Newly elected Mayor Adam Paul is against giving a TIF for a new Walmart
near the intersection of Clarkson and Manchester. The Ellisville City
Council has given preliminary approval for the TIF, but Paul thinks
public opinion may still prevail.
Revisionist TIF History From Columbia’s City Manager
The Columbia Missourian has published an overview of the statewide use of Tax Increment Financing (TIF), a development subsidy that is growing in popularity. The article provides a detailed overview, and the Missourian has posted excellent data online. Unfortunately, Columbia City Manager Mike Matthes, in his comments, seems to be fond of revising TIF history.
Matthes cited Independence, a suburb near Kansas City, as an example of a community that has enjoyed success with TIFs. I wonder if he was referring to the Bass Pro TIF in Independence that has failed. The city of Independence has had to kick in more than $4.1 million to cover bond payments associated with the project.
Matthes also said that “(TIF) does prevent and eliminate blight” and “it does increase property value and tax revenue over time.” Though the Missourian highlighted a TIF in North Kansas City that is characterized as successful, it failed to mention the notorious Citadel TIF in nearby Kansas City.
In late 2011, Kansas City officials voted to pay $15 million to purchase property that had been razed and contaminated with asbestos. The Citadel site now sits vacant, and is an example of a TIF project that made an area much, much worse, instead of eliminating so-called blight.
Moreover, earlier this week, the Wall Street Journal characterized Kansas City’s downtown entertainment TIF development, the Power & Light Development, as a “budget hole.” The Journal reports that the Power & Light Development is generating less than one-third of the tax revenue needed to cover debt costs associated with the project. As a result, Kansas City is setting aside $12.8 million to make up the difference.
On the eastern side of the state, TIF does not look much better. Matthes’ statement that TIF eliminates blight and increases tax revenue over time ignores the findings of a multi-year study of TIF and other development subsidies in the Saint Louis area that those subsidies were frequently concentrated in “higher-income communities.” The same study found that retail jobs associated with TIF projects came at a cost of more than $370,000 in taxpayer dollars.
Those findings are not surprising: Years earlier, the Brookings Institution concluded that TIF in Missouri “. . . is used extensively in high-tax-base Missouri suburban areas with little need for assistance . . .”
Perhaps I am being unfair. When Matthes said that TIF has proven to eliminate blight, he may have been referring to the TIF awarded to a Saint Louis area mall. The mall was deemed “blighted” because it lacked a Nordstrom’s. I suppose, because the West County Mall now has a Nordstrom’s, one could consider the “blight” removed.
Terrible New Valet Parking Law In Saint Louis City
I can admit there was a problem with valet parking in the city of Saint Louis. Steve Patterson has covered the issue well over at Urban Review. I agree with all of his comments. Too many new restaurants, etc., were operating valet parking like they owned the street. But, in typical government fashion, the city has taken a jackhammer to a fly. Instead of enforcing a process by which certain areas can be dedicated for valet parking at certain times, and then writing tickets for people or companies who violate it (such as a new restaurant who just decides to install valet parking in front of their restaurant and removes parking to do so), the city has taken the opportunity to just regulate the entire industry. Absolute garbage.
The new law will require that every part-time high school kid who parks cars in the summer to give the city $100 (assuming the fee is set at the maximum legal limit) for the right to do so. Even worse is the option for the city to declare an entire part of the city (such as downtown) a “special valet zone” and then only allow one valet company (of the city’s choosing, wink, wink) to operate within that zone. So the city is going to limit competition within the industry, which always works out great. That is why economists use valet parking as the standard example of a natural monopoly in all the textbooks, because parking is a public good that does not operate under the law of supply and demand. (Sarcasm note: parking is not a public good.)
Licensing the people who park cars as valets is a bad idea that will limit youth employment. Regulating the entire industry is a terrible idea. Limiting competition within the industry is the worst idea of all.
One Ellisville Citizen’s Take on a TIF for Walmart
The Ellisville City Council has given preliminary approval to a TIF for a new Walmart near the intersection of Clarkson and Manchester. The final vote is scheduled for May 2nd. Residents like Liz Schmidt are baffled by the council’s move. In her opinion, residents have already made their feelings clear about the TIF.
NAACP Says Litigation Likely In Fight For School Choice
When six failing schools close in an unaccredited school district, where do the students go?
That is the question facing Saint Louis officials and one that may have significant implications for state education policy. At the end of the school year, the six Imagine charter schools in the City of Saint Louis will close. The Imagine Schools have had a host of financial and academic troubles, with some reports raising questions of financial misconduct.
When the Imagine schools close, they will leave 3,000 or more students searching to find a new school. The NAACP, in a letter to state Commissioner of Education Chris Nicastro, estimates that there are only 500 open seats in city charter schools. The remaining Imagine school students’ only publicly provided option is to attend a school in the city’s public school district. The problem is, Saint Louis Public Schools (SLPS) have been unaccredited for years.
