The Questionable Economics Of Building Around Light Rail

Posted on by Kacie Barnes (Galbraith)

There has been a lot of talk in the community about transit-oriented development (TOD) and its supposed benefits (which I contest). If you want to hear about these supposed benefits, a second round of public meetings regarding future Saint Louis TOD projects are scheduled over the next week.

Citizens for Modern Transit recently hosted a luncheon with national TOD expert Dena Belzer on the Economics of Building Around Light Rail. I had an opportunity to review her Powerpoint presentation, which did not convince me of any such economic benefit.

Granted, I have to hedge my comments with the fact that I did not physically attend the presentation. That being said, the most outrageous trend running throughout the presentation is that TOD will save money. It will save money for the government, it will save money for households, employees, employers — pretty much everybody.

The presentation suggests that compact development helps municipalities save money. Just like you save money at Jos. A. Banks buying two suits to get the third one free, when you did not even need a suit. Spending money just to get a “good deal” is not always a good justification for spending that money.

And what about households? Belzer’s presentation suggests that TOD can save households billions of dollars and that money can be reinvested in the community. First of all, TOD will not save us money when we are paying for it in our taxes.

Secondly, she cites figures that suggest Portland’s transit policies save residents $2.6 billion per year. However, more than half of that imaginary figure comes from the estimated value of commute time that has been reduced due to transit options — the opportunity cost. I do not know about you, but I have not found a way to manufacture gold coins from the time I save on days that traffic is light. Nor do I mind my commute to work. Many people choose to spend more time commuting in favor of lower housing costs, community preference, or a variety of other factors.

Other people prefer to use transit or live near a Metro stop and enjoy a predictable commute. There is nothing wrong with that. However, it is not a sufficient reason to compel all taxpayers to subsidize housing, retail, and office facilities around transit stops so that planners can impose their views on the rest of us.

It Just Ain’t So

Posted on by James V. Shuls

Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Someone needs to get the message to President Barack Obama, Missouri Gov. Jay Nixon, Missouri Commissioner of Education Chris Nicastro, the St. Louis Post-Dispatch, and the St. Louis American that what they believe about early childhood education “just ain’t so.”

All of the above have been pushing increased funding for early childhood education on the basis that it will provide a great return on investment, up to a stratospheric level of 8–1 in the widely-criticized study the Post-Dispatch cites. (And they accuse us of being a “belief” tank?)

The folks at the Cato Institute have been doing a great job covering the topic of early childhood education. In a recent post, they state that the large returns on investment often cited do:

. . . not in fact refer to the typical return from federal or state pre-K programs. It refers to the findings from a single intensive 1960s early childhood experiment that served 58 children in Ypsilanti, Michigan- The High/Scope Perry preschool program. Out of the literally hundreds of preschool studies conducted in the past half-century, the Perry results are not representative and have never been reproduced on a national or even a state level. In fact, an earnest experimental effort to reproduce them for just a few hundred children at eight locations failed despite an annual investment of $32,000 per child, adjusted for inflation . . .

I have written about these claims.

Spending money on children is appealing and it is something almost everyone agrees is a worthwhile endeavor. I am not opposed to spending tax money on early childhood education, but I am opposed to universal pre-school programs or systems that put the private market at a competitive disadvantage. I am also opposed to selectively using the research to advance a point, when the data simply do not bear out. The Post-Dispatch would, no doubt, call us out if we did that.

As Cato puts it, “What we have here, in other words, is a monumental act of cherry picking rather than an example of scientifically grounded policymaking.” In other words, it “just ain’t so.”

This photo was originally posted at http://www.cato.org/blog/one-nation-under-informed
This photo was originally posted at http://www.cato.org/blog/one-nation-under-informed

One Day Down, Five To Go!

Posted on by Alex Schroeder

The United States Postal Service (USPS) recently announced that it will cut Saturday delivery in August. The post office has been in the financial doldrums over the last few years, not least because of onerous pension obligations and a reliance on an increasingly obsolete service. The USPS is a government-sanctioned monopoly, largely insulated from competition. Its decision is consistent with this privileged status; in the face of financial difficulties, it simply reduces the quality of its service.

There is nothing wrong with a business manipulating its prices and practices when it is confronted with a budgetary dilemma. But there is something wrong when it fails to adequately serve customers while the state prohibits competition. In the private sector, businesses compete to provide the best for the least. In the case of the USPS, however, customer satisfaction can simply be sacrificed for financial health. After all, why worry about quality customer service when a competitor cannot put you out of business?

The least weak argument in favor of public mail delivery is that private enterprise could not profitably serve rural areas. For example, my grandfather often patronizes the post office in Centertown, Mo., a small town in Cole County. He prefers it to the one in Jefferson City, as there is never a wait. My guess is that the privatization of the USPS would spell the end of the Centertown branch, as well as countless other small town post offices across the state. Or perhaps they would remain, but mail delivery to and from such remote locations would be significantly more expensive.

