Emerald Automotive Still Seeking The Green

Posted on by Patrick Ishmael

It’s been a couple years since we first discussed hybrid car start-up Emerald Automotive. When we last left it, Emerald was debating whether it would pursue the (doomed) Aerotropolis tax credits of 2011 — in context, a very creative avenue of funding for a car company. Since then, updates on the very-much earthbound car manufacturer have been infrequent. The last article I’ve been able to find from a major Saint Louis daily was last January, and things weren’t looking good for the project.

The original timetable called for the Hazelwood plant to be producing vans by 2014, but that has been pushed back because the company is still searching for funding — about $160 million — to build the facility, Marble said.

In addition to some private capital, Emerald has received a $3 million loan from Hazelwood and $2 million from the Missouri Technology Corp., plus a $5 million grant from the British government’s Technology Strategy Board.

The company had hoped to snag a $100 million-plus loan from the U.S. Department of Energy’s Advanced Technology Vehicle Manufacturing Program, but withdrew that application last summer to pursue private investment options after federal energy loans stalled in the wake of the Solyndra controversy. Solyndra, a solar-panel manufacturer, went bankrupt after getting a $535 million DOE loan.

It’s never a good sign when your project, rightfully or wrongfully, gets lumped in with publicly financed boondoggles like Solyndra. The online publication Patch.com reported in July that Emerald says it will open its doors in 2015, with 600 jobs waiting in the wings. But as this process drags on, it begs the question: Is the Emerald project actually happening?  I left a message with the Missouri Technology Corporation (MTC) to find out; I haven’t received a return call.

Fortunately, Hazelwood’s office of economic development was more helpful. Hazelwood indicated that after abandoning the Department of Energy’s loan program, Emerald indeed turned its sights to finding investments from the private market and had been giving demonstrations of their product to potential investors. Although Hazelwood did not have a figure for how close Emerald had gotten to its original $160 million goal, it was pretty clear that Emerald wasn’t exactly getting close — at least not yet. Hazelwood and the MTC could take possession of some of Emerald’s patents if the company goes out of business, but as the Mamtek situation reaffirmed, there’s no telling whether the patents are worth anything close to the public loans that supported the company. That should leave us all a little unsettled.

On the positive side, I was happy to hear that the company is turning its attention to getting investments from the private market. That’s how it should have been from the beginning, and how it should be going forward. Every itemized dollar of investment noted in the St. Louis Beacon article was related in some way to government funding. That’s not how capitalism is supposed to work.

Will Emerald find the green? Time — and hopefully, the market — will tell. We’ll keep you posted.

Time For Teacher Tenure Reform?

Posted on by James V. Shuls

As first appearing in Southeast Missourian, September 23, 2013:

In New York City, it is incredibly difficult to remove a tenured teacher. There are, however, many differences between teacher tenure laws and policies in New York City and those in Missouri. In New York, teachers are granted tenure after their third year of teaching. In Missouri, it is five years. New York City has a cumbersome collective bargaining agreement; collective bargaining is a relatively new concept for Missouri teachers. Still, teacher tenure remains an important and contentious issue in Missouri.

Missouri statute says teachers earn an “indefinite contract.” However, state laws also allow school administrators to remove teachers for reasons of misconduct or incompetence. The question really is, how difficult is it to remove a tenured teacher for his or her performance in the classroom? And should it be easier?

On one side, teachers’ unions say state laws simply grant due process. On the other, some claim removing a tenured teacher is a herculean task. In a recent policy study with Kacie Barnes, I explored this question. We wanted to find out from the group that should know best — superintendents — how difficult it is to remove a tenured teacher.

We surveyed 192 Missouri public school superintendents about the topic. According to superintendents, it is not impossible to remove a tenured teacher, but it is certainly not easy, either. Nearly 75 percent indicated it was either “somewhat” or “very difficult” to remove a tenured teacher. This difficulty primarily comes from the time and paperwork necessary to navigate the bureaucratic process.

Administrators also must consider important political dynamics and the cost involved. Because the circumstances can vary greatly, estimates of the cost involved to remove a tenured teacher can vary widely, from very little to hundreds of thousands of dollars. For these reasons, among others, very few tenured teachers are removed for their performance — three-tenths of 1 percent, by our estimates.

Should we reform teacher tenure? According to superintendents, yes. Ninety-two percent of superintendents in our survey indicated they would be supportive of some type of teacher tenure reform. One superintendent unequivocally stated, “Teacher tenure is the greatest restraint to student performance!”

A possible solution many superintendents in our study mentioned is multiyear contracts. Ultimately, it seems more superintendents would like the ability to develop local policies that best meet the needs of their teacher labor force.

We may not have rubber rooms, but Missouri superintendents recognize that teacher tenure is an issue that should be addressed.

James V. Shuls, Ph.D., is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy. You can find the full policy study, “The Power to Lead: Analysis of Superintendent Survey Responses Regarding Teacher Tenure,” online at showmeinstitute.org.

