Not All Airport Bonds Fly

Posted on by Patrick Tuohey

The Branson Airport, derided by Kansas City’s City Council Transportation Committee Chairman Russ Johnson as a stealer of market share from Kansas City’s own airport, is struggling to make some bond payments.

According to The Bond Buyer newspaper:

Branson Airport LLC previously defaulted on terms of a forbearance agreement and faced possible bondholder enforcement action absent a new agreement. The trustee recently posted an amended and restated forbearance agreement dated April 22. It extends a June 30 expiration this year to June 30, 2014.

There is a huge difference between the Branson and Kansas City airports, though. Branson is America’s only private commercial airport, so there is no way taxpayers will be on the hook there. (As an aside, with Southwest Airlines recently entering the Branson market, we are optimistic that this important experiment will succeed. We are certainly rooting for it. If it does not, well, risk is a part of free-market capitalism.)

What would happen if the Kansas City airport similarly failed to meet its bond obligations? In a story about the airport for The Pitch, Steve Vockrodt wrote:

The city would not be on the hook to make up the difference if the airport didn’t produce enough revenue to cover bond payments. Bondholders would be screwed on their investments, but so would the airport’s reputation when it wanted to issue bonds in the future.

Vockrodt is correct, but it is unlikely that Kansas City’s leadership championing this project would sit by and let the airport default. For example, Kansas City recently refinanced debt incurred by the Citadel development scheme, which was never actually built. (Talk about a bridge to nowhere!) We’ve already written about how the city is on the hook for the Power & Light District. Like the airport, the city is not legally required to make the Power & Light’s Tax Increment Financing (TIF) payments. However, it has chosen to. It is therefore reasonable to expect that if a new MCI terminal fails to generate enough cash to repay its debts, Kansas City would reach into its general funds to make up the difference. In other words, the city will take money currently spent on essential city services and divert it to pay for the new airport.

Other airports have failed to live up to the fantastic expectations of development boosters. Cincinnati’s traffic dropped as ticket prices rose. Kansas City has enough financial drains, our airport need not be one of them.

Reform City Manager Rules In Missouri

Posted on by David Stokes

As published in the St. Louis Post Dispatch:

Mike Royko’s classic book Boss, about Chicago Mayor Richard Daley (the first one), has a great thread in it about the political use of Chicago building codes. Chicago had one of the nation’s strictest building codes, but everyone knew it was rarely enforced. However, if you did something really terrible, like rent an apartment to a black person in a white neighborhood or put a Republican political sign in your window, you quickly found out just how strict the building code was. There are similar examples of selective political enforcement for many other laws, which brings us, once again, to Ellisville, Mo.
Many Missouri cities have adopted a “city manager” form of government. As part of that form of government, cities often place strict rules prohibiting contact between elected city officials and city employees or contractors other than the city manager. (Often, the only exception to this is for official city investigations.) Having such a contact was one of the accusations against former Ellisville Mayor Adam Paul in his impeachment. Despite good intentions of preventing political interference, those rules against any contact are thoroughly ridiculous. Preventing contact between elected officials and city employees except the city manager serves to empower the city manager over the elected officials, not to mention minor little issues with freedom of speech and association.

Economists would refer to the core problem here as information asymmetry. City managers are full-time, well-compensated employees of a city, while elected city officials are, in most cases, part-time. City managers have the access to information, time to review it, and training to interpret it. That is not automatically a bad thing. It is generally why they were hired in the first place. However, in areas of potential disagreement between a city manager and other city officials, the elected officials are certainly at an information disadvantage. This can become especially true for elected officials who may be in the political minority on their legislative body. A city manager working closely with a political majority can readily shut out other officials from the debate. If those elected officials in the minority have no way to access information, such as talking to other city employees who may know the true story, how can those public officials do their jobs?

Beyond being able to represent their constituents, these restrictive contact rules are, almost by necessity, selectively enforced. They are written so broadly that elected officials can be punished, if they are a target, for the most mundane of discussions. If we really impeached every local elected official who had a minor conversation with a city employee, the people would have a lot of good things to read about on Sunday.

