Kansas City Water Privatization Still a Hot Topic

Posted on by David Stokes

The Kansas City Star’s Yael Abouhalkah has a solid piece today on the state of water and sewer privatization in Kansas City. Or, rather, the hopeful event of water and sewer privatization in Kansas City. Saint Louis County has almost a million people who are served by private water utilities. If it works here — and it does — it can work in Kansas City.

We have written plenty on Kansas City water privatization before. Like Saint Louis sewer customers, Kansas City residents are going to face fairly large water and sewer bill increases whether privatization happens or not. They can pay a private company to fix the problems and manage the system, or they can pay the government more to fix the problems and manage the system — the same government whose management put them in this situation in the first place. (To be fair, not all of the cost issues can be blamed on Kansas City management. Many of the sewer issues are substantially the fault of over-regulation by the EPA.)

Privatizing the entire system would have many benefits for Kansas City. It would get a large amount of money from the sale which it could use in a variety of ways. It would expand the tax base by putting the water company assets on the tax rolls. The city would capitalize on all the engineering expertise right there in Kansas City. It would take the choices on rates out of the hands of politicians, who often under-price municipal utilities for political gains. There are plenty of other benefits as well. I hope Kansas City continues to seriously consider this idea.

It Is Time To Increase Public School Transparency

Posted on by Audrey Spalding

In the past three years, the Missouri State Auditor has chastised public school districts for irresponsible spending, excessive pay for administrators, awarding a no-bid contract to a school board member, failing to collect on a real estate deal, and awarding a hefty car allowance to a district superintendent.

Given that state and local property taxpayers spend billions on Missouri’s public education system every year, taking a closer look at how school districts spend money is certainly warranted.

One way to do this could be to set up a transparency site like the Missouri Accountability Portal (MAP). MAP is a site where anyone can look at (or download) recent data for state tax credit issuances, state employee pay, and state spending. The general public can use it to learn how state money is being spent, reporters can use the data to find material for an article, and policy analysts can even use it to examine the amount of tax credits issued under a certain program over time. In fact, one school board member is trying to set up a school district transparency site that would follow this model.

Posting detailed school district expenditure data, even if only for Missouri’s largest districts, could help ensure that the general public has better information to monitor how public education dollars are spent. This provides more detailed information about a district’s spending than the school-level and district-level data that the Missouri Department of Elementary and Secondary Education posts.

In 2011, the state auditor suggested that the Kansas City Metropolitan School District reconsider its $800 per month car allowance for its superintendent. But the Kansas City district is not alone.

In my study of Missouri school superintendent compensation, I found that 26.1 percent of districts surveyed provided superintendents with a car allowance, a car, or an annuity. Indeed, 17 school superintendents in Missouri received a car allowance of more than $500 per month, with a few school districts providing more than $800 each month to superintendents for their vehicles. Years later, there are likely other school districts paying $800 or more for superintendent car allowances.

With a transparency portal, reporters or the general public could find information like that easily, and before an audit is warranted. Transparency might discourage board members and administrators from awarding outsize benefits or spending frivolously.

With better technology, making it easier every day to share information online, school district transparency portals are something to consider.

Good News: Missouri Behind Only 42 Other States in Economic Growth Last Year

Posted on by Patrick Ishmael

This week, the U.S. Commerce Department reported that Missouri’s economic growth placed the state 43rd in the country last year. It is a variation on that eternal question: Is Missouri’s development glass partly full, or mostly empty?

Empty. Definitely empty.

The Commerce Department says Missouri’s economy grew much more slowly last year than the rest of the nation. Department figures rank Missouri 43rd in economic growth last year with an economy that grew by less than one percent. The National average was 1.5 percent. The department studies show almost every sector of the state’s economy grew more slowly than the average or shrank.

New reports today paint a clearer picture of how “less than 1 percent” Missouri’s growth really was .04 percent. Not .4 percent, but .04 percent. For all intents and purposes, that is zero. Throw in Missouri Journal’s report that the state’s new jobless claims increased to the third highest level in the country last month and it is clear Missouri is headed in the wrong direction, at about 80 mph.

Last month, I talked at length about how poorly Missouri has done economically over the last five years, and according to Rich States, Poor States, the state has been stuck around 40th in economic performance for basically the entirety of that period. Not much has changed legislatively in those intervening years to change Missouri’s fate – tax credits are still running amok, income taxes still dominate as sources of revenue, and local “economic development” plans are still off kilter – so the Commerce Department’s findings are not surprising (which is frustrating on its own terms.)

