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.

Help Wanted

Posted on by Audrey Spalding

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

Posted on by Michael Rathbone

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

Posted on by David Stokes

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.

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