Ellisville, Mo., provided a recent example of this problem. The Ellisville City Council majority, city manager, and city attorney opposed the mayor on key issues. The political dispute ultimately resulted in the mayor’s impeachment for, among other (generally minor) charges, speaking with a city contractor outside of “approved” channels. By all accounts, the discussion was nothing more than an innocuous question-and-answer about what was happening to a group of residents being forced to move. Leaving aside the validity of the impeachment (which is currently subject to litigation), removing an elected official from office for having a brief conversation about his or her constituents should be deeply troubling. In normal instances, obtaining new data or counsel to improve your decision-making is, suffice it to say, a good thing.

City charter rules that limit communication only to the city manager and block all other municipal contacts by elected officials are methods of limiting information. That is rarely a good thing. These rules empower city managers and their political allies, and can be too easily turned into a political weapon. We need safeguards against political interference in daily municipal matters, but these charter rules are too blunt and selectively enforced. Cities would be better off removing those restrictions. Good government deserves open information, not restricted access and knowledge chokepoints.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Missouri House Bill 253…Vetoed! (Part I)

Posted on by Michael Rathbone

To the surprise of absolutely nobody, Missouri Gov. Jay Nixon vetoed Missouri House Bill 253, which would have cut individual and business income taxes. Nixon lays out the reasons he vetoed the legislation in his veto message. I will highlight some of his reasons.

First, according to Nixon, Missouri is already a low-tax state. I addressed this concern in an earlier post. In some areas, Missouri is a low-tax state; in others, it isn’t. Regarding income taxes, Missouri has a higher income tax rate than most of its neighbors, including Kansas and Illinois. If you factor in the fact that both Saint Louis and Kansas City have earnings taxes, the rates are significantly higher.

Second, Nixon claims that HB 253 would increase taxes on prescription drugs. Patrick Ishmael wrote a blog post concerning this issue. Officials with the Missouri Department of Revenue (DOR) say the legislation keeps the sales tax exemption in place. According to DOR officials, “the language provided to Legislative Research by the Missouri Department of Revenue protected the sales tax exemption for prescription drugs.” That’s also what I came away with; I read the bill.

Nixon also criticizes HB 253 for removing the sales tax exemption for college textbooks. That would be bad…why? I’m in favor of expanding the sales tax base and I don’t think college textbooks should be exempt from the sales tax. Yes, it would add more to the cost of going to college, but as a college graduate, I can assure you, textbooks were not the biggest cost factor for many of my peers and me (and I had scholarships).

I will have more to say about Nixon’s veto message. There is a lot in it to digest and the legislature will have its hands full if it wants to override the veto. However, while I do not think HB 253 is perfect, I do think it is a step in the right direction and will make Missouri a more attractive place to do business.

The Establishment Strikes Back

Posted on by Patrick Tuohey

The publisher of the Lee’s Summit Journal is not at all impressed with his neighbors’ method for objecting to government policy. In a piece titled Attack of the EEZ, he writes of a recent public meeting about Enhanced Enterprise Zones (EEZs):

Rules like repeating past discussion points, being respectful and not talking over each other went right out the window early on. Several people that live or own property in the proposed zone acted like they had never even been to a public or council meeting – and perhaps they haven’t.

The author may be right. Most of these people have spent a lifetime being busy working, trying to earn incomes and pay the federal, state, and local taxes that Lee’s Summit city officials now want to spend on an economic development tool that does exactly nothing. But what he characterizes as “an anti-government rally, complete with cat calls, cheering and cries of ‘you’re not taking my property!’ echoing throughout the room” seemed to me to be a very civil meeting of 250 people. People who, while intellectually opposed to what the Lee’s Summit City Council was considering, remained very civil. You can judge the proceeding for yourself online here.

It may be true that citizens of Lee’s Summit do not understand EEZs and fear the impact on their homes. But it is also likely true that members of the EEZ Advisory Board and City Council do not understand EEZs either. Because if they were familiar with the research on EEZs, they wouldn’t be wasting so much time on a policy that is such a complete failure.