Public support is likely necessary if many rural areas are to maintain their post offices, but this is not a justification for such support. Many things are relatively expensive for rural dwellers (e.g., Internet, gas to get to the grocery store); others are comparatively cheap (e.g., land).  The reverse is true for urbanites. What sense does it make to subsidize something simply because it is comparatively expensive in a given area?  The bottom line is that living in a particular locale comes with its unique set of costs. The most sensible route to take is to stop artificially reducing the cost of mail service in rural areas; let those who remain in these areas face the commensurate costs.

Privatizing the USPS, in short, makes both practical and moral sense.

Three Ways Bad Public Policy Hurts Missouri

Posted on by David Stokes

In this February 2013 Show-Me Forum, Policy Analysts David Stokes and Patrick Ishmael detail some of the specific bad public policies that are hurting Missouri. Of particular focus are corporate handouts in the form of development tax incentives, governments lobbying other governments for a larger share of taxpayer money, and Enterprise Zones (plus EEZs). Like all the Show-Me Forums, this event was held in Columbia. On the following day, Stokes and Ishmael reprised this presentation for an audience in the Show-Me Institute’s office in the Central West End of Saint Louis.

Letter Grades: A Hallmark Of Childhood

Posted on by James V. Shuls

The Springfield News-Leader recently published an article that stated, “It’s a hallmark of childhood — the grade card, hopefully stamped ‘A’ or ‘B’ and not the dreaded ‘F.’ But the ways schools grade their students may soon be the way they are graded themselves.” Legislation has been proposed which would assign each school a letter grade based on the evaluation system currently in place in the Missouri Department of Elementary and Secondary Education.

According to the News-Leader, there are numerous opponents of grading schools, including superintendents, school district personnel, and the Missouri PTA president. In fact, the PTA president states that A–F grading “doesn’t address any problems at all. It’s just another way of identifying the problems that we know are there.”

The fact is, A–F grading does help address problems. The first problem it addresses is transparency. Currently, it is very difficult to see how an individual school is performing in comparison to other schools or a benchmark level of performance. A letter grade will solve this problem in a way that is easy for the average parent to understand.

Assigning letter grades to schools also encourages those schools to improve. The A–F grading system in Florida has been evaluated a number of times and the results show that the stigma of receiving an “F” grade encourages schools to change practices and to improve. Rouse, Hannaway, Goldhaber, and Figlio wrote in a National Bureau of Economic Research paper:

In sum, we find that schools receiving an “F” grade are more likely to focus on low performing students, lengthen the amount of time devoted to instruction, adopt different ways to organize the day and learning environment of the students and teachers, increase resources available to teachers, and decrease principal control, as was expected given the increased oversight built into the A+ Plan.

Assigning A–F grades is not just a way to single out or label low-performing schools. It is a way to motivate schools to improve instructional practice and to strive for excellence.

Can A School Transform A Community? (Part 2)

Posted on by James V. Shuls

Last week, I wrote about KIPP Inspire Academy (KIA) and asked, can a school transform a community? This week, the St. Louis Post-Dispatch released a great story about City Garden, essentially exploring the same question. Their answer, like mine, is yes.

Like KIA, City Garden is a charter school, but that is about all the two schools have in common. The instructional practices at KIA are markedly different than they are at City Garden, which uses a Montessori approach. Another notable difference is that KIA is an open enrollment charter school without an attendance zone. That means students from anywhere in Saint Louis can enroll at KIA. City Garden, on the other hand, does have an attendance zone. Like a traditional public school, this means only students who live in that zone are allowed to enroll.

There are interesting implications with having an attendance zone, which the Post-Dispatch piece discusses, but I will discuss at another time.

What strikes me about KIA and City Garden is that they are both able to have a tremendous positive impact on their surrounding community.

For cities with low-performing school districts, the infusion of a great school seems to make a tremendous impact. But what can suburban or rural areas learn from this? Most of those communities do not need to “transform.” Indeed, many of them are doing quite well.

If we continue to have a limited view of charter schools as “schools for failing districts” then we make a mistake. What I see from KIA and City Garden is the opportunity for choice that they bring. These two schools offer something very different to families.

As I have written before, school districts often cannot meet the needs of all families, especially when they implement the same policies and instructional strategies district-wide. The lessons we should take from KIA and City Garden is that there is no one recipe for success and that families throughout the state would benefit from having more educational options.

Pevely Should Disincorporate

Posted on by David Stokes

In the past year (plus a little more), three Missouri towns — St. George, Mack’s Creek, and Quitman — have disincorporated. I particularly like the fact that a town named “Quitman,” well . . . quit. Uplands Park is now considering disincorporation, and another town needs to: Pevely.

Pevely, a small (but not tiny) town in Jefferson County, is having trouble on a number of fronts. It cannot pay for its employees’ health insurance, it cut fluoride from its water to save money, and it is staring down the barrel of a substantial judgment against it from a lawsuit. I am confident the troubles run even deeper.

