Real Estate 101

Posted on by Kacie Barnes (Galbraith)

If you were a real estate agent with nearly 8,000 properties for sale, what would you do?

You might be thinking, “Well, duh. I would sell them. Cha-ching!” Seems really simple, but the St. Louis Land Reutilization Authority (LRA) does not appear to have that same mindset.

When I met with Michael Allen, founder of the Preservation Research Office (a private historic preservation and architectural research organization) he remarked at how little advertising the LRA does for its properties. Compared to real estate agencies, LRA advertisement is practically non-existent.

Shouldn’t the LRA function in the same way as real estate agents if its goal is to sell property?

According to Janet McAfee Real Estate’s Marketing Director Chuck Roper, the Multiple Listing Service (MLS) is the primary source of real estate listing information for approved brokers in Saint Louis. LRA-owned properties, however, are very rarely listed in the MLS.

Besides the MLS, there are a variety of other ways to make information available about properties. Newspaper and magazine ads, online ads, listings on real estate websites, social media, direct mail…you get the picture. The LRA does none of these things. You could drive by an LRA property that is for sale and have absolutely no idea. Two LRA staff members gave me different replies about whether they post “For Sale” signs. One said they are put up on “selected properties.” But the other simply said, “Nope, we don’t do that.”

With the LRA, the onus is all on you, the potential buyer, to figure out the entire process to purchase a home. You have to know that the LRA exists, what it does, find its list of properties, set up your own inspection of the house, and then begin the application process.

Every year that goes by, the city pays more and more to maintain these properties. They sit vacant, collecting no property tax. With 8,000 vacant properties, the LRA cannot afford to have the attitude that these properties can sell themselves. Any real estate agent will tell you that couldn’t be further from the truth.

Why A Single High School Equivalency Exam?

Posted on by James V. Shuls

The Missouri Department of Elementary and Secondary Education (DESE) announced on Wednesday that it selected a new test to replace the GED, the HiSET.

The cost of the new test will be $95, which includes a $60 registration fee for the cost of the test and $7 for each of the five test sections to cover the costs of administering the test. Because examinees do not have to complete the entire test at one time, they can take the test in sections.

The $60 registration fee will allow individuals to test three times during a 12-month period. Examinees who do not pass the test the first time can retake the entire test or any of the test sections two more times within the 12-month period by paying an additional $7-per-section fee.

The change was prompted because

. . . the American Council on Education GED Testing Services (GEDTS) and Pearson announced plans to create a for-profit organization to develop a new computer-based high school equivalency test to replace the current GED test in January 2014. Shortly after the announcement, GEDTS revealed that the price of its new test would be $120, not including any state administrative fees.

Changes to the GED have finally prompted others to enter the market for high school equivalency tests.

I commend DESE’s attempt to keep the cost low for test takers. What puzzles me is why they chose only one exam. It would be a much better system if multiple providers of high school equivalency tests were recognized and individuals were given the ability to choose among them. Some students may wish to pay to take the GED because it is so widely recognized.

Having multiple tests would give individuals who have not graduated from high school more opportunities to better their lives. Instead of providing options, we have simply moved from one monopoly to another.

Missouri House Bill 253…Vetoed! (Part III)

Posted on by Michael Rathbone

Now all of a sudden Missouri Gov. Jay Nixon is concerned about certain businesses getting preferential treatment in the tax code. Specifically, in his veto of Missouri House Bill 253, Nixon said that it “…provides preferential treatment to select Missouri businesses, while discriminating against the majority of others based solely on the paperwork the businesses filed to organize.”

First, a quibble. Nixon says this “preferential treatment” will be discriminating against the majority of businesses in the state. That left me confused. How did the governor reach that conclusion? According to figures from the Missouri Department of Revenue, the state has 128,126 pass-through entities (including S-Corps). The total number of C-Corps is 68,185. By most rules of math that I know, 128,126 is a larger number than 68,185, so I can’t possibly see the governor’s point here.

Does HB 253 create preferential treatment for one type of business, as the governor fears? Eh, not really. Both the pass-through entity and corporate income tax cut are nearly the same amount. It is true that the corporate income tax cut only goes into effect if certain revenue targets are met, and it will take 10 years to be fully enacted instead of the five years for the business tax deduction. In the long run, however, the amount of the tax cut will be nearly identical. If the governor has evidence that this short-term difference will negatively impact Missouri businesses, he should present it.

