”

Second, the cities they chose skew the results to the point that they are meaningless.

New York has lower VMT because it is extremely congested, located on water and built before World War II when cars were less prevalent on a pre-planned street grid. Even without its fantastic transit network it would still have a much lower VMT.

Dallas has a lower VMT because congestion is much more severe. Worsening congestion to lessen VMT is a perverse policy goal. Further, Dallas is the poster child for how not to build rail. Despite populations increases and the addition of a light-rail network, fewer people take transit in Dallas in 2013 then before the light-rail network was built. When a region spends billions to build transit and the total number of people commuting by transit declines, you have made some major mistakes.

Kansas City’s population and density are not like the population and density in New York or Dallas. Additionally, Kansas City’s needs are different. We cannot look to New York or Dallas for any meaningful prediction of the impact of rail in Kansas City. The comparisons are absolutely meaningless, to the point of being misleading.

Perhaps most indicative of the city’s lack of desire to engage seriously with taxpayers is that officials NextRailKC can’t even be bothered to develop their own misleading infographics — instead, they chose to borrow Charlotte’s.

Proactive Is The New Reactive

Posted on by James V. Shuls

There is a lot of talk these days in Jefferson City about being proactive in public schools. Currently, when a school drops below a set performance mark, the district becomes unaccredited. Students are then able to transfer out of the district to a nearby accredited one. Many view this as a reactive, nuclear option. What we need, they say, is early intervention. We need to be proactive when a school starts to struggle. I hate to get tied up in semantics, but by definition, targeting schools that are struggling is reactive, not proactive. It is a reaction to their declining performance.

Lawmakers have their hearts in the right place, but they place too much confidence in their ability to dictate solutions from Jefferson City. After I testified before the Missouri House Elementary and Secondary Education Committee about the student transfer issue, one representative asked me what lawmakers should do to help those struggling school districts.

“What advice would you give us?” she asked.

“I would tell you that you cannot mandate excellence and you cannot dictate innovation,” I said.

“You would have us do nothing?” she asked.

“No, I would have you get out of the way,” I said. “Remove unnecessary restrictions and burdensome regulations. Free the local schools to innovate.”

Missouri could:

Reform teacher tenure policies; remove Last In, First Out provisions; and reform teacher pensions so schools have more flexibility in staffing decisions.

Change seat time and class restrictions that inhibit some blended learning and online learning models.

Try something like Kentucky’s “Districts of Innovation,” where school districts can become “exempt from certain administrative regulations and statutory provisions.”

Responding to government failure with more government action is not being proactive. Policies like the ones cited above are proactive. They put the power into the hands of the school leaders on the ground. A proactive system is one that gives school leaders the freedom to be innovative and gives parents the ability to choose.

Why Was The Depression So Great?

Posted on by Michael Rathbone

Show-Me Institute Policy Researcher Michael Rathbone explains the causes of the Great Depression and the effects of government policies during that crisis in this presentation titled “Why was the Depression so Great?”

This presentation covers three main points: what caused the Great Depression; what caused it to go on for so long; and how did we finally get out of it.

Many believe that the cause was the stock market crash of 1929, which caused the Great Depression and a laissez-faire approach toward the crisis, ultimately making things worse. However, that is incorrect. In fact, while the crash started the crisis, it was a series of well-intentioned but poorly thought-out government actions that turned a sharp recession into a depression.

This presentation details how, in fact, President Roosevelt built upon the policies of President Hoover to combat the Depression. However, these policies did not get the country out of the Depression. In reality, it took a combination of events, including World War II, to actually end the Depression and restore strong economic growth. After watching this presentation, you will have a better understanding of that era in American history and the effects of public policy on the economy.

Download the slide show

 

Tell Taxpayers Where Their Money Is Going

Posted on by Patrick Tuohey

On Thursday, the mayor of Kansas City, Mo., disclosed that the city is ponying up another $65,000 to woo the 2016 Republican convention. Jackson Co., Mo., Wyandotte Co./Kansas City, Kan., and Johnson Co., Kan., also are chipping in an additional $65,000 each. This $260,000 total is in addition to the $100,000 that Kansas City, Mo., already spent. We participated in a KSHB TV story about the spending and asserted that taxpayers ought to be told what is being promised in their name.

Kansas City Mayor Sly James argued that hosting the convention is a once-in-a-lifetime opportunity, and he may be correct. Certainly, we all are proud of Kansas City and eager to show off on the 40th anniversary of the last time we hosted. Those are arguments for spending the money — they are not arguments for not telling taxpayers how the money is being spent. If the mayor is so confident about his choices, there is no reason to hide who is getting the money and for what. Furthermore, taxpayers ought to know what additional commitments the city is making to the convention committee. Remember, the $165,000 spent so far is just for the bid to host. Hosting itself will cost millions.

The city claims that the convention will have a large economic impact. We previously have written that those estimates are largely useless as they assume that without the convention there would be no economic activity — which is just silly. The city’s “fact sheet” suggests the economic impact to Kansas City would be similar to Tampa’s in 2012: $214 million. The city likely is getting that from a Tampa Tribune story in which they cited a University of Tampa analysis:

The total impact takes in $214 million in direct spending by the groups that put on the convention, including the Tampa Bay Host Committee, the City of Tampa, the convention’s Committee on Arrangements and corporate sponsors.

Note that in addition to ignoring any economic activity that would have happened without the convention, this impact includes spending from Tampa’s taxpayers.

Lastly, it was gratifying to read in their “fact sheet” that the city thinks we have sufficient hotel rooms and bus service to accommodate the convention, and that our airport has more than 50 direct flights. Let’s hope city officials remember this the next time they advocate committing public funds to convention hotels, streetcars, and new airport terminals.

Mark Your Calendars For Our April 25 Tax Credit Scholarship Event

Posted on by James V. Shuls

Lindenwood_Event_Banner

When I speak about tax credit scholarships, I get a lot of questions: What is a tax credit scholarship? How would that work? What are the chances of that passing in Missouri?

If you want to find out the answer to these and other questions, join us on April 25 at Lindenwood University in St. Charles, Mo. We are partnering with the Hammond Institute for Free Enterprise at Lindenwood University to present a dynamite event, “Expanded Opportunities: A Discussion About Tax Credit Scholarships.”

Jason Bedrick, of the Cato Institute, and Jonathan Butcher, of the Goldwater Institute, will present information about how these programs are working in other states. You can download their recent case studies for the Show-Me Institute about the New Hampshire and Arizona programs directly from our website.

Attendees also will be able to take part in a panel discussion with Missouri Sen. John Lamping (R-Dist. 24), Sen. Maria Chappelle-Nadal (D-Dist. 14), Missouri Speaker of the House Tim Jones (R-Dist. 110), and Rep. Michael Butler (D-Dist. 79).

RSVP online, mark your calendars, tell your friends, and join us on April 25.

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.

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