Many small cities in Missouri, and especially in Saint Louis County, are having trouble providing a base level of services. For most of these situations, the county is better suited to provide local services in a cost-effective manner. Generally, this can be accomplished without raising overall county costs much, due to transferable taxes such as utility taxes, business licenses, state road funds, court fees, etc. (I am defining a transferable tax or fee as one where the tax is not layered. The city gets it if it is incorporated, and the county gets it if it is not.) This is especially true in Saint Louis County, where the sales tax pool comes into play.

Jefferson County has a solid county government system and it should take over services within the community of Pevely. Hopefully, Pevely can become another example of successful disincorporation in Missouri.

Teachers, Health Care, And Inefficiency

Posted on by James V. Shuls

In a study recently released in EducationNext, Bob Costrell and Jeff Dean find that the cost of health care for public school teachers is increasing rapidly in comparison to the private sector. Health care costs for teachers are 26 percent higher than for workers in the private sector, up from a 12 percent gap in 2004 (see graph below).

Costrell_Dean_HealthCare

The authors do not present specific figures for Missouri, but note that across the country, health care expenses contribute to a significant portion of a teacher’s compensation. According to the study, “in 2004, health insurance costs tacked 11.4 percent onto teacher earnings; in 2012, they added 15.5 percent.”

The money spent on teacher health benefits is approximately $560 per pupil per year. If we assume that we spend $560 per student in Missouri, that would be nearly 6 percent of our total operating expenditures on health care benefits for teachers.

So what accounts for the higher health care expenditures on teachers? Costrell and Dean note that teachers’ unions and collective bargaining are driving factors toward “higher total premiums, higher employer costs, and lower employee contributions in both the public and private sector.”

Now, there is nothing wrong with providing teachers good health benefits, but we could improve options for teachers and decrease costs by shifting some of the teacher compensation from the school district to the teacher. Namely, this would align incentives to keep costs down, give school districts greater flexibility, and provide teachers with options.

As Missouri school districts face tight budgets, they must begin to look at ways to not just trim costs but to also improve efficiency. Health care benefits are a good place to start.

Contract With Veolia Would Benefit Saint Louis Water Services

Posted on by David Stokes

Innovation comes from the private sector. You need not be a radical capitalist to agree with that simple statement. It is a plain truth. For example, a private inventor, not a government water company, invented the water meter. (Note: The water meter was invented 160 years ago, but the City of Saint Louis still has not adopted it.) City residents will benefit from the proposed consulting deal with a private company to improve the city’s water division.

In putting together a team of officials to launch an effort to improve water services, Saint Louis Mayor Francis Slay deserves credit, not condemnation. When an agency such as the water division, which has been doing something for a long time, wants to look at ways to improve, it is obvious they should look outside the organization for new ideas. Anything short of that is an exercise in futility.

The team the mayor established collected water consulting bids from major water industry applicants. They chose the French consortium Veolia — one of the world’s largest private utility companies — to advise the city. The contract calls for a $250,000 consulting deal. Depending on which recommendations the city chooses, Veolia would then be paid more to help implement the improvements.

This is not privatization. Trust me, I wrote the study on privatizing the city water division and I wish this was privatization. It is not. This is a simple consulting deal. The city would still own, operate, and maintain every part of the water division. All this proposal calls for is tapping into the expertise of the private sector to improve water provision in the city. That will benefit everyone in the city and should be embraced, not attacked.

Opponents of this proposal are applying the shotgun approach in their fight: objecting to everything possible. This includes the irrelevant (Veolia’s work in the West Bank and Israel), the ideological (general left-wing opposition to private companies), the incomplete (cherry-picking a few Veolia municipal contracts that have not worked out and ignoring the many that have) and the idiotic (Veolia is foreign). Veolia has been successfully providing comprehensive water services in Oklahoma City, Okla., and Edwardsville, Ill. — to give just two Midwest examples — for many years. Those cities have routinely renewed the Veolia contracts.

While nothing about this proposal involves privatizing the water division, the absolute objection to private water from some is still peculiar. Private water companies have been serving the one million people in Saint Louis County, just one step north, west, and south of the city, for a century. Do you recall all the scandals and controversies about private water provision in the county? Neither do I.

But it is scandalous that the city water division has never implemented water meters. I am not blaming current leadership — this should have been completed 50 years ago. The lack of water meters encourages waste, overuse, inefficiency, and is unfair to consumers. When the city raises water rates, as it did in 2010, residents have no ability to react to that price increase (other than non-payment). Businesses, which use water meters within the city, can react to price increases by reducing usage and saving money, as AB InBev has done in recent years. City residents deserve the same ability to benefit from conservation as companies. People who use lesser amounts of water have long subsidized heavy water consumers in the city, and that is wrong. If you want to have the most glamorous lawn in the neighborhood, that is fine. But you should pay for it, not your neighbors.

The consulting deal with Veolia will result in many different ideas to improve water delivery in the city. These will range from the obvious, such as water meters, to the creative. People, businesses, and governments all benefit when they seek advice from knowledgeable parties outside their normal circles. Saint Louis city government and the water division are no different. The objections to the contract are an example of scattered ideology trying to stop practical steps for general improvement. The contract for consulting services from Veolia will improve water quality and services in the city, and that will benefit everyone.

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

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