Sure, members of the establishment like these taxpayer giveaways — which amount to nothing more than corporate welfare — because they will be first in line to receive them. The consultants and state employees who encourage such programs also benefit. Having to stand in the dock and answer questions from mere voters made them uncomfortable. The Journal publisher wrote that he:

. . . felt sorry for city staff, for EEZ Advisory Board chair Keith Asel, for city consultant Chris Sally and for the five councilmen that were lined up along the back wall during the two-hour event.

Poor dears. I hope they recover. (Note, most of the councilmen snuck out long before the meeting adjourned.) And I hope the people of Lee’s Summit continue to demand answers to difficult and unpleasant questions. Even if — or better yet, because — it makes those in the establishment earn their keep.

Common Core Is More Like Curves Than Weight Watchers

Posted on by James V. Shuls

Mike McShane, a research fellow at the American Enterprise Institute, is in the middle of an interesting blog series: “Dispatches from a nervous Common Core observer (in 10 parts).” In his first post, he asks, “Is the Common Core Curves or Weight Watchers?”

McShane notes that Curves is a very scripted and regimented workout program, while Weight Watchers simply provides guidelines for users.

Many supporters of the Common Core say the standards are just that, standards. They don’t tell teachers how to teach, they simply set the end goal. If that’s true, then the Common Core is like Weight Watchers.

However, there is a lot of evidence that the Common Core State Standards are being implemented in a manner that provides little flexibility to local schools and individual teachers. McShane writes:

First, both consortia developing tests for the Common Core standards are developing … tests designed to be given throughout the year to make sure that students are on pace to reach the level of competence that the standards require. While making sure that students are on the right path is a perfectly reasonable and laudable goal, it has the unintended consequence of standardizing the order in which particular material is taught. It makes the standards begin to look more like a curriculum…

and

Second, there do appear to be certain pedagogical undertones to the standards. Tom Loveless wrote a fantastic post over at the Brookings Institution’s blog aptly titled “The Banality of Deeper Learning.” In it, he highlights language that has been used to support the Common Core (and many other educational projects) including “project-based” “inquiry and discovery” “higher-level thinking.” These tend to be code-words for an approach to education that de-emphasizes the learning of discrete facts and standard algorithms…

This is a very important issue. Many supporters of the Common Core have said, “These are just standards. They don’t tell teachers how to teach.” I’m just not sure I believe that. From what I’ve seen, it certainly looks like the Common Core is more like Curves.

Gov. Nixon Unexpectedly Gives Legislators Another Reason To Override A Tax Cut Veto

Posted on by Patrick Ishmael

Last Thursday, Missouri Gov. Jay Nixon dispatched a press release saying he believes the income tax cut, passed by a wide margin earlier this month, would in fact raise the sales tax on prescription drugs in the state. That’s news to the drafters of the legislation, who say the legislative language in question actually came from… the governor’s Department of Revenue. No doubt, there’s an army of tax lawyers heading to Jefferson City right now to figure out how that language should be interpreted, and I’m sure we’ll hear more on their analyses soon.

But if good policy wasn’t a sufficient reason to override the widely expected veto of the tax cut before, then self-preservation might be — an incentive the governor has now offered up through his remarks. If there is in fact a “tax increase” in this tax cut, legislators cannot afford to have nothing to show for it and no way to fix it. That leaves them with only one option: preserve the tax cut and correct the drafting error. Voting not to override a veto of the tax cut would close that door; voting to override the veto would prop it open.

But stripping away all the inside-baseball stuff, this whole situation boils down to one thing: that the governor would rather spend taxpayers’ money on new state programs, such as an expansion of Medicaid, than return the money to taxpayers. That’s sad, and I wish the governor would just come out and tell us as much rather than dance around the fact. If nothing else, it would save taxpayers the money spent on all the governor’s press releases hinting at this reality.

Columbia Could Pave The Way For Food Trucks

Posted on by Kacie Barnes (Galbraith)

It’s food truck season again. As food trucks grow in popularity, more cities are working on policies to set guidelines for these mobile eateries.

Columbia’s Downtown Community Improvement District (CID) hopes to update a city ordinance to allow food trucks on downtown streets. CID board members, restaurant owners, and food truck representatives worked together to find a solution that should please all parties.

Hopefully regulations will not look like the 75 pages of food truck rules that the Council of Washington, D.C., recently introduced. Several food trucks staged a protest a few days before the Council hearing (short video here). Trucks parked at their normal lunch spots, but refused to open for business during the lunch rush. These trucks wanted to show what lunch would be like in their absence if the city imposed overly burdensome regulations on the trucks.

Columbia’s food truck business, on the other hand, is only just beginning. The city has two food trucks operating right now, Pepe’s and Sunflower Waffle Co. But the CID is smart in thinking ahead, looking to prevent issues before a problem starts. The CID board members, restaurant owners, and food truck  representatives all agreed on certain public areas that would be best suited to food truck occupancy.

While it is helpful that varying interests are working together, the city can best encourage food truck business by imposing as few regulations as possible. Excessive rules or fees would deter entrepreneurs from starting up new food trucks. Confining the mobile vendors to specific areas of the city may help keep restaurant owners from complaining, but it also may limit the success of food trucks, if they can’t freely go where customers want them.

Democracy Alive And Well In Lee’s Summit

Posted on by Patrick Tuohey

On May 23, the Lee’s Summit Enhanced Enterprise Zone (EEZ) Advisory Committee held a public meeting to collect feedback on a proposed EEZ. On April 11, the Show-Me Institute had submitted testimony about the failure of EEZs to generate any results, and on May 15, the Lee’s Summit Journal published our guest commentary regarding the issue. About 250 people were there, leading the city manager to comment that  it was one of the most well-attended meetings he had witnessed.

To a person, those in the room were opposed to the implementation of the EEZ. They asked questions about the zone, the required findings of blight, and the implications for the property values. Some were upset about the implications of blight and if their property could be subjected to eminent domain as a result. The Lee’s Summit Journal reported:

By state statute, such a zone does not alter local zoning nor can a city enact eminent domain on an EEZ area, a claim made by members of the Show-Me Institute.

“Any use of eminent domain within an EEZ is deliberately misleading,” [city consultant Chris] Sally told the crowd, adding that the term “blight” doesn’t mean a residence is blighted or run down and would not decrease property values, a claim that brought groans and sighs from the audience.

Members of the Show-Me Institute do not make this claim. We asked the Journal for a revision, but did not receive one. In our brief discussion about eminent domain in the testimony and op-ed, we put EEZs into the larger context of incentive and subsidies programs such as Tax Increment Financing (TIF), which do sometimes involve eminent domain. This is appropriate because recent history shows that when cities start implementing programs like this, they do not just stop at one. If you blight an area once for an EEZ, it will be even easier next time to blight it again for a TIF, and that very well could involve eminent domain abuse.

It is understandable that economic development consultants such as Sally are frustrated by research showing that the economic development “tools” from which they make their living are useless. Sally had to admit as much when he was asked if the job growth claims of Enhanced Enterprise Zones accounted for growth that was already happening in the area. He answered that they did not. In other words, and as the Show-Me Institute research pointed out, consultants and politicians just use EEZs to claim credit for economic growth that was already going to happen.

What is deliberately misleading, however, is the designation of EEZs themselves, and several attendees  commented the process was dishonest. In order to blight the area in which the Lee’s Summit City Council wants to attract development, it must include other “low-income” areas so that the whole EEZ qualifies. As a result, some of the so-called low-income areas are, in reality, neighborhoods with a large number of retired people. The City Council must also rely on 13-year old Census data regarding poverty and income — because more recent and accurate data won’t provide the numbers they need to create the EEZ. As a result, consultants like Sally draw lines around a Lee’s Summit that doesn’t exist, and state bureaucrats and city leaders seem willing to go along with the charade.

Democracy is alive and well in Lee’s Summit. The people understand a bad idea when they see it, even if city officials cannot.

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