Missouri can do better, and the Show-Me Institute has offered a number of proposals in the last year that would make the state more competitive. Extinguish failing economic development tax credit programs. Eliminate the growth-dampening corporate income tax with the savings gained through tax credit elimination. Fix Tax Increment Financing (TIF). Cut wasteful spending.

It is time for a change.

Sorry, Film Directors: Taxpayers Should Not Have To Pay For Your Luxury Hotel Rooms

Posted on by Audrey Spalding

Film director Jennifer Lynch told KSDK Channel 5 that Saint Louis is the perfect place to shoot her film, “A Fall From Grace.” The film is about a “homicide detective tracking a serial killer along the Mississippi River who burns his victims.”

But the problem, Lynch says, is the lack of financial incentives available for movie production in Missouri. Though the state still offers the film production tax credit, Missouri Gov. Jay Nixon shut down the Missouri Film Commission in 2011, and the Missouri Accountability Portal shows that no film tax credits have been issued for 2012.

From KSDK:

Missouri actually has $4.5 million to use for tax breaks, but the Department of Economic Development doesn’t have anyone to recruit out-of-state productions.

“It hurts the city, it hurts the state and it ultimately hurts us because we’re forced to go elsewhere for monetary reasons,” said Lynch.

One way to answer the question of whether a lack of film tax credits hurts the state is to look at what film tax credit money has subsidized in the past.

The 2009 film “Up in the Air,” which starred George Clooney, was filmed in Saint Louis, and was issued $4.1 million in tax credits from the state. Under Missouri’s Film Production Tax Credit program, movie productions are reimbursed for a portion of their expenses.

In 2010, the Show-Me Institute requested documentation from the state Department of Economic Development (DED) that showed what expenses associated with the film tax credit program were deemed eligible for partial reimbursement. The documents we received are now posted online.

Below are some expenses that the production of “Up in the Air” incurred and the DED deemed eligible for the Film Tax Credit program:

* More than $11,000 in living allowance money for Director Jason Reitman.

* $5,600 for George Clooney to stay at the Chase Park Plaza.

* More than $8,500 in living allowance money for Vera Farmiga.

* More than $11,000 in living allowance money for Executive Producer Michael Beugg.

If having state taxpayers fund living expenses for high-paid actors and directors while working on “Up in the Air” is not concerning enough, recent reports have found state film tax credit programs lacking.

If Lynch really thinks Saint Louis is the best place to film her movie, then make it here. But if tax credits are necessary, I would prefer she stay in East Saint Louis.

P.S. Lynch is not the first person to think that using film tax credits to subsidize a movie about a serial killer is a good idea. Jack Donaghy ran with that in 2011.

Missouri’s Buildings Immemorial, And The Right Place For Preservation

Posted on by Patrick Ishmael

Last week, the historic preservation group Missouri Preservation released its list of the state’s “Most Endangered Historic Places.” They describe their publication as such:

Now in its twelfth year, the program has sought to bring statewide attention to endangered places through a media campaign and offers support services to the properties on the list.

The list is a good one overall, calling attention to some notable structures that with some love and money — emphasis on money — could be saved.

But there seems to me to be one significant outlier in the mix: Kemper Arena, Kansas City’s 1970s-era predecessor to the new Sprint Center downtown. The cavernous space hosts few events these days since Sprint opened, and even the family of the arena’s namesake is calling for the place to be torn down. (It is worth noting that our Chairman of the Board (who also is a Show-Me co-founder) is a Kemper, although I have not discussed this issue with him.)

Is Kemper Arena historic? Sure. It housed the 1976 Republican National Convention, countless sporting events, and served as the backdrop of some of the greatest rodeos and barbecues in the country. But does that, therefore, mean it is off limits for demolition, if it comes to that? No.

State-underwritten historic preservation efforts, particularly in and around Saint Louis, have been operating with an open throttle for more than a decade now, with the state issuing more than $1 billion in tax credits for preservation since 1999. As obvious preservation projects have dwindled, the preservation net has widened in some cases to simply keep the subsidies pumping. But are we saving historic buildings, or just saving — and oftentimes subsidizing — aging properties under the pretext of historic preservation? Shouldn’t that blurring distinction bother preservationists?

As a born-and-bred Kansas Citian, a movement to save Kemper absent a plan the private market would embrace would be mystifying to me. There is a difference between advocating for ingenious uses of old properties and trying to force old and obsolete properties on the community for all time. I support the former. I am not keen on the latter. Indispensable history is all around us, but not every building is indispensable.

Kemper Arena has certainly had some fine days, and to the extent Missouri Preservation is highlighting that history, the organization should be applauded. But while Kemper has had historic days, much like so many buildings of its kind, that does not mean it should stand until the end of days.

