Joseph Miller talks about transportation funding in the Show-Me State. A bill pending in Jefferson City, HJR 68, would put a 1% sales tax to the voters next November. Miller argues that drivers, not shoppers, should pay for roads and bridges.
Super Bowl Lessons For Kansas City Transit
With Clay Chastain’s partial victory in the Missouri Supreme Court this week, his plan for a 24-mile light-rail system for Kansas City may come back under consideration. We have written many times that Kansas City would be better off without light rail. It is prohibitively expensive, carries few commuters in cities with low-population densities, and is inflexible to changing demand. For an example of this inflexibility, look no further than the aftermath of the Super Bowl.
While most Missouri residents are aware that the Seahawks defeated the Broncos in the big game, they might not know that transportation enthusiasts had dubbed this year’s game the first “mass transit Super Bowl.” The New York metropolitan area is the nation’s densest, with extensive rail and bus networks. Organizers encouraged almost 100,000 fans to take public transportation, either rail or bus, to reach the game. Indeed, this is the type of event where mass transit systems should be most effective: moving a large crowd of predictable size to and from a centralized location.
However, things did not go as planned. As fans left the game, thousands packed into the Secaucus train station, where people waited up to 45 minutes for hot, crowded train cars. Some passengers reportedly required medical attention. It took hours, and scrambling 50 buses to the site, to clear out the jam.
What went wrong? Despite actively promoting the use of mass transit to get to the Super Bowl, organizers underestimated the number who would use the trains by a factor of three. Trains are a relatively inflexible form of transit; it takes a long while to bring extra capacity to an area with a sudden, unexpected spike in demand.
There are lessons Kansas City should take from the Super Bowl in planning the city’s future transit priorities:
First, planning for transit is fraught with pitfalls. Organizers of the Super Bowl had a set population and pre-sold tickets, only to massively underestimate those who would take rail transit. In the same way, no one can be sure of the future traveling habits of Kansas City residents or the city’s growth pattern.
Second, buses are flexible, trains are not. To alleviate the jam after the Super Bowl, New Jersey brought on 50 extra buses. New Jersey could not suddenly bring a whole set of trains to the Super Bowl when a problem arose. They could not build a new station to spread out the crowd. If Kansas City builds light rail and the population shifts or there is economic growth in an area where there is no rail service, there is little the city can do but eat its losses and build a new line. But if the city focuses on Bus Rapid Transit, it could shift resources to meet new demand.
On The Airline Industry, Don’t Trust The Airlines, Just Listen To A Consultant
The Kansas City Star recently published an article airing the views of a consultant group, Frasca & Associates. Frasca attacked the airlines’ critical view of the proposed $1.2 billion new terminal plan for Kansas City International Airport (MCI). Despite getting more ink than the airlines’ representative received, all the points the consultant made were irrelevant or shortsighted.
First, the consultant criticized the airlines’ statement that the airline industry has experienced considerable stress since 2001 and would attempt to use their limited resources where they make the most profit. The consultant claimed that, “In fact, the airlines are now experiencing record profits.” This point is shortsighted. Airlines have managed profitability in the last couple of years. However, in the last two decades, the airlines lost so much money that Warren Buffett joked, “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.” The airlines only reached this profitability after massive consolidation, keeping just the most profitable flights, and closing airport hubs. Airlines, especially MCI’s largest carrier, Southwest, have learned their lesson and will likely remain cost-conscious in the future.
Second, the consultant objected to the airlines’ view that terminals do not create demand. They stated:
…a new or expanded terminal can address certain deficiencies and open up new air service opportunities…For example, the lack of international gate capacity…
This point is strange, as the consultant admits that growth in international travel at MCI is essentially flat (0.7 percent growth) and will remain so. But, according to the consultant, Kansas City can be like Pittsburgh, which has a flight to Paris. Unfortunately, Pittsburgh had to pay $9 million in subsidies for that honor, so maybe Kansas City does not want be like Pittsburgh. As Southwest officials stated, MCI has adequate capacity and its price competitiveness means more service. Compared to non-hub peer airports, MCI has more non-stop destinations.
Third, consultants disagreed with the airlines about the importance of landing costs for airlines. They stated:
In general, airport costs (i.e., terminal rents and landing fees) comprise roughly 3 to 6 percent of an airline’s total costs.
The consultants claim that fuel is most important to airlines and operation costs can decrease at a more efficient, new site. However, this is irrelevant. If a new terminal is built that makes MCI more expensive to operate out of, the airport could certainly lose flights. Perhaps the consultants at Frasca & Associates should call Southwest officials and tell them that 3-6 percent of their costs don’t matter and they should not have refused to sign a lease agreement with Sacramento International Airport after that airport’s costs increased.
