Building A Better Streetcar Proposal

Posted on by Patrick Ishmael

I have lodged my complaints for a long time regarding Kansas City’s $100 million trolley proposal. In short, it is yet another unnecessary government-centric development proposal that would raise taxes on residents and business owners already enduring some of the highest tax rates in the Midwest.

There is, of course, another (and better) way to fund this trolley, and the Kansas City Star’s Lewis Diuguid articulates it quite clearly: private funding.

So instead of heaping more taxes on those folks, Mayor Sly James and the City Council should begin an all-out, metrowide streetcar fundraising drive. Fundraisers helped build other great bricks-and-mortar things for the city.

The Central Library downtown is a wonderful example. So is the addition to the Nelson-Atkins Museum of Art.

People contributed to the construction of the Kauffman Center and the World War I Museum. Corporations metrowide, foundations and individuals could do the same for streetcars.

Private fundraising for ostensibly public projects is not a new idea, and as Diuguid highlights, that is especially true for Kansas City.

The city’s proposal already contemplates user fees and advertising to supplement the public financing component. Shouldn’t the Kansas City Council take the next step and explore the possibility of philanthropy and private investment, and work to remove the public component? And if there is neither a private nor philanthropic interest in building the streetcar, doesn’t that say something about the merits of the project?

What Is The Matter With Columbia?

Posted on by Audrey Spalding

The demolition of the Regency Hotel site. Photo by Timmy Huynh of the Columbia Missourian

The demolition of the Regency Hotel site. Photo by Timmy Huynh of the Columbia Missourian.

Since 2005, the City of Columbia has entered into the business of subsidizing development in a big way. The Columbia City Council approved its first Tax Increment Financing (TIF) project in 2009 and is considering another one.

In 2010, the city actually bought property for $3 million in order to lease it to IBM for $1 (yes, just a dollar) for at least 10 years. In fall 2011, the Columbia Missourian reported that IBM had hired just 101 full-time employees, far short of the 800 jobs promised.

It may not be a tax subsidy, but it is certainly a failed bet: The city has also built a very expensive parking garage that garishly lights up downtown Columbia in the evenings. The Missourian has reported that it costs more than $3,000 each month to keep the lights on in that garage. Of course, the cost of the parking lot is $21 million, and its parking revenue appears to have been paltry.

To this former Columbia resident, the city’s development bets seem contrived. The City Council, hoping for a better hotel, approved a large TIF for the Regency Hotel site on Broadway (demolition site pictured above). In my humble opinion, if the replacement of any hotel in Columbia could merit subsidy, I would nominate the Arrow Head Motel, which looks a little worse for the wear.

Now, the Columbia City Council is moving aggressively forward to allow for the awarding of Enhanced Enterprise Zone (EEZ) subsidies. The City Council voted 7-0 on Monday to set up an EEZ board, the first step needed to hand out EEZ development subsidies, despite the fact that many people showed up to protest that move.

What, exactly, is wrong with Columbia? The unemployment rate in the Columbia metropolitan statistical area is lower than the rest of Missouri. Columbia has a large college campus that guarantees a certain level of sales tax revenue and occupied apartments. It hosts football games that draw even more commercial activity to the city.

And yet, Columbia officials argue that a large swath of their downtown should be considered “blighted” and that the city needs development subsidies.

I wonder, to what success are those officials looking? I have pointed out before (in a Columbia newspaper) that TIF has a very poor track record on both sides of the state when it comes to creating long-term growth.

The Wall Street Journal just highlighted Kansas City’s bad development bets. The Saint Louis area’s use of development incentives has been so inefficient that we have spent more than $370,000 per job created. And the Associated Press just reported that the Kansas City development incentive border war has resulted in $750 million in incentives spent to move jobs across state lines.

Development subsidies that taxpayers fund are no way to provide long-term economic growth. But if Columbia’s city officials are itching to get into the development game, they should do so with their own money, and on their own time.

Tax Credit Scorecard: The Good, The Bad, And The Downright Sad

Posted on by Patrick Ishmael

The Missouri General Assembly’s 2012 session is over. How did the legislature do?

The Good: With most current elected officials disinterested in fixing Missouri’s tax credit binge, much of the “good news” here is what the legislature did not do. For one, a piece of legislation that resurrected part of 2011’s failed Aerotropolis tax credit boondoggle failed to make it out of the Senate. Another piece of legislation that would have expanded and created several tax credit programs without fixing the state’s out-of-control development scheme also failed.

The Bad: A compromise proposal that the Senate passed late in the session would have cut the cap on the Historic Preservation Tax Credit by almost half, from $140 million per year to $75 million. While not a perfect piece of legislation, it was probably the single-best chance for genuine tax credit reform this session. Not surprisingly, it died without a vote in the House.

The Sad: Tax credits remain one of the state’s most pressing areas for reform, and yet there appears to be few courageous leaders willing to take the reins and lead the charge to reform the system, either modestly through sunsets and caps, or audaciously, through a wholesale swap and elimination of the corporate income tax. Reform will come, but whether it will be forced on the legislature or whether it acts proactively on its own accord remains to be seen.

Successfully Competing For Students

Posted on by Audrey Spalding

In 2000, 48 percent of parents in the Maplewood-Richmond Heights School District chose to opt out of that public school system. According to the St. Louis Post-Dispatch, the district was in poor shape. The district was struggling academically, its buildings had fallen into disrepair. The district’s buildings certainly did not sound inviting, according to reporter Elisa Crouch’s description:

The high school was surrounded by barbed wire. Doors with broken locks were chained shut or jammed with broom sticks. Science labs had no running water. Gangs used school walls for graffiti.

That was when Superintendent Linda Henke started at the district. Now, 12 years later, as she retires, the district is much better off. It has made big strides academically, with its students outperforming the state average in Missouri Assessment Program (MAP) test scores. The buildings look more inviting.

According to the Post-Dispatch, Henke had to make tough decisions to improve the district. She terminated 30 teachers, a no small feat given how hard it can be to fire a teacher in Missouri, and the teachers’ union sued the district. The Maplewood-Richmond Heights School District also successfully passed a tax levy increase in 2010 during the midst of a recession.

But the best sign of the district’s success is that more area parents are opting to send their children to public schools. Now, 75 percent of neighborhood children are enrolled in the district. Though some of this change is due to the recession and parents no longer able to afford private school tuition, most of this change is likely attributable to the positive changes made at the district.  Parents are capable of recognizing educational success, and many will, if able, leave a failing district by moving or finding a better educational alternative.

But for every success story like that at Maplewood-Richmond Heights, there are districts that are falling behind with many parents unable to afford a better option. Instead of relegating students to a failing district for who knows how long, wouldn’t it be better if districts were held accountable for failure and rewarded for success?

One way to do this would be to allow parents to choose what school (and what district) their child attends, with the child taking his or her per-pupil funding to the chosen school. That way, successful districts would attract more students (and funding), while failing districts would have to compete for students and funding, or risk being closed. If competition for students can work for Maplewood, why can’t it work for the rest of the state?

I Am Not Alone On The Dome

Posted on by Michael Rathbone

I have not been shy about expressing my distaste for the current proposals being bandied about for upgrading the Edward Jones Dome. Today, the St. Louis Post-Dispatch published my letter expressing dismay at one of its columnist’s support for the Dome upgrade. Also today, the Post-Dispatch published a column by David Nicklaus echoing many of the same points I previously made.

Nicklaus cites an economic study conducted by Robert A. Baade and Victor A. Matheson which found that “Researchers who have gone back and looked at economic data for localities that have hosted mega-events, attracted new franchises, or built new sports facilities have almost invariably found little or no economic benefits from spectator sports.” This echoes the conclusions of the St. Louis Federal Reserve study that I cited. The economic case for upgrading the Dome simply is not there.

I also have to concur with Nicklaus regarding the public officials who are making the case for the Dome. If these officials are for the Dome, make the case in terms of civic pride or boosting the city’s image. Take that case to the people and let the chips fall where they may, but do not try to sell the plan to the public stating that upgrading the Dome will be an economic boost to the area, because it is not true.

Health Care Scorecard: The Good, The Bad, And The Downright Sad

Posted on by Patrick Ishmael

The legislative session is over. How did the Missouri Legislature fare in the area of health care?

The Good: The Legislature will submit to voters a referendum that would block the governor from unilaterally implementing ObamaCare. I have written about this in the past and had researched last September what the governor could do unilaterally. I expect Missourians will add an exclamation point to the state’s opposition to the Patient Protection and Affordable Care Act (PPACA) with the referendum, not unlike Missourians did with Proposition C in 2010. If passed, the referendum will deny the governor the ability to impose an ObamaCare health insurance exchange in Missouri.

Moreover, Missouri senators defeated what would have been an extension of the expensive and burdensome kindergarten optometrist mandate, an issue which I testified against. An unnecessary and inefficient imposition on Missouri’s families, the bill’s failure was the right thing for Missourians and Missouri families. This is an all-too-rare example of removing licensing-related rules and regulations in Missouri. I hope we have more of this in the future.

The Bad: In this case, really bad legislation. A bill that would have declared ObamaCare “unconstitutional” and applied criminal penalties to federal officials who would implement portions of the law in the state never made it to a vote on the floor of the Senate. Re-litigating the centuries-old notions of state interposition is neither necessary nor helpful to combating ObamaCare. The bill’s unceremonious end was warranted.

The Sad: Late last week I worried here that a bill allowing volunteer health organizations access to medically underserved Missourians would die due to a small potatoes dispute in one of the bill’s sections. To be clear, both the House and the Senate passed nearly identical versions of the bill. And yet, it died. It is a shame, bordering on shameful  that the chambers could not reconcile their differences.

Episode IV: A New Dome (They Might As Well)?

Posted on by Michael Rathbone

The St. Louis Rams’ counter-offer to the St. Louis Convention & Visitors Commission (CVC) has just been released. You can read the proposal yourself, but the key take-away is that the estimated price for this upgrade is in the range of $500 million to $750 million, with $700 million as the more specific estimate. The breakdown between private and public money is unknown, but presumably the public portion will be substantial.  Also, the plan would involve making the Dome unfit for conventions for two years, due to renovation work. Needless to say, operators of hotels and restaurants in Saint Louis would not be thrilled with such an arrangement in the short term.

Before even discussing the merits of such a proposal, it is imperative to ask, where would the city, county, and state find the money to pay for this, even if they wanted to? The state had enough trouble balancing the budget for its current obligations. Saint Louis City is looking to reduce the size of the police force and Saint Louis County is laying off workers to balance its budget.

Also, would the public be better off with an investment of this sort? I already pointed out the conclusions of a St. Louis Federal Reserve study showing that the impact of public investments into sports stadiums was negligible, or in the case of Saint Louis, negative. In a book written by Roger G. Noll and Andrew Zimbalist, “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums,” the authors conclude: “the economic case for publicly financed stadiums cannot credibly rest on the benefits to local business, as measured by jobs, income, and investment.”

If the Rams want a first-tier stadium, they should be free to build one with private funds, like the Carolina Panthers did. However, if they want the taxpayers to pay for most of it . . . then that is a problem. It is time to choose between what the city, county, and state need and what they would like to have.

Let Kansas Make Foolish Development Bets; We Have Better Things To Do

Posted on by Audrey Spalding

The Associated Press has published an excellent article about the tax incentive border war in Kansas City.

According to the AP, Missouri and Kansas have committed more than $750 million in tax incentives and bonds to lure companies across the state line. That amount of taxpayer money is incredible to promise away in just five years. Perhaps even more incredible is that the former head of the Missouri Department of Economic Development (DED) openly told the AP:

You get to a point where you have to say we are wasting taxpayer money.

For once, I agree with someone associated with the DED. It is certainly nice for elected officials to be able to issue a press release and claim to have created jobs and investment. But that practice is a raw deal for taxpayers. Research has shown that state tax credits have a lousy track record of delivering on promises. And, Missouri taxpayers support this foolish practice at a cost of hundreds of millions of dollars in state tax credits.

Though he has promised in the past to try and rein in tax credits, our governor does not seem to quite get it. Missouri Gov. Jay Nixon told the AP:

I’m going to compete for jobs for our state, I’m not backing up on that. But I think that the real long-term solution is how do we get more out of the region as far as joint economic impact?

Here is an idea: If a company wants to leave Missouri because Kansas has promised it a ridiculous amount of money, like $100,000 per job, let it go. That is a poor use of taxpayer dollars, and when a company moves a few miles, its employees frequently stay where they put. Those employees will continue to own homes, shop, and pay taxes in Missouri.

There are better ways to make our state competitive. Let’s lower the corporate income tax. Why not reduce the state income tax?

The way to encourage economic growth throughout the state is to provide tax relief to all Missourians, instead of participating in a tax incentive game that helps politicians earn political points.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging