Joplin School District Right To Be Concerned About Super TIF

Posted on by David Stokes

Officials for the Joplin School District are admirably asking some tough questions about a proposed Tax Increment Financing (TIF) district. The boundaries of the proposed TIF district will encompass a substantial portion of the redevelopment area so severely damaged by the 2011 tornado. This subject is, obviously, difficult because we all want to help Joplin move forward any way we can. But, as the school district officials point out, how is freezing all the property taxes within the redevelopment area at a low post-tornado level for 23 years going to help Joplin move forward?

According to the Joplin Globe, the destruction from the tornado resulted in a decrease of $34 million in assessed valuation for the school district (and a similar number for the city, counties, etc.). According to the rules of TIF, a new TIF would freeze the property taxes paid to all districts at that number for 23 years. In the long run, that could be very damaging to public services. Fifteen years from now, how is the school district going to fund its services when a substantial part of the district has its taxes frozen at a 2012 post-tornado level? One way they will do it is by having very high taxes on the areas outside of the redevelopment zone. If this TIF passes, I could see tax differences between the areas in and out of the zone so large that people start making decisions to move based on that, and that will start to affect property values. (See pages 33-36 here for how this can happen in such situations.) It is one thing to pay more to live in a better school district. It is another thing to pay more for a house with lower taxes than other, similar homes within the same school district.

My general objections to TIF are laid out here. There are, no doubt, different circumstances in Joplin than just moving around big box stores in Saint Louis County.

The Joplin Globe editorial board is correct in stating that the community should step back before making such an enormous decision. Once the properties within the proposed district are redeveloped, they should be required to pay, at a minimum, the pre-tornado tax levels to partly reduce the discrepancy in future property taxes between property in and out of the TIF district. (Obviously, before and during the period they are being redeveloped, the much lower tax levels should be paid.)

No Vote on Prop B, A Blessing in Disguise?

Posted on by James V. Shuls

Anyone who believed the ads in favor of Proposition B might expect the “no” vote to be devastating for Missouri schools. As Peter Venkman might say, it will lead to “human sacrifice, cats and dogs living together … mass hysteria;” or in education terms: staff reductions and increased class sizes. Despite nearly every education agency in the state supporting the measure and copious amounts of ink filling opinion pages with support, Missourians voted to not increase tobacco taxes. So that begs the question, why do Missouri voters hate children?

The truth is, Missouri voters do not hate children, or even taxation for education. Take, for example, the results of Proposition S in Saint Louis County. Even though the property taxes for schools in the county are 50 percent higher than the average school property tax rate in the state, voters approved the 19 percent property tax increase with 59 percent of the vote.

Many Missourians simply did not believe that the increased revenue from the tobacco tax would actually go to education, and for good reason. Though the drafters of the legislation said the funds would be “in addition to” funds generated by the funding formula, they inserted a provision that allowed those funds to replace general revenue when the state could not fully fund their obligations to K-12 schools. As it turns out, that is exactly the position we are in right now. Missourians simply do not do not like taxes that unfairly target one population with dubious claims that they will benefit schools.

Proponents of Prop B claim big tobacco used scare tactics to garner opposition to the measure. In fact, the opposite was true, as advocates for the tax increase suggested the revenue generated would prevent teacher layoffs and increased class sizes. Those claims, of course, are not likely to come to fruition. However, if the state continues to underfund its obligations, the result is a massive lawsuit. Unless legislators want the courts to settle the issue of education funding, they need to have some serious discussions when they return to Jefferson City.

The debate about education funding will certainly be contentious and will pit rural, urban, and suburban legislators and school districts against each other. It could also be highly productive, allowing lawmakers to tackle some of the most pressing issues in K-12 education.

For instance, legislators could work out the kinks in the intradistrict transfer bill so more students have access to high-quality schools.

They could improve transparency by ensuring the money follows the child to their school, not just to their district. This would ensure money designated for high-poverty or special needs students is actually spent on those kids and not at wealthier schools in the district.

Or, lawmakers could consider tax-credit scholarships or education savings accounts as a way to save money and ensure parents have more educational options for their kids.

To many, taxing smokers to fund education sounded like a good idea. In reality, Prop B would have done little to build a strong, sustainable education system, but it would have provided cover for legislators to avoid the tough discussions that are needed. It is possible the “no” vote was actually a blessing for education funding; it may force legislators to go to the state capital and do the difficult job that they have been elected to do.

James V. Shuls is the education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

McGraw Milhaven – David Stokes on KTRS

Posted on by David Stokes

David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program. In this appearance, Stokes and the host discuss how they spent their Thanksgiving, the current state of the proposed Richmond Heights TIF, the effect of TIF on small businesses and communities, the current state of the McKee/Northside TIF, the pervasive flaws in TIF proposals generally, and whether Stokes thinks that a TIF would be justified in an are that is actually economically depressed.

 

Empty and Broke

Posted on by Kacie Barnes (Galbraith)

In Missouri, we are no strangers to airports that are deep in debt. Lambert-St. Louis International Airport is still facing the consequences of its $1.1 billion expansion. Passenger traffic was declining when the airport expanded, and traffic is still declining.

MidAmerica Airport in St. Clair County, Ill., was built in the 1990s with high hopes that business would materialize. Have you ever flown out of MidAmerica? Me neither. The airport failed to ever gain a significant amount of passenger traffic. The government provided subsidies to airlines that did fly there, and many still quickly left the market. Fast forward to today: the airport continues to operate. This is when I wish I could tell you that there was a miraculous turnaround and MidAmerica found a way to become profitable. Oh, how I wish. The airport is still open because it has more than $100 million of debt to pay off. Where would MidAmerica find the money to pay?

The Manhattan Institute just published an article about the growing number of new or expanded airports that are underused or virtually empty. It gave me a sinking feeling in my stomach when I thought about the future of the Columbia Regional Airport. We have written about the airport’s expansion plans and Delta’s recent departure from the Columbia market. The Manhattan Institute article points out that “… airport expansions often increase ticket prices, driving businesses away. After airports have built new facilities, they pass the expense on to passengers in the form of pricier tickets.”

I do not know what the future has in store for Columbia Regional Airport. But MidAmerica’s failure shows us that “if you build it, they will come” is not necessarily true. I am not in a position to say whether Columbia is in need of expansion or improvements. But I take Delta’s departure from the market as a sign that they do not see Columbia as an area for growth in air travel. Columbia officials need to evaluate whether there are real opportunities for growth. If there are not, then a costly government-funded airport expansion is not a wise decision.

A Minimum Wage Hike . . . Good for Missouri?

Posted on by Michael Rathbone

Beginning Jan. 1, due to a ballot initiative approved in 2006, Missouri will see its minimum wage increase by 10 cents. There is a healthy debate as to whether this wage increase is a good thing for Missouri. Advocates for the wage hike argue that increasing the minimum wage will increase the buying power of low-income workers. Opponents of the minimum wage increase argue that increasing the minimum wage will hurt Missouri’s business competitiveness.

Who is right? According to research conducted for the Show-Me Institute, David Neumark, an economics professor and director of the Center for Economics and Public Policy at the University of California-Irvine, found that there is no evidence to suggest that increasing the minimum wage will help stimulate the economy. Nor is there a basis for concluding that minimum wages help reduce the proportion of families living at or near poverty. In fact, according to Neumark, “Minimum wages can have unintended harmful distributional effects — possibly increasing the number of poor or low-income families.”

A 10-cent increase in the minimum wage is not going to change things much one way or another. However, even if the minimum wage were to increase by $1 an hour, there are still better ways to help poor people. In Neumark’s paper, he suggests expanding the Earned Income Tax Credit (EITC) as one way to help poor families. Patrick Ishmael and I think eliminating the corporate income tax and the tax on small business income will enable Missouri businesses to further expand their businesses and create jobs.

Despite what a majority of Missouri voters thought at the time, the automatic increases to Missouri’s minimum wage are not good for the state. Markets should determine wages, not government. The state would be better served if, at the minimum, it would desist with the automatic wage increases.

Crossfit Creates Jobs

Posted on by Kacie Barnes (Galbraith)

This week is Global Entrepreneurship Week. It is a time to celebrate the innovators and job creators who, simply put, make our lives better. They bring ideas to life, they create jobs, and they persevere.

Greg Glassman is a true entrepreneur. He is the CEO and founder of Crossfit, a rapidly growing fitness program (of which I am a huge fan). This week I heard him speak at a conference about the development of his business.

If I could recite his whole speech for you I would, but here is my takeaway: Glassman uses freedom to grow the Crossfit movement. Standardization works for some businesses, such as McDonalds, but Glassman realized that Crossfit would touch more lives if he allowed affiliates to use his fitness program and run their businesses how they chose.

None of the Crossfit methods are protected, and affiliates only pay to use the Crossfit name. There are no requirements to use a certain brand of equipment, to operate specific hours, or to run the gyms in any specific way.

Because of this, Glassman has enabled thousands of Crossfit gyms to open in the past few years. Glassman gives all of his affiliates an equal opportunity to survive and thrive on their own. This is important. Entrepreneurs like Greg Glassman create jobs, not the government.

