St. Louis Development Corporation Just Making Stuff Up

Posted on by David Stokes

The 2013 annual report for the St. Louis Development Corporation (SLDC) is out. Let’s give them credit for timeliness, at a minimum, being that 2013 is not even done yet.

The report is a great example of ridiculous government claims. I took the time to add up all the “jobs created” claims for each of the various subsidies on pages 6 and 7. The report claims that the work of the SLDC and its various subsidies (TIF, etc.) will result in 18,198 new jobs. If I added in their “jobs retained” or “construction job” claims, it would be even higher.

Let me give you an idea of how completely bogus these claims are. According to the U.S. Bureau of Labor Statistics, the entire Saint Louis metropolitan region only added 13,500 jobs in the year from July 2012 to July 2013. That is ALL job creation in our entire 2.5 million-person metro area. Yet the SLDC is claiming its actions in 2013, which only reflect subsidized jobs within the city of Saint Louis, will create more than 18,000 jobs. (To be clear, they are not claiming all the jobs came in 2013 or just within one year.)

These stats bring to mind the comments of economist Dick Netzer when presented with preposterous claims of success by economic development officials (p. 134):

“Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”

Let me repeat this. This city’s economic development arm (which is now combined with the county, but these stats are city-only) is claiming that the projects they are subsidizing in 2013 will produce almost 5,000 more jobs than the compilers of economic data at the BLS say were created in our entire region by all types of job growth during approximately the same period. (I recognize there is some gross vs. net difference here, but the claims are so entirely out of whack that it does not really matter. I’ll explain further in comments if anyone wants me to.)

A state audit found that the Missouri Quality Jobs Program has claimed to generate almost 27,000 jobs, but in fact had generated slightly more than 7,000. This is the same basic thing. These numbers from the SLDC should be taken with the same grains of salt (and subsidized salt, at that).

The idea that governments should be empowered to take other people’s money to support government-sanctioned, targeted business investments is absurd. Their evidence of government success is, too often, simply made up.

The Streetcars Strike Back

Posted on by Joseph Miller

Despite their inefficiency and high cost, local planners are attempting to revive the streetcar system in Saint Louis based on questionable promises of local development.

Streetcars once operated throughout Saint Louis, but the combined competition of car travel and more efficient buses made their operation uneconomical. As a tool of public transportation, or moving people around the city, streetcars are not optimal. Compared to buses, they are inflexible, require expensive infrastructure, and are relatively slow. However, local planners are attempting to bring these relics back to the streets of Saint Louis, starting with the Loop trolley and a plan for a streetcar downtown.

Planners do not propose that streetcars are primarily superior people movers. Instead, they claim that streetcars raise property values, promote economic development, and attract “choice” travelers.  Planners point to examples in Portland and other cities where streetcars supposedly attracted huge investment because they are a fixed infrastructure system upon which developers can depend. However, even the friendliest studies of streetcars state that large tax subsidies were integral to the development in places such as Portland, Seattle, and Kenosha. If streetcars do attract housing or retail development, it is likely because they are coupled with, or signal the arrival of, government largess. Those payouts will ultimately cost the taxpayer or reduce funds for other needed services.

Planners also claim that streetcars attract “choice users,” or those who could drive but choose transit if the level of service is high. These riders, according to streetcar advocates, will not ride buses, as they provide low-quality service. However, a U.S. Department of Transportation study found that the low opinion of buses versus other forms of transit stems largely from their image of serving low-income passengers and economically depressed areas. These opinions change when buses are re-branded and built to serve more affluent customers. Hence, it is more likely that trolleys through disadvantaged neighborhoods will lower residents’ opinions of streetcar service instead of transforming local neighborhoods.

In most American cities, including Saint Louis, buses carry the majority of travelers and the vast majority of low-income transit users. If Saint Louis plans to subsidize public transportation, it should aim to improve the system that provides the greatest public service. Building an expensive toy to attract affluent riders is a lower priority. With the Loop trolley in danger of losing its $22 million grant from the Federal Transit Administration, it is time to revisit both the costs and benefits of streetcar service in Saint Louis.

Is The Aviation Department Inflating Repair Estimates For KCI?

Posted on by Joseph Miller

Our previous post dealt with how the Aviation Department has scant information on how it will save money on its $1.2 billion new terminal for Kansas City International Airport (KCI). This post questions the Aviation Department’s recently presented analysis on the cost of repairing and keeping KCI’s current layout.

The Aviation Department once claimed that the cost of repairing KCI’s existing terminals would be around $600 million. However, as of a presentation on Sept. 10, the Aviation Department now claims the cost will be between $645 million and $785 million. A cursory inspection of these estimates prompts many questions, as the itemized repair costs are much larger than those for identical or similar items in the new terminal plan’s budget.

For example, the Advance Terminal Planning Study’s cost for a modification to the central utility plant, which the Aviation Department now claims is a cost ceiling, is $19.6 million. But in the September presentation on repairing the old terminal, the estimated cost for the same project is $20-25 million. Notice that, for the same project, the highest possible price in the new terminal plan is less than the lowest possible price quoted in a repair plan.

As for requirements for parking structures and roadways, the Advance Terminal Planning Study predicts that the new terminal will require an entirely new loop road system, a new parking garage, and significant demolition, all at a cost of $320 million. But in the September 10th presentation, the cost of merely refurbishing current roadways and parking, which is seemingly a lot less extensive than what is required for the new terminal, is placed between $210 and $260 million. One of the reasons given for this inexplicably large expense for refurbishment is to “increase parking capacity.”  KCI has more parking spaces than any peer airport in its planning study and almost three times the spaces of St. Louis-Lambert Airport. Why KCI requires more parking capacity needs explanation.

If these discrepancies are because the Advance Terminal Planning Study’s numbers are too optimistic, the Aviation Department should be using a higher estimate than $1.2 billion for a new terminal. If not, the estimate for the cost of refurbishment is too high. Advisory Committee co-chairmen Bob Berkebile’s call for independent analysis is welcome if it can clear up these questions.

What Do Bus Rides Tell Us About School Choice?

Posted on by James V. Shuls

Last Tuesday, the Joint Committee on Education hosted a marathon hearing exclusively on the inter-district school transfer law. Over the course of the five hour long hearing, numerous witnesses brought up the fact that some students in the two unaccredited school districts are riding buses for three hours a day in order to attend a school in Mehlville, Kirkwood, or Francis Howell. What conclusion did they draw from this fact? Most decided this was unassailable proof that the school transfer law was failing; that we need to shut it down immediately so these poor children can come back home. This is exactly the wrong conclusion to draw from this.

We must remember that students are riding buses for multiple hours each day by choice. These students want better educational opportunities. They are willing to ride the bus for hours each day to secure those opportunities. Some are even willing to ride their bicycle 30 miles to secure that opportunity.

The fact that students are riding the bus for so long is hardly a criticism of inter-district transfers or school choice. Rather, it is a testimony to the resolve of students and their families. Their sacrifice demonstrates that there is great demand for school choice.

I by no means believe the current transfer law is perfect. Something must be done to make the law more tenable, but fixing the problems should not mean we have to deprive students of the opportunities they so desire and deserve. Long bus rides are not the problem. The problem is a lack of educational options close to home. We can work towards solving that problem by expanding school choice, not by limiting choice.

The Airport’s Self-Dealing

Posted on by Patrick Tuohey

Imagine you have applied to the city for a building permit. The project is complicated and the city wants outside advice before giving you permission. What are the chances that they would ask you to recommend someone to give them that advice? What are the chances they would have applicants apply to you directly? If you’re thinking the chances are zero, then you haven’t worked in Kansas City, Mo. And you haven’t spent much time dealing with the mayor’s so-called advisory group on the proposed new terminal at Kansas City International Airport (MCI).

Members of the advisory group are studying the airport to decide if the Aviation Department should build the new $1.2 billion terminal they want. Those lessons have been presented by, well, the Aviation Department. But the advisory group wants to get an independent point of view, so it is seeking a consultant. Those interested are to apply through, who else, the Aviation Department.

This might be excusable were it not just the latest in a series of events demonstrating that the advisory group is not really expected to tell Mayor Sly James anything he doesn’t want to hear. Consider the following:

The advisory group will continue its meetings well into 2014 with no end in sight. No one knows what their decision will be, but it’s clear that any information they receive will either be gathered by the Aviation Department or those it approves, such as the so-called independent consultant.

Lower Costs Or Just Lowball Estimates For A New Terminal?

Posted on by Joseph Miller

Recent public disclosures for Kansas City’s new airline terminal proposal have become more confusing and contradictory. The Kansas City Aviation Department needs to release more thorough information as to why its cost estimates for a new terminal are decreasing.

According to the Kansas City Business Journal, the new terminal plan could cost anywhere between $960 million and $1.35 billion; however, officials with the Aviation Department do not expect costs to go above $1.2 billion and believe they can drive costs down to about $900 million. While these statements make it seem as though $1.2 billion is the cost ceiling for the terminal, the Aviation Department’s Advance Terminal Planning Study puts the expected cost at more than $1.2 billion. That baseline (not ceiling) estimate includes construction, core terminal requirements, necessary new parking structures, repairs to the airfield, and a modest construction overrun cushion.

While construction delays and other unexpected costs could lead to significantly more than $1.2 billion, what are the exigencies through which the Aviation Department could drive down the cost to $960 million, or even $900 million? That would require a savings of $263 million to $323 million, which is more than the costs of all the proposed repairs and improvements to the airport’s runways.  Other than cutting a large, integral part of the new terminal project, there does not seem to be anything in the current plan that could reduce costs to $900 million.

To give the benefit of the doubt to the Aviation Department, let us assume that this is one of the first construction projects in the history of the United States with no construction contingencies required, saving the project 15 percent. In this highly improbable scenario, to reach the hoped-for estimates, the project would need an additional $80 million to $140 million in savings, more than any single component in the Aviation Department’s plans.

The new terminal project is being sold to the public on the argument that its design is efficient and the old terminal is inadequate. The Aviation Department should explain which sections of this plan are not necessary or where the initial cost estimates were overzealous. After this approach is taken to other refurbishment approaches as well, the public can make an informed decision about whether Kansas City International (KCI) needs a new terminal.

Levees For Floodways

Posted on by Joseph Miller

The U.S. Army Corps of Engineers (USACE) is looking to move forward with a costly levee system to protect a floodway in southern Missouri. The project is at the expense of much-needed maintenance to existing systems across the state.

In July, the USACE released its latest draft environmental impact statement for the St. Johns Bayou and New Madrid Floodway project. A major component of this $164 million project is to close a 1,500-foot gap at the southern edge of the New Madrid Floodway with a new levee. USACE claims that this project will protect agricultural land in the New Madrid Floodway from yearly back-flooding with a benefit-to-cost ratio of 2:1.

However, experts and other government departments claim that the environmental impact statement, the seventh proposing this levee since Congress approved the project in 1954, underestimates both construction expenses and other externalities. The USACE is well-known for construction cost overruns, exemplified by a lock and dam project on the Ohio River. Although the money already spent on that project is almost five times the original budget, it remains incomplete.

The Corps is also likely underestimating ecological damage to the Mississippi River. As it closes off the last area in Missouri where the Mississippi has access to flooding areas, the proposed levee is likely to damage the Mississippi River’s ecology, including its fish stock and bird species. The U.S. Department of the Interior states that USACE’s plans for mitigation:

…lack scientific validation, are logistically infeasible, and inadequate both in kind…and amount.

A new levee endangers not only fish and fowl, but also Missouri residents. As the U.S. General Accounting Office (GAO) stated in 1995, “That levees increase flood levels is subject to little disagreement.” The back-flooding into the New Madrid Floodway relieves pressure from levees upstream in Missouri. Shutting off this escape route increases the danger of levee failure at other places along the river.

While the Corps plans a new levee system with ominous consequences, Missouri’s existing levees remain in a state of disrepair. Of the 133 rated levees in USACE’s registered system for Missouri, only 5 percent are fully acceptable for a 100-year flood (1 percent chance in any given year). Ninety percent are “minimally acceptable” (have one or more areas that endanger the structure) and an additional 5 percent are “unacceptable” (not rated to perform up to standard in the next flood). That $164 million might be better spent maintaining the system that already exists rather than protecting a floodway.

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