Though the Missouri Supreme Court recently ruled that students in an unaccredited district like SLPS must be allowed to transfer to an accredited district, the Imagine school students are not being given the option to attend nearby suburban districts.
Recently, the Saint Louis City firefighters filed a lawsuit to allow their children into nearby accredited schools. It now looks likely that the NAACP will join the fight for expanded educational choice in the Saint Louis area.
The NAACP is strongly advocating that the Imagine students be given a chance to choose a quality school in an accredited district. Adolphus Pruitt, the local NAACP’s director, has said that litigation is likely, and that attorneys are being interviewed.
When will the pressure in Saint Louis be enough to convince state legislators that a solution is needed? Saint Louis would not be mired in this situation if public funding for education could follow students to any school of their choosing. Instead, public education dollars in Missouri are tied to school districts, and subject to a convoluted and outdated funding formula. If legislators do not bring forward a solution, it seems likely that educational choice will be forced through more litigation.
Should Walmart Get a TIF In Ellisville?
The Ellisville city council has given preliminary approval for a TIF to
fund development of a Walmart at the corner of Clarkson and Manchester.
That vote overrides the county TIF commission, and apparently, the will
of a majority of Ellisville residents. David Stokes takes a look.
Why a Whopping Increase in Missouri’s Cigarette Tax Is a Bad Idea
While growing up in the small border town of Atchison,
Kan., my father, uncles, and family friends made frequent trips
over the Amelia Earhart Bridge to a small convenience store in
Buchanan County, Mo. They usually returned with a full gas
tank and small quantities of alcohol or cigarettes. I was too
young to understand what prompted these excursions. Now I
know. My father and others took advantage of Missouri’s low
excise tax rates on gas, alcohol, and cigarettes. As these trips
continued, sales and tax revenue were redistributed from Kansas
to Missouri. While the convenience store in Missouri remained
busy, the Shell station near the bridge in Atchison was often
empty.
Missouri benefited at Kansas’ expense as a direct result
of maintaining a lower tax rate in a competitive marketplace. In
2009, the QuikTrip on Southwest Blvd. in Kansas City, Kan.,
moved its location 100 feet into Missouri to take advantage of
the lower excise taxes. However, the situation that prompted this
move may be about to change.
Last fall, the Missouri Secretary of State gave approval to
a coalition of Missourians, led by the American Cancer Society,
to circulate a petition proposing an increase in the cigarette tax
from 17 cents to 90 cents per pack, a whopping 429 percent
increase. If passed, this proposal will stop the heavy cross-over
traffic of people coming to Missouri from other states to buy
cigarettes at a bargain price. In fact, business likely will shift in
the opposite direction – out of Missouri into other states.
Kansas’s 79-cent cigarette tax would certainly serve as an
appealing alternative to Missouri’s potential 90-cent tax. Under
the proposed increase, those who purchase cigarettes in Missouri
would pay $2.20 more per carton than they would if they
purchase cigarettes in Kansas.
While raising excise taxes might appear to be a simple way to
increase revenue, it can backfire and may even cause a loss in net
cigarette sales. Missouri’s two largest metropolitan areas, Saint Louis
and Kansas City, border states with much higher cigarette taxes,
prompting residents of neighboring Illinois and Kansas to make their
purchases here. Missouri’s 17-cent tax is certainly attractive to residents
of Illinois, where the tax rate is 98 cents, and Kansas, where the rate is
79 cents. Missouri benefits when residents of other states who come to
Missouri for work, sporting events, etc., voluntarily make such purchases
here.
Missouri Attorney General Chris Koster, a proponent of raising
Missouri’s cigarette tax, claimed in the Kansas City Star that a fivefold
increase in the state’s cigarette tax would lift revenue by a commensurate
amount – from $90 million a year to close to $500 million. But Koster’s
figures do not account for the major decrease in sales likely to occur
should the tax hike become a reality. It is silly to think that cigarette
sales will remain the same if Missouri smokers are required to spend
$14.60 more per carton of cigarettes. Remember, when you tax
something, sales will decrease. Increasing a cigarette tax might result in
less smoking, but it will also drive down purchases of cigarettes.
Patrick Fleenor, former senior economist at the Tax Foundation,
provides a telling example: When Michigan increased its cigarette tax
rate from $2.50 to $7.50 per carton (25 cents to 75 cents per pack), sales
decreased 26.7 percent. During the same period, cigarette sales greatly
increased in Indiana and other neighboring states with lower cigarette tax
rates. Should Missouri follow in the footsteps of Michigan, convenience
stores in Atchison, Kