Show-Me Institute Policy Analyst David Stokes says the Missouri Legislature should have tackled tax credit reform.
Help Wanted
Looking for work in Columbia? If job promises are to be believed, it may be time to give the overly subsidized IBM service center in Columbia a call.
You may remember the IBM facility from news accounts in 2010, when the Columbia Missourian reported that state and local government had lined up an impressive subsidy package for IBM. It entailed more than $30 million in state and local tax subsidies, including a big exemption on local personal property taxes, and millions in state tax credits. The City of Columbia actually bought IBM’s building for $3 million and is leasing it to the company for just a $1 a year, meaning that the company is not paying property taxes on the building.
In exchange, IBM promised to bring 800 new jobs to the facility within three years, and is required to bring in at least 600.
According to the latest reports, IBM had 349 employees at its Columbia service center during the last months of 2011. But company officials promise that they are on track to have 800 new hires by the end of 2012. In order to hire the remaining 451 employees, IBM should be hiring at least one new employee every day, including weekends and holidays.
The IBM service center in Columbia could be a promising lead for those looking for work. After all, when all the state and local subsidies are accounted for, Missouri taxpayers will have subsidized IBM’s Columbia operation to the tune of nearly $40,000 for each job. Collecting a paycheck from the company is one way to try and recoup your tax dollars.
Stuck In The Middle With You
I have not been shy about criticizing Missouri’s lack of movement toward real, substantive tax reform. Now, Kansas has beaten us to the punch. Kansas Gov. Sam Brownback has signed into law a tax cut package that eliminates Kansas’ three personal income tax brackets and replaces them with two new ones, at 3 and 4.9 percent. This new top marginal tax rate is lower than Missouri’s top personal income tax rate, which is 6 percent.
The tax cut will not be met with celebration in Kansas City, Mo., which already is in a bidding war with Kansas as it tries to keep businesses on our side of the border. In addition to the individual income tax cut, Kansas has changed how it taxes small business that will result in nearly 191,000 small businesses not paying income taxes. Any small business in Missouri must be interested in the prospect of not paying taxes on their non-wage income, and Kansas is not THAT far away.
What is Missouri doing in response? Not much. There were proposals in the 2012 session of the Missouri Legislature to cut personal income and corporate income taxes, but they did not pass. While Kansas moves forward in making itself more competitive and attractive to businesses, we are stuck carrying out business as usual. Considering the fact that Missouri is falling behind the rest of the nation in economic performance, something has to change. Alas, we can take our quantum of solace in the fact we are not making things worse, like they are in Illinois.
The MSD Bond Issue: Vote Yes Or No, But Blame The EPA
The Metropolitan St. Louis Sewer District (MSD) has an enormous bond issue on the ballot next week, for $945 million! Even in a post-bailout America, that is a lot of money.
I do not know how I am going to vote on this issue. The project is going to be done and rates are going to increase either way. If the bond issue passes, rates will increase slowly, but bond financing will have to be added to the total costs. If the bond issue fails, rates will increase more substantially right away, but we would not have to pay an estimated $200 million in bond financing costs. (My $200 million estimate comes from the bottom of page 7 here.) Pay more now or pay more later. I am probably leaning toward paying more now, but each voter is going to have to make that choice for himself or herself and their families, and I certainly understand those wanting to take a more long-term view.
I do not blame MSD for this. Kansas City is going through a very similar process, as are cities around the country. I blame unnecessarily strict EPA rules designed to prevent occasional releases of sewage during extremely heavy storms and to eliminate the use of combined sewers. I also blame time and the aging process.
Nobody wants sewage releases, and everyone wants safe water. The issue arises when federal regulators require local sewer authorities to spend billions of dollars for comparatively small increases in water quality. Perhaps cost should not matter because it is for the kids. But we do not live in fairyland, we do not spread magic dust, and costs do matter; as does regulatory overreach.
Could MSD have done a better job in recent decades updating the system to prepare for this? Almost certainly, but at some point it was going to be necessary to do a massive upgrade of an old sewer system; EPA regulations or not. The EPA regulations will do what the federal government usually does: take an issue and make it larger, more expensive, more litigious, and more intrusive. But that is our fault for allowing the federal government to grow to a size where it gets to dictate so much of our lives; it is not MSD’s fault.
People who are better able to comment on the technical, engineering aspect of the issue should feel free to chime in via the comments.
A Mixed Bag?
Show-Me Institute Policy Analyst Patrick Ishmael talks about how the Legislature dealt with health care and tax credits … and says it’s good news, bad news.
Too Little, Too Late?
The St. Louis Post-Dispatch reports that regulators have granted banks increased flexibility to rent foreclosed homes that they cannot sell. This is great news. Private banks now have more options that can help put vacant homes to productive use, and people still (understandably) wary of purchasing a home can choose to rent one instead. Hopefully this will result in fewer vacant properties and more people in homes.
However, this ease of regulation comes just a little late. The housing market crisis began years ago. Part of the federal government’s response was to throw hundreds of millions of dollars in taxpayer money at the problem. In February 2010, the U.S. Department of Housing and Urban Development (HUD) awarded more than $223 million to help establish land banks in Michigan. More than $40 million went to a land bank in Ohio. The Saint Louis land bank, the Land Reutilization Authority (LRA), has used federal money to acquire property.
It would have been nice if the federal government had eased this regulation earlier, and before so much money was dumped into a program that has not been proven successful. After all, the Saint Louis land bank, which is the oldest standing land bank in the U.S., has not succeeded in getting vacant property back into private, productive use. Since its creation, the land bank’s holdings have quintupled, and Show-Me Institute research found that the land bank had a habit of rejecting nearly half of all formal offers to purchase its property.
There is a real risk that land banks set up in Michigan, Ohio, Indiana, New York, and other states will end up where the Saint Louis land bank has: Holding many properties indefinitely, and plagued by processes that favor political insiders. Much of the blame for this expensive and unproven expansion of land banking rests squarely with the federal programs and funding that encouraged it.
Reducing regulations associated with renting vacant, foreclosed homes is a good first step to dealing with the glut of foreclosed property. A next good step would be for the federal government to cease funding land banks.
A Bankrupt Idea?
Show-Me Institute Policy Analyst Audrey Spalding says setting up a land bank in Kansas City is bad legislation.
Another Judge Rules Saint Louis’ Red Light Camera System Unconstitutional
Once again, a Saint Louis City judge has found that the city’s red light cameras are unconstitutional. Yesterday, Judge Theresa Counts Burke sided with a ruling in February that found that the City of Saint Louis’ red light camera system violates due process. Missouri Sen. Jim Lembke (R-Dist. 1), a long-time critic of red light cameras, brought forth the case.
Saint Louis City’s system violates due process because tickets sent to alleged violators do not contain information about a court hearing date or the right to contest. That means, attorney Bevis Schock (a Show-Me Institute board member) told KMOX, that “. . . there’s no way the defendant, the person receiving the notice, understands that there’s a right to a hearing.”
Hopefully this ruling will help bring about the elimination of red light cameras in Missouri. In our state, red light cameras have not been shown to increase safety. But they are popular, perhaps because they can help a city raise a great deal of revenue from traffic tickets.
This latest ruling throws the continued operation of red light cameras in Saint Louis City into question. One Saint Louis attorney has said that he would advise family members to not pay red light camera tickets because the penalty for the ticket appears to be just threatening letters from a company in Texas.
In related news, at the most recent Columbia City Council meeting, city officials reported that the installation of red light cameras had resulted in more than a four-fold increase in tickets. The city has issued more than 3,500 tickets since the cameras were installed in September 2009, compared to an average of about 330 tickets before the cameras were installed.
And earlier this year, Kansas City found that red light cameras in its city had not increased safety, as promised. In fact, the study found that both accidents and fatal accidents had increased at a majority of intersections where red light cameras are installed.
For more information about the policy questions regarding red light cameras, watch Show-Me Institute Policy Analyst David Stokes’ recent vlog on the Saint Louis red light camera issue, or check out our “Policing By Camera” panel discussion with Lembke, Saint Louis Alderman Antonio French, and Redditt Hudson of the American Civil Liberties Union (ACLU).
Fixing the Dome
Show-Me Institute Policy Researcher Michael Rathbone says the public shouldn’t bear the brunt of fixing up the Edward Jones Dome for the Rams.