Pro-Obamacare Saint Louis Hospital Cutting Back Benefits To Part-Timers … Apparently Because Of Obamacare

Posted on by Patrick Ishmael

Earlier this year, BJC Healthcare hosted a press conference supporting the expansion of Medicaid in Missouri under the Affordable Care Act (ACA) — a fiscally irresponsible move that would just pump more money into the already broken state program. For BJC, the press conference made sense; it and hospitals across the country supported the law’s passage in 2010 believing they’d make more money by negotiating and defending the government’s overhaul plans. So when the supper call came late last year to get the Medicaid gravy train moving in Missouri, it wasn’t surprising that BJC and its CEO were out there ringing the triangle.

Yet, that BJC would become the face of the “Affordable Care Act” — also known as “Obamacare” — in Missouri takes some serious nerve. In 2012, the health system’s profits rose a whopping 129 percent, to more than $365 million from $158 million just a year before. It’s clear enough that BJC has done well in the three years since the bill was passed. But just because those three years have been good to some in the health care industry doesn’t mean it’s been as great for everyone, let alone BJC’s own employees. Just ask some of BJC’s part-timers:

BJC Healthcare, the largest St. Louis employer, is preparing to cut health insurance benefits for some of its part-time employees.

According to two part-time nurses with the BJC system, managers and Human Resources representatives recently began informing certain employees that those who do not work at least 24 hours per week will be ineligible for health benefits.

This change of policy could affect thousands of workers at Barnes-Jewish Hospital, St. Louis Children’s Hospital, Christian Hospital and BJC’s other hospitals, outpatient centers and clinics.

BJC declined to discuss the matter.

Why would health care provider BJC cut health care benefits at this moment in time? You may have already guessed at the reason:

One part-time nurse at Barnes-Jewish Hospital, who requested anonymity, said that she was recently told by a BJC manager that these health benefits were pared back as a consequence of the new health care law.

“Affordable Care”? (Emphasis mine)

Chris Johnson, vice president and manager of consulting services at J.W. Terrill, said dropping part-timers from health care coverage is a growing consideration as businesses grapple with rising health care costs and changes to the health care landscape under Obamacare.

The Affordable Care Act made care less affordable, created a system that could end up with American jobs being shipped abroad, imposed (and imposes) requirements that discourage employers from letting employees keep their plans if they like them, and fundamentally doubled down on a broken health care status quo. We have needed health care reform in this country for years, but the Affordable Care Act simply was not it.

Of course, BJC already has its golden parachute. Unfortunately, it doesn’t appear there are enough life-saving devices on the hospital’s plane for all of its employees.

$16 Million For Two Blocks?

Posted on by David Stokes

Should Missouri and St. Louis taxpayers provide more than $16.5 million in tax subsidies to move Laclede Gas two blocks from 720 Olive to the General American building on Market? Read the TIF application.

Transcript:

We’re standing here at the Laclede Gas building at 720 Olive in downtown St. Louis. The main tenant here is planning on moving two blocks south to the vacant General American building. There’s nothing wrong with that. It happens all the time in any big city. The catch is that city and state taxpayers are going to subsidies that move with over sixteen-and-a-half million dollars. That’s other people’s money to help a company move two blocks.

The economic evidence is strong that local earnings taxes harm cities more than property taxes do (see: Local Revenue Hills: Evidence from Four U.S. Cities, New Evidence of the Effects of City Earnings Taxes on Growth, How an Earnings Tax Harms Cities Like Saint Louis and Kansas City, and Triumph of the City). So why exactly is the city giving up the less harmful tax in order to keep more of the more harmful tax?
 
Sixteen-and-a-half million dollars in subsidies. 2 Blocks. Lower taxes for some and higher taxes for everyone else. Economic Development, if you can call it that, in the St. Louis region is insane.

This subsidy will not grow the economy of St. Louis city or our region. One empty building becomes full while a full building loses its main tenant. If the city’s doing this because it’s concerned about losing the earnings taxes of the Laclede Gas employees, perhaps the city should get serious about removing the earnings tax instead of hollowing out its property tax base.

For the Show-Me Institute, I’m David Stokes.

 

 

MCI’s Cost Per Enplanement (Terminal Financing – Part 4)

Posted on by Patrick Tuohey

During the Sept. 10 Kansas City Airport Terminal Advisory Group meeting, panelists discussed airport financing. In a slide show presentation, Aviation Department Chief Financial Officer John Green indicated that with their key assumptions, cost per enplanement (CPE, or cost per passenger) will grow from the current $5.25 to between $14.36 and $18.70 in 2022 if the single terminal is built.

As my colleague Joe Miller wrote several weeks ago:

Having a high cost per passenger can mean fewer passengers, as the marginal leisure traveler chooses not to fly for vacation and businesses decide to economize on airline tickets. This, in turn, reduces airline profits and constricts service, which further pushes up CPE. This is precisely why that measure is a major point in airport bond ratings, and why MCI [Kansas City International Airport] currently advertises the fact that its CPE is only $5. The Star seems to assume that $19 per passenger, far above the median CPE for peer airports, will have no effect on MCI’s bond ratings or competitiveness.

Now it appears the Aviation Department is also assuming that tripling the CPE will have no effect. While it may be unknown how a high cost per passenger impacts ticket cost, it likely does influence whether an airline chooses to fly out of an airport. Isn’t that the whole point, making MCI more attractive to airlines?

For more about this topic, read here and here.

Free Rides In The Zoo Museum Taxing District?

Posted on by Haleigh Albers

Show-Me Institute Intern, Haleigh Albers, talks about the demographic changes in the St. Louis area that impact the St. Louis Zoo-Museum Taxing District. As the population of the region has grown, the population living within the Tax District has decreased reducing the tax base. Are visitors from the wider region to the St. Louis Zoo free-riding on that diminished tax base?

Read more about this in Haleigh’s op-ed.

 

Is The Zoo-Museum District An Outdated And Unfair Tax?

Posted on by Allison Davis

The Saint Louis Zoo is a great place for families to spend a summer day. Many people like that the zoo does not charge admission, but few visitors know how the zoo is funded. When told that a property tax in Saint Louis City and Saint Louis County pays for the zoo, some visitors were surprised. Residents of Chicago and Tennessee said the free admission is nice. However, two citizens of Saint Louis City think it is unfair that residents of surrounding counties can visit the zoo for free.

While the fairness of this tax is a worthy topic of debate, Haleigh Albers, an intern at the Show-Me Institute, said she is more concerned about the sustainability of this tax. The population of the tax district (Saint Louis City plus Saint Louis County) has been decreasing steadily over the past few decades, meaning that fewer and fewer taxpayers are supporting the zoo.

Not only is the population of the taxing district shrinking but — more importantly — the population also is getting smaller relative to the greater Saint Louis area. Haleigh writes:

At the time the Zoo-Museum District tax was levied on Saint Louis City and Saint Louis County, the residential taxpayers accounted for 62 percent of the population of the greater Saint Louis area. The majority of the typical Zoo-Museum District customers were contributing to its funding. Conversely, in 2010, Saint Louis City and Saint Louis County consisted of only 47 percent of the metro area. Therefore, less than half of the expected patrons were funding the District.

population over time final

KCI’s Overly Optimistic Estimates – Part 2

Posted on by Patrick Tuohey

At the Sept. 10 Kansas City Airport Terminal Advisory Group meeting, airport Chief Financial Officer John Green presented a financial analysis which included as part of the Key Assumptions for Projections (page 5) a 2 percent growth in passenger enplanements (the number of people boarding the plane).

But recent passenger numbers fly in the face of that. In 2012, total enplanements were down 4 percent from 2011. And 2013 numbers so far are down more than 3 percent from 2012. I recall Green saying to the advisory group that the Aviation Department predicts a growth in passenger traffic of 2.8 percent for 2013. So far, that appears to be wildly optimistic. Way back on July 11, the Show-Me Institute’s Joe Miller wrote:

The determination of some Kansas City officials to construct a new $1.2 billion terminal at Kansas City International Airport (MCI) is based on optimistic projections. Not only do their projections fly in the face of aviation industry trends in the last decade, they don’t even conform with the airport’s own 2012 financial report.

The Kansas City Aviation Department originally used 2006 baseline estimates to justify new terminal specifications. Back then, they predicted 2.8 percent growth in enplanements (the number of people boarding the airplane) from 2006 onward. But they were wrong, and eventually had to revise the projected growth down to 1.9 percent. The growth of passengers in the last decade has fallen even further, to 0.01 percent. This slide in growth started before the financial crisis. Even including the booming 1990s, total growth averaged a meager 1.9 percent from 1991 to 2012.

Those aren’t the only optimistic numbers among the key assumptions. The Aviation Department appears to have lowballed its 3 percent estimation of escalation, a euphemism for cost overruns. According to a February 2009 report from the Airports Council International – North America aimed specifically at  estimating airports’ capital development costs, escalation has averaged 7 percent and has been as high as 11 percent.

Recent construction cost escalation has clearly impacted airport development costs. ACI-NA surveyed respondents about their experiences with increasing construction costs. As shown in Table 2, nearly 60 percent of all respondents to this question reported an increase of greater than five percent for development projects recently bid or re-estimated, with an average of 7% increases for the 45 reporting airports; over one-fifth reported an above 10 percent increase. These increases are well above the general inflation rate of 2.8 per cent. FAA also reported in its latest NPIAS report that “construction costs have increased approximately 11 percent” for the past two years, “due in large part to increases in materials and labor.”

Green took pains to state that these assumptions, which amount to predicting the future, are difficult to make. No one doubts this. In some cases, the estimates are conservative, such as an assumption that the interest rate will be 6 percent. But on important matters such as passenger traffic and cost overruns, the people of Kansas City are likely skeptical, and right to be.

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