Preservation has a place. It’s just not every place.

Episode V: The CVC Strikes Back

Posted on by Michael Rathbone

The St. Louis Convention and Visitors Commission (CVC) has rejected the St. Louis Rams football team’s proposal for upgrading the Edward Jones Dome into a “first-tier” facility. Both sides have until June 15 to reach some sort of agreement or they will go into arbitration.

I think my position on this whole situation is pretty clear. First, Saint Louis City, Saint Louis County, and the state of Missouri are not awash with cash and it is doubtful that they can afford to spend much public money on Dome upgrades. More importantly, however, I would like to reiterate that there is no economic justification for using public funds to upgrade sports facilities. In Saint Louis, one study showed that the use of public funds on sports facilities was economically HARMFUL.

If the Rams want to make the case that keeping them in Saint Louis would be beneficial to civic pride, they should be free to do so. However, it is important for the general public to know that if they are counting on a Dome upgrade to act as an economic stimulus, they will be sorely disappointed.

Will Missouri Taxpayers Have To Bail Out Public Pensions?

Posted on by Josh Smith

A recent New York Times article discusses something we have talked about on Show-Me Daily: the unrealistically rosy forecasts of public pension funds. If words like “forecast” and “public pension” make your eyes glaze over, hold on for the kicker — if you are a Missouri taxpayer, this is something that will likely cost you money soon, or result in your city or state going bankrupt. From the article (emphasis added):

In New York, the city’s chief actuary, Robert North, has proposed lowering the assumed rate of return for the city’s five pension funds to 7 percent from 8 percent, which would be one of the sharpest reductions by a public pension fund in the United States. But that change would mean finding an additional $1.9 billion for the pension system every year, a huge amount for a city already depositing more than a tenth of its budget — $7.3 billion a year — into the funds.

And:

Ailing pension systems have been among the factors that have recently driven struggling cities into Chapter 9 bankruptcy. Such bankruptcies are rare, but economists warn that more are likely in the coming years.

These problems are not confined to New York City. As the New York Times article says, this is a near-term problem for “public retirement systems from Alaska to Maine.” This expensive problem is manifesting in Missouri, and in particular in Saint Louis with the recent discussion of firefighter pensions.

Public employee pensions tend to use an outdated benefits structure that relies on growth assumptions that are unrealistic in the current climate. Public employee retirees are receiving pension benefits that assume growth rates that just do not match reality. This means that current employees are paying into a system that, in its current state, cannot afford to pay them when they retire. Something has to give. Either their benefits will be reduced, the current employees will be asked (or required) to contribute more — taking a salary cut to support their retired peers — or the taxpayers will be tapped year after year to plug the holes in the broken pension system.

Lowering the forecasted growth rate from 8 percent to 7 percent per year is not enough to improve this serious problem. And the longer Missouri policymakers wait to make politically unpopular decisions that will improve the long-term picture, the worse the finances become. Let’s not be like Greece and curry favor with unrealistic future promises to pay. Instead, let’s lead the way on substantial public pension reform at the state and local level by switching all public employees to defined contribution 401(k) retirement plans.

Reminder From Illinois: It Could Be Worse

Posted on by Michael Rathbone

I recently lamented Missouri’s lack of action compared to Kansas in reforming the state’s tax code and making the state more economically competitive. Despite this, I do give Missouri credit for not making things worse. On the other hand, Illinois has showed us what not to do. This week, the Illinois Legislature approved a bill that will raise taxes on cigarettes to $1.98 a pack. In comparison, Missouri has a 17-cents-per-pack tax on cigarettes.

I, and other members of the Show-Me Institute, have opposed raising taxes on cigarettes. However, if Illinois wants to send more of its residents fleeing to Missouri to buy cigarettes, then I will not talk them out of it. We could use the money. In fact, some legislators in Illinois fear that is exactly what will happen: “”We are going to lose revenue . . . from goods purchased across the border when people go to buy their cigarettes,” Illinois Sen. Kyle McCarter (R-Highland) said.

When the Show-Me Institute asked several visitors from Illinois whether they planned to stock up on cigarettes and other goods while in Missouri due to our lower excise taxes, many responded in the affirmative. It is likely that many more Illinois residents will feel the same way when this increased tax goes into effect.

So when people in Missouri advocate for increasing cigarette taxes, think about the state’s price advantage compared to some of its neighbors. Think about the potential customers that will be lost when the state no longer makes it worth their while to travel across the border to buy goods here. Also, think about how increasing taxes on cigarettes would harm the poor the most. Consider these things and be thankful that Missouri has not followed Illinois’ lead, at least, not yet.

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