It also is humorous that the governor is criticizing companies getting preferential treatment through the tax code. This is the same governor who extolled the benefits of the Mamtek deal, which was awarded $7.6 million in Missouri Quality Jobs tax credits and $6.8 million in Missouri BUILD tax credits. Economic development tax credits, by their very nature, give preferential treatment in the tax code. I wonder what brought on the change in outlook. The governor has voiced support for tax credit reform, but he hasn’t been hesitant to take credit for the supposed “benefits” that they create.

HB 253 is by no means a perfect bill, but it is a step in the right direction. Nixon has listed his reasons for vetoing the bill and hopefully I have conveyed how those fears are either imagined or overstated. Hopefully some kind of tax reform is enacted. Missouri cannot afford to wait too long.

CID Lives

Posted on by David Stokes

If your future dream involves a shopping excursion to the Crossroads Art District in Kansas City, it may cost you a little bit more thanks to a proposed Community Improvement District (CID) for the area. CIDs are another example of the alphabet soup of special taxing districts in Missouri. Sing it with me:

“Is this a CID? Or is this an EEZ? Or is this a TDD? I thought it was old KC? Or just another subsidy…”

On the ladder of subsidies, CIDs are at the lower end of noxiousness. Nonetheless, as someone else (I don’t recall whom or where) said (paraphrasing here), “CIDs represent an admission that local government has failed in basic responsibilities.” Stepping into a void left by poor public services with new private activity is one thing. Stepping into the void with new, additional taxes and rules is quite another.

Along with all the other special taxing districts and subsidies, CIDs represent a constant growth in the public sector to do basic things that used to be better delineated between public or private responsibilities.

Police protection? Public. Better driveways to your own store? Private. Pretty flowers to beautify your shopping center? Private. Now we have turned these latter areas into semi-public responsibilities supported by tax dollars, be they TIF, TDD, or whatever.

I am pleased to read that there may yet be some serious opposition to the Crossroads CID proposal, as reported by Tony’s Kansas City. It should be far more difficult than it is to get these special districts established. Sometimes CIDs can focus on legitimately public interests, and you can argue that is the case here. (If it stays focused on security.) But often these types of districts easily morph into taxpayer-funded expense accounts for businesses that lack the proper oversight of tax dollars (like the Lake Lotawana CID). And the more you have of them, the harder it is to monitor all of them.

I hope the residents and business owners of the Crossroads district think long and hard about this latest tax proposal. I think their goals can be accomplished through private action (like the education campaign they have been waging) instead of new taxes.

Conventional Fears

Posted on by Kacie Barnes (Galbraith)

Let’s be honest. We all like new stuff.

So I can understand why Jefferson City officials are planning a fancy new conference center. But as we have said in the past, the government is not the best suited to plan development. There are two proposals for the project; both companies have told Jeff City officials that the government’s request for a facility with 30,000 square feet of exhibit space and an accompanying 200-room hotel is not realistic in this market.

The city has promised $9 million in lodging tax revenue to support construction, and is discussing the details of an operating subsidy.

The News Tribune editorial board has fears, writing, “Worst-case scenarios revolve around a money-losing conference center that must be vacated or infused with a perpetual subsidy of city tax dollars.” This is a real fear.

A Brookings Institution study found that the convention marketplace in the U.S. has been declining for quite some time. Yet, localities have continued to compete with each other for convention business by investing in new construction and expanding existing facilities. The study notes that many conference centers, including those in Saint Louis and Washington, D.C., have operated at a loss.

Why are Jefferson City officials so eager to invest in something for which they have not demonstrated a need? If developers who stand to gain from subsidies are telling the government that their plans will not be profitable  — the government should listen.

Lee’s Summit And The Road Not Taken

Posted on by Patrick Tuohey

The Lee’s Summit City Council voted overwhelmingly to end its consideration of Enhanced Enterprise Zones (EEZs). This is a good thing, and it is a credit to the members of the City Council who were intellectually supple enough to reconsider something that as recently as two months ago seemed a fait accompli. It is also a great credit to activists and residents who attended meetings and hearings about the matter — making sure city leaders knew their concerns.

The Show-Me Institute testified before the City Council in April that EEZs are as effective at creating jobs and economic growth as doing nothing. The data simply doesn’t support EEZ supporters’ claims. In fact, when questioned at a subsequent informational meeting, the consultant the city hired had to admit that numbers showing the success of EEZs don’t take into account what the growth may have been without EEZs. Basically, the whole program is built on the logical fallacy knows as Post Hoc Ergo Propter Hoc — after, therefore, because of.

Figures showing how many other places in Missouri have adopted EEZs did not sway residents. They were skeptical of claims of growth as a result of EEZs, and they were hostile to the claims that blight would do no harm. They wanted none of it.

Lee’s Summit has a lot going for it. As we wrote in our guest commentary in the Lee’s Summit Journal:

In 2006 and again in 2010, Money Magazine cited Lee’s Summit as one of the 100 Best Cities in the United States. The Lee’s Summit Chamber of Commerce boasts on its website: “Lee’s Summit is an ideal place to live and work, providing a desirable lifestyle that everyone can enjoy — high-quality, affordable housing in safe neighborhoods endowed with fine schools and excellent health care facilities.”

Governing a city is difficult, and my guess is that it’s even harder than it need be because everyone is trying to second-guess the free market to get ahead. City officials don’t want to just create jobs, they want to create the right kind of jobs, whatever that means. But the truest path to success in Lee’s Summit and elsewhere is to do less. Keep taxes low for everyone, streamline the bureaucracy, and let the free market thrive.

When it comes to EEZs, Lee’s Summit has chosen the road less traveled, and that will make all the difference.

Missouri House Bill 253…Vetoed! (Part II)

Posted on by Michael Rathbone

Let’s make one thing clear: The state is required to have a balanced budget. If revenues do not meet current expenditure levels, then there will have to be cuts to the budget in order to match revenues. Governor Nixon fears that HB 253 will force deep cuts that will affect vital services. Governor Nixon’s fears are overstated.

First, there are revenue triggers in the bill that would prevent the full tax cut from taking affect if revenues did not grow. Governor Nixon warns that if the Marketplace Fairness Act is enacted and the top rates drop by one-half percent, then state revenues will suffer. If this did occur; however, then the rest of the individual and corporate tax cuts would be stopped and only the business tax deductions would continue.

Second, the state is looking to have a $300 million surplus at the end of the year, which means it currently has more than enough revenue to fund its current operations. Now whether we have a surplus next year depends on what the state plans to spend and the state of Missouri’s economy. However, right now, Missouri has a cushion to absorb a decline in revenue.

Third, the Governor’s analysis (at least in the veto message), does not consider the dynamic effects for lowering the tax rates. According to a paper by Mathias Trabandt and Harald Uhlig, increased economic efficiency can make up for some of the revenue lost due to a tax cut. I’m not saying this tax cut will pay for itself, but the economic research by Trabandt and Uhlig suggest that it is not unreasonable to suggest that the loss in revenue will not be as large as opponents fear.

It is also important to note that if the state kept to tight expenditure limits for future years, like increasing spending only by inflation and population growth, then it would be easier to live with diminished revenues. For example, the Show-Me Institute published a policy study by Stephen Moore and Richard Vedder on how Missouri could eliminate the income tax entirely by 2020 if it adhered to these expenditure limits.

Governor Nixon’s veto will hurt Missouri in the long run and I’m sure Kansas is grateful for his actions. However, the reasons behind Governor Nixon’s veto are flawed and if Missouri is to remain competitive, it needs measures like HB 253 to become law.

Dismantling The Post-Dispatch’s Piece About Education (Part 4 of 4)

Posted on by James V. Shuls

The St. Louis Post-Dispatch editorial board recently issued an opinion piece riddled with errors, faulty assumptions, and half-truths. This post is the fourth of four posts (part 1, part 2, and part 3) that aims to point out where the editorial board got it wrong.

Fallacy 4: State-by-state comparisons need not adjust for the cost of living

Teachers in Missouri are among the worst paid in the nation, right? That is what the editorial board of the Post-Dispatch would have you believe. As evidence, they link to a piece in The Atlantic, which lists the 10 best and 10 worst states in terms of teacher salaries. Missouri ranks 3rd on the 10 worst list.

As with almost everything else written in the editorial piece, there is a huge problem with this comparison — the cost of living.

The average teacher salary listed for Missouri is $46,411. This seems much lower than the $72,708 salary listed for New York or the $69,434 salary listed for California. Of course, it costs much more to live in those places.

A quick visit to a cost-of-living calculator can help us understand the difference between Missouri’s teacher salaries and those of the highest-paying states.

A salary of $45,000 in Saint Louis, Mo., would be approximately equal to:

$90,246 in Brooklyn, N.Y.

$108,079 in Manhattan, N.Y.

$67,821 in Boston, Mass.

$65,598 in Long Beach, Calif.

$74,242 in San Jose, Calif.

$64,807 in Newark-Elizabeth, N.J.

$61,152 in Hartford, Conn.

$72,810 in Stamford, Conn.

It is disappointing that the Post-Dispatch piece misses the mark on so many levels, because there is room for good debate on these issues.

Because I have spent the past four blog posts explaining where the Post-Dispatch went wrong, I think I should close with an area of agreement. The editors note that the legislature is not meeting its obligation because they are under-funding the foundation formula. To that, I agree.

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