Missouri, please learn from Glassman’s success. Show-Me Institute analysts have written about the importance of treating businesses fairly and allowing them to grow or fail on their own. Business growth means more job creation, less unemployment, and happier Missourians. Entrepreneurial growth such as Glassman’s means all the above plus more individual and economic freedom for all. Isn’t this what all of us want?

What Missouri Could Learn From Its Deer Hunters

Posted on by Patrick Ishmael

Hunting season is in full swing, and for many Missourians it’s a family affair. As one hunter put it in the Kansas City Star on Sunday, “For me, it’s a lot more than just the hunting….I get to see people that I only see a couple times a year. Deer season is always a big deal for our family.” From learning how to safely handle rifles and bows to enjoying time with family outdoors, today thousands of young Missourians participate in an enduring — and growing — tradition of hunting in the state.

In fact, the Missouri Department of Conservation announced last week that hunters had eclipsed the mark set in 2011 for deer harvested during the annual youth hunting season — over 19,000 deer, and a more-than three-fold increase above the state’s first youth hunt, instituted in 2001. Growing awareness of the hunt has no doubt increased participation in it over the years, but permit fees imposed by the state could easily have tamped down the season’s growth, if the costs were fixed high enough. Fortunately, Missouri’s hunting permit costs are generally quite low — and that’s a fact the Department of Conservation readily promotes on its website.

Low permit cost is another reason Missouri is a great place to hunt. Missouri’s $17 Resident Firearms Any-Deer Permit is a bargain compared to the average of $46.63 for equivalent privileges in surrounding states. Missouri charges only $8.50 for a resident any-deer permit for kids under age 16. Resident youths pay just $3.50 for antlerless-deer permits.

Missouri has kept the state-imposed costs of joining the hunt relatively minimal, and it’s reasonable to believe that participation in the youth hunt has risen at least partially because the barriers to engaging in it are so low.

Shouldn’t the state apply this lesson to other areas of policy? The lower the fees and taxes, the more likely it is that you’ll get more of an activity — here, hunting, but the idea applies elsewhere, too. Imagine: What would happen to Missouri’s economy from the perspectives of growth and competitiveness if the state got rid of its taxes on corporations and pass-through income?

Kansas opened the season for economic innovations earlier this year by dumping its tax on pass-throughs and reducing its income tax, but there’s no telling which state in the region is going to take down the big, long-term economic prizes in this highly competitive tax environment. Suffice to say, Missouri should join that hunt, and very, very soon.

The State Needs To Stop Acting Like A Bank

Posted on by Michael Rathbone

During this time of year, no one wants to say, “Bah, Humbug!” However, I would be remiss if I did not mention that the state might run into a revenue shortfall (between $400 million and $600 million) next year.

That can be troublesome, but it also presents an opportunity for the state to re-examine some of its questionable spending decisions. In earlier commentary, I have listed some areas where the state should reconsider spending money.

However, for now, I will focus on the state’s support of the Missouri Agricultural and Small Business Development Authority.

The mission of the authority is to make “capital available to Missouri farmers, particularly independent producers; agribusiness; and small business at competitive interest rates on a scale to make a major impact.”

This raises a red flag for me. An entity that makes capital available to businesses at a “competitive” interest rate sounds an awful lot like a bank to me. In fact, a couple of the programs that the authority administers include: Missouri Agribusiness Revolving Loan Fund, Alternative Loan Program and Animal Waste Treatment Loan Program.

The total state funds loaned to the Animal Waste Treatment Loan Program alone is close to $500,000 ($485,333.56 for fiscal year 2011, specifically).

Is anybody uncomfortable that a part of state government is acting like a bank? Why can’t the recipients of these loans get private financing? If they are great deals, why are private banks and/or financial institutions not jumping at the chance to invest in these projects?

Farms already face lower property tax burdens compared to commercial businesses (farm property has an assessment ration of 12 percent compared to commercial at 32 percent and residential at 19 percent, and the soil quality grading system sets a very low appraised value already) so why do they need additional help with subsidized loans?

Also, how can a government and a private enterprise compete when it comes to financing? By issuing below market interest rates to different businesses, isn’t the state undercutting private financial institutions?

Even if a state department/agency/program loses money, it can acquire new financing by compulsion with increased taxes. A private organization does not have that same power to tax (although with TDDs and CIDs, we are getting there).

Thus, with the ability to achieve easier financing, what real incentive is there for the state to make wise spending decisions when it comes to these loans besides avoiding grief from dedicated bloggers such as me? Isn’t it time for the state to get out of the business of lending with your money and return to the basics?

Just some food for thought.

Michael Rathbone is a policy researcher at the Show-Me Institute,
which promotes market solutions for Missouri public policy.

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