Clayton Seeks Four-Leaf Clover Of Tax Increases

Posted on by David Stokes

As first appearing in the St. Louis Business Journal:

Like a mischievous Leprechaun sporting a four-leaf clover, the city of Clayton is proposing four new tax increases on its April municipal ballot. That is right, four tax increases at one time: two sales tax increases and two bond proposals involving property tax increases. If they all pass, Clayton will “boast” the second-highest baseline city sales tax rate in Saint Louis County, along with one of the highest property tax rates. What kind of luck would that be for Clayton residents and businesses? The answer can only be very bad luck, indeed.

In order for Clayton to continue in its position as Saint Louis County’s economic downtown, it needs to maintain low commercial taxes. The April ballot proposals represent three or four steps in the wrong direction. Having the highest city sales tax rate in the county is hardly going to encourage people to shop in Clayton. High commercial property taxes will also discourage some business investment and give businesses reasons to locate elsewhere.

One of the two new sales taxes is for “economic development” efforts. Please do not let the positive name fool you. Raising taxes to fund government “economic development” is to modern communities what bloodletting was to 16th-century medicine. Whatever the sickness (and Clayton is definitely not sick), economic development taxes, like bloodletting, are best avoided. Clayton has, to its credit, been more disciplined than most other cities in its use of harmful tax subsidies such as Tax Increment Financing (TIF) and other giveaways. Hopefully that fiscal discipline will continue, so why would Clayton want to raise taxes to fund “economic development” programs that do more harm than good?

The other sales tax would be dedicated to emergency services: police, fire, and ambulances. General taxes already fund that city priority at a very effective level, with no plan to lower those general taxes if a new, special sales tax is added. Nobody disputes the importance of emergency services, but this tax increase is more about bookkeeping and higher city revenues than improving service quality.

The first property tax proposal is probably the most defensible spending. It would finance an overhaul of the city’s residential streets, many of which are legitimately due for replacement. Good roads are a necessary function of local government, and this bond issue is a reasonable way to accomplish that. However, it is fair to point out that the commercial sector already pays a targeted, extra property tax for the downtown area, which can include street and parking improvements. Under this proposal, it would face the same tax increase for neighborhood roads as the residents of those neighborhoods.

The other property tax increase is less necessary. It would fund a bond issue for Shaw Park, especially the ice rink. Instead of raising taxes to fund improvements to the ice rink, Clayton should follow the lead of the City of Saint Louis and outsource it to private operators. Steinberg Ice Rink in Forest Park is privately managed, and the city earns rental income each year without having to operate the rink. Taxpayers and customers all benefit from a well-maintained, privately run ice rink such as Steinberg, and Clayton should revisit that option instead of asking for a tax increase.

This four-leaf clover of tax increases goes in the wrong direction for Clayton residents and businesses, and would be very unlucky for them indeed.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Public Employee Pensions Are Great . . . Except When They Aren’t

Posted on by James V. Shuls

When people hear the word “pension,” they often think “retirement security.” That is the idea of a public employee pension system, to ensure that public sector workers, such as teachers, have a safe, secure retirement. Missouri has three of these systems for teachers and they are great . . . except when they aren’t. To understand what I mean, look at the two figures below.

Kauffman Pension Report Figure 8 KCKauffman Pension Report Figure 9 STL

Missouri’s teacher pension systems are back-loaded. That is, teachers accrue much of their pension wealth toward the end of their careers. Unfortunately, very few teachers in Saint Louis and Kansas City ever reach this point. The figures above come from a recent report that the Ewing Marion Kauffman Foundation issued. Today, Dane Stangler and Aaron North, from the Kauffman Foundation, have an op-ed in the St. Louis Post-Dispatch. They wrote:

Because most of the pension value accrues in the final years of an educator’s career, the typical new teacher in Kansas City or St. Louis does not benefit from the current system. Based on our research, we estimate the likelihood that a traditional public school teacher in St. Louis stays in the profession long enough to earn the maximum pension benefit to be about 4 percent. In other words, 96 percent of teachers in St. Louis will leave prior to reaching the full benefit and the percentage is comparable in Kansas City (approximately 3 percent).

That is just one of the problems with Missouri’s current teacher pension systems. As I have written before, the separate pension systems for Saint Louis and Kansas City put the urban districts at a disadvantage.  Stangler and North pointed out:

There is no reciprocity between the plans, so if a teacher begins her career in Springfield and leaves for a position in Kansas City or St. Louis, she will lose much of the pension wealth she had earned by either forgoing the employer contributions or having the value of her pension frozen at the time she quits.

Missouri’s teacher pensions are great for teachers who stay for 25 to 30 years in a single pension system. For teachers who work less or more than that time in a single pension system, the current system is not so great. Indeed, those teachers are subsidizing the retirement of others.

More importantly, these systems are not good for kids in Saint Louis and Kansas City because they act as a barrier to recruiting veteran teachers to the cities.

Kansas City’s Streetcar Continues To Undercut Busses

Posted on by Patrick Tuohey

Last year we learned that the Kansas City Area Transit Authority (KCATA) was spending money on the streetcar that was meant for its bus system. At the time, KCUR reported:

Area Transportation Authority general manager Mark Huffer said diverting transit tax money for streets and streetcars is taking its toll.

“It’s going to be virtually impossible for us to sustain current service levels like things such as Max on Prospect or Max on North Oak that we hear a lot of people asking for – for the long run – if what is continuing to be allocated to ATA lessens every year,” says Huffer.

A year later and Kansas City has finally made that MAX bus line on Prospect a priority — but only if voters approve a huge sales tax and additional property assessment to support that same streetcar. KMBC reported on Tuesday that:

In August, voters must approve the new Prospect MAX bus line as part of the city’s second streetcar route proposal. The city grouped the two together as part of its strategy to expand its mass transit options.

The streetcar proposal continues to draw big crowds angry about its tax proposals. But the Kansas City Transit Authority admits the high price tag will be a hard sell.

This should bother people who are seriously interested in providing effective transit in Kansas City. The successful, well-run, and cost-effective MAX system is being unnecessarily linked to the streetcar.  That is just bad policy.

A Victory For Government Accountability In Kansas City

Posted on by Patrick Tuohey

When the Missouri Legislature considered creating a land bank for Kansas City, the Show-Me Institute was opposed. We argued in testimony before the legislature that the existing Jackson County Land Trust was as effective as any similar agency across the country. We testified that:

There does not appear to be any evidence that the Jackson County Land Trust is doing a poor job of getting vacant property back into private, productive use.

Considering the Saint Louis example, any effort in Kansas City was likely to fall prey to Kansas City politicians who might direct the city to hold onto property on behalf of favored constituents or special interests. We are glad to report that the Kansas City Land Bank has addressed these concerns. On March 3, the Board of Commissioners adopted the following resolution:

The Land Bank supplements the Code of Ethics with the additional requirement, that any Commissioner that receives a contact from an elected official or staff lobbying for or against particular application for a property held by the Land Bank shall disclose such contact to the Land Bank staff within a reasonable time thereafter, and shall disclose that contact to the other Commissioners prior to voting upon the particular application for which such contact was made.

The board also will start listing the reasons for any application rejection in the minutes so that applicants and others can understand the commissioners’ decision-making process. This is a great win for transparency in government, and we congratulate the land bank board for taking this important step.

Education Needs More Money, STAT!

Posted on by James V. Shuls

If you believe the popular media outlets, Missouri schools are in dire need of more cash. They claim that Missouri is under-funding education and that our state ranks low in comparisons of education spending. If we would just get with the program and give schools more cash, we will reap the rewards. It is true that our state lawmakers are not fully funding the foundation formula for public schools. On principle, they should fully fund the formula, but I’m not convinced that fully funding the formula would really lead to better results for students.

As I have written on the Show-Me Daily blog, “Since 1992, Missouri has seen nearly a 40 percent increase in per-pupil spending. Yet we have seen little in terms of increases in academic achievement.”

A new study by Andrew Coulson, of the Cato Institute, adds more evidence to support this claim. Using school funding data and student scores from the SAT, he compared the increase in spending with changes in SAT scores for the past 40 years. Before anyone complains that most Missourians don’t take the SAT, it is important to note that Coulson takes this into account and uses statistical procedures to account for the different types of students who have taken the SAT.

He demonstrates that education funding has increase precipitously, while SAT scores have remained relatively flat.

Whether looking at the National Assessment of Educational Progress (NAEP), as I did in my previous post, or the SAT, it is clear that student achievement has practically flat-lined. Evidence from the past four decades suggests that money alone will not cure these ills.

CATO 2014 Education Funding

Does Saint Louis Have Enough Transit Service?

Posted on by Joseph Miller

With the transit committee hearing in Washington this week, there has been a freight train of stories and blog posts on how public transportation is the future. According to transit boosters, the reason that transportation makes up a tiny fraction of total vehicle miles in the U.S. is because the system just isn’t good enough. One blog, on how to get millenials (my generation) to use transit, states:

[S]ervice time is very key. Whether it’s rail or bus rapid transit, the key word is “rapid.” If the service is quick, we will ride. One of the biggest issues I’ve seen is when someone has tried an “express” route that is express in name only.

That is all transit needs to do, take people from where they are to where they want to go, with speed. But in reality, that is easier said than done. My own experience trying to use the Saint Louis Metro system is a good illustration of this.

I am a millennial and I live in the Central West End neighborhood of Saint Louis. I do not own a car. Earlier this week, I was supposed to go to an Ultimate Frisbee scrimmage after work. We usually play at a park on the Hill, a 20-minute bike ride away. But this week, the location changed to Franz Park. I figured I might be able to take public transportation, but my hopes were quickly dashed.

map

If I owned a car or carpooled, the total trip would have been 9 minutes. To take transit, however, would have taken between 40 and 50 minutes. That was slightly faster than walking (1 hour 9 minutes), but quite a bit slower than biking on a safe bike route (30-35 minutes).

For people who support more transit, the lesson they would take from this is that Saint Louis needs more transit service. But that is the wrong lesson. The Central West End, where I live, has bus and light-rail service. Still, transit service was little better than walking. This is not an isolated case; I walk, bike, and carpool many more miles than I use transit.

Metro spent $300 million on transit last year, or $190 for every resident of the area it serves. How much more would have to be spent so that I could have express service to work, Franz Park, and everywhere else that I want to go in the Saint Louis area? As a car-less millennial, I have a greater incentive to take transit than the vast majority of Saint Louis area residents who own a car. Yet, transit is not my primary means of getting around Saint Louis. How much would have to be spent to make transit my primary means of transportation if I already owned a car?

More Than 500 Economists Oppose Minimum Wage Hike

Posted on by Rik W. Hafer

In an open letter released March 12, 2014, more than 500 economists voiced their agreement that increasing the federal minimum wage to $10.10 would not reduce poverty. The letter’s release coincided with hearings in the U.S. Senate’s Health, Education, Labor and Pensions (HELP) Committee to debate raising the federal minimum wage. The letter notes that poverty is a complex issue and simply raising the minimum wage is not “a silver bullet solution.” The letter’s signatories include Nobel laureates Eugene Fama, Edward Prescott, and Vernon Smith along with a number of previous administration officials, among them Glenn Hubbard, Greg Mankiw, and Harvey Rosen, all past chairs of the Council of Economic Advisors. (The full letter and list of signatories is available here.)

Raising the minimum wage costs jobs for the very workers it is supposed to help. A recent study by the Congressional Budget Office (CBO) found that the proposed increase would cost the economy 500,000 jobs by 2016. This outcome from raising the minimum wage agrees with previous work, including analysis that David Neumark and I wrote for the Show-Me Institute.

Missouri policymakers must consider the full impact of raising the minimum wage. It simply is not good public policy to raise wages for some individuals at the expense of other workers who are made even worse off than they are now. The minimum wage simply is not a viable policy tool to fight poverty.

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