The consultants make several other points that are equally not insightful. Perhaps it need only be pointed out that airlines understand the aviation industry. The airlines also decide where their airplanes actually go, making their viewpoint on why they choose specific airports especially important.
Update: Lee’s Summit Superintendent’s Amazing Contract
Yesterday, I wrote a piece in which I noted that the Lee’s Summit School District superintendent earned $258,660. Indeed, this was the figure cited in the recent audit of the school district and it was an accurate figure. It is not, however, his current salary. Shortly after we published the post, an astute reader of the blog pointed me to the superintendent’s current contract. This year, he is earning $282,831. Yes, he received a $24,171, or 9.3 percent, raise from last year to this year. Next year, he is due to receive $294,463, and $306,735 the year after that.
One mistake I made in the post was stating that his fringe benefits were in addition to his salary. His new contract states that the salary “includes the value of certain fringe benefits,” such as deferred compensation, family medical insurance, association dues, cell phone, business expenses, and a vehicle allowance. So, for the most part, his benefits are included in his salary total. Still, this is a pretty nice salary. In addition to these perks, he is allowed up to $3,000 additional income to cover fuel expenses. And, he is given 30 vacation days on top of holidays.
Let’s not forget, the superintendent is also a member of the Public School Retirement System (PSRS). That means the school district must provide a 14.5 percent match to his retirement contributions. All told, the compensation package for the superintendent of the Lee’s Summit School District is north of $320,000.
Update: Following this post, we received the following tweet from Dr. David McGehee:
@ShowMe As a matter of fact, base salary $218,972 13-14, $227,731 14-15, and $236,840 15-16. Rest reported is in lieu of benefits & expenses
— David McGehee (@DrDavidMcGehee) February 5, 2014
MCI’s Competitiveness Harmed, Not Helped, With New Terminal Plan
Two weeks ago, Southwest Airlines gave a presentation to the Kansas City Airport Terminal Advisory Group about the proposed $1.2 billion new terminal plan for Kansas City International Airport (MCI). Southwest officials echoed our concerns about the immense cost of the plan.
These revelations pushed some of those who had supported the new terminal to call for a new plan. But in the past week, those who still support the new terminal plan started to push back. As the Kansas City Star reports, transportation consultants working for the terminal advisory group stated that upgrades might attract more flights. These consultants also stated that the new terminal plan has the increased amenities and power outlets the business community demands.
Adding to this, business leaders stated at the most recent meeting of the Airport Advisory Group that unnamed businesses chose not to invest in Kansas City because MCI is not a welcoming “front door.” Those business leaders went on to say, like the aforementioned transportation consultants, that major repairs are necessary to draw more business travelers and investment to Kansas City. In other words, business travelers choose travel destinations based upon which airports have Cinnabons and Sbarros.
However, these arguments are less compelling when one notes that, with 51 cities in reach by direct flights, MCI has relatively good service compared to airports in peer cities. This is largely due to MCI’s price competitiveness.
In addition, the evidence shows that a city’s economic climate, not the state of its airport terminals, is most important for determining travel demand. As to the need for more amenities like food options and electrical outlets, building a $1.2 billion new terminal to address these matters is like using a jackhammer to drive a nail.
To sum it up, the airlines (and common sense) say that building an expensive new terminal will not increase demand for air travel. Quite the contrary, the higher costs to airlines and passengers may mean fewer flights. Even if we agree with business leaders that MCI requires more amenities, certainly there is a cheaper way of providing these than a $1.2 billion new terminal plan. The cost is so much greater than the supposed benefits that the plan looks more like a vanity project than a sound investment.
Kansas City’s Charter Change
Last week, the Kansas City City Council decided against two charter changes that the mayor had proposed and political groups had backed. The proposed changes that will not go to the voters would have given the mayor the ability to fire the city manager and would have changed the structure of the City Council so that there would be 12 in-district seats.
The Show-Me Institute testified before the Charter Commission last year stating that calling Kansas City’s mayor a weak mayor is a misnomer. While the mayor of Kansas City is more a member of the City Council than his own executive branch, mayors can veto legislation. According to Reza Baqir in his 2002 study in the Journal of Political Economy:
The only indicator of mayor powers that was consistent with statistically significant results was the overall mayor veto indicator.
Kansas City City Councilmember Ed Ford made the correct argument that the power to fire is the power to hire, as any mayor could simply threaten to fire a candidate for city manager while they are under consideration by the City Council. While the Show-Me Institute does not advocate for or against a strong mayoral system of government — in fact, there are benefits of a strong mayoral system — it would be best to build a new governing system from the ground up rather than tinker with one item at a time.
Regarding in-district seats versus at-large City Council seats, our position was more concrete. Research indicates that at-large seats serve as a break on government spending. Lawrence Southwick surveyed 2,000 cities across the country for his 1997 study in Economics and Politics and found that at-large municipal officials:
. . . act so as to reduce both spending and taxes as compared to what ward representatives do. The ward representatives act in a more “pork barrel” framework which results in more spending.
Some on the Charter Commission seemed bewildered about the conclusion that in-district seats can increase per-capita spending, but we find that taxpayers understand the matter clearly. In general, at-large City Council members are more likely to mind the whole store, while in-district City Council members more likely are concerned about earning votes from a small local community.
Mirror Mirror, Who Is The Highest Paid Of Them All?
Yesterday, the Missouri Auditor’s office released its audit of the Lee’s Summit R-VII School District. Relatively speaking, it was a pretty clean audit. The district has not been flouting state law by passing students on who are well below grade level. Nor has the district overpaid its construction manager to the tune of $1.2 million. In comparison, Lee’s Summit’s infractions are minor: more than $116,000 in no-bid contracts, not managing transactions on the 900-plus purchasing cards issued to district personnel, purchasing a piece of land for $775,000 without an appraisal. You know, no big deal.
What has shocked people the most about the audit may be the salary and benefit package that the superintendent receives. The report noted:
The district’s superintendent at June 30, 2013, was Dr. David McGehee. His annual compensation was $258,660, which included a deferred compensation allowance of $19,716, family medical insurance of $15,377, and association expenses of $12,000. He was also provided a district vehicle for business and personal use.
Let me be clear. That is $258,660 plus those other benefits. None of this should come as a shock to readers of the Show-Me Daily blog. In 2010, we published a policy study detailing the actual pay of public school superintendents in Missouri and we noted that many receive significant perks.
One of the things we highlighted in that paper was that there seemed to be no correlation between academic performance of students and the compensation of the superintendent. From just a cursory glance, this seems to be the case here. From 2009 to 2013, the percentage of Lee’s Summit students scoring proficient or advanced in math and language arts has remained almost unchanged. Other districts, however, have improved and Lee’s Summit has dropped in the rankings. In 2009, the district was in the top 35 districts in terms of performance on the math and language arts exams. The district since has dropped to 90th and 53rd, respectively.
In approximately the same time frame, the superintendent’s salary has increased dramatically. In 2007, he was paid a salary of $170,000. In the seven years since then, he has received a 52 percent raise. According to data that the Missouri Department of Elementary and Secondary Education collects, this makes him the highest-paid superintendent in the state.
School Choice Week Update
Keep Bike Shares Self-Supporting
With more than 2,000 users in its first few months of operation, the Kansas City bike share program has had a lot of success getting people to ride bikes in downtown Kansas City. A bike share is a service that allows people to rent bikes for short periods. These bikes are rented from and must be returned to “stations” dispersed throughout the city. However, many bike share programs are having a difficult time finding the money to stay in business. Kansas City and other Missouri cities should resist those urging the use of public money to support bike shares. The evidence shows that bike shares serve highly educated elites who can pay their own way.
The Kansas City B-Cycle program launched in 2012 as a non-profit bike share service. Sponsors include the city and county as well as banks, insurance companies, and other private businesses. Bike rentals cost $7 for a day pass or $65 for a year pass. B-Cycle is also using Kickstarter campaigns, which draw micro-donations from interested individuals, to fund new stations throughout the city. This type of voluntary funding supports downtown transportation without forcing those who do not use the system to pay.
However, all is not well for bike sharing programs. Public Bike System Co., which operates many bike share systems in the U.S., recently went bankrupt. The problem for many bike share programs is that rental fees from users do not cover operating costs, meaning sponsors need to cover part of the operating expenses and all the capital investment of the services. Sponsor support can be transient, and as bike shares expand to include less profitable stations, bike share services quickly lose solvency. Enter the urban transit boosters (such as the National League of Cities), who claim dubiously large congestion and livability benefits from bike share programs. They support city and state funding for, and capital investment in, bike share programs.
However, like many transportation projects, subsidizing a bike share program most likely benefits the wealthy and educated. A survey of riders using Capital Bikeshare in Washington D.C., found that 95 percent of users held a college degree (56 percent had a masters or doctorate). As for income, 80 percent made more than $50,000 per year and 45 percent earned more than $100,000 per year. For perspective, per capita personal income in the district is about $45,000 and less than half of all residents have college degrees. Clearly, bike share users do not need city-subsidized bike rentals. Furthermore, from data collected in Kansas City, we know that most riders use the bikes on the weekends in the downtown core. In short, a city-supported bike share uses public dollars to support the weekend excursions of highly educated, upper-middle class residents.
The Kansas City bike share service has achieved its initial success primarily as a user- and sponsor-supported venture. But Kansas City residents should be wary, lest the city begin subsidizing the recreation of the wealthy at the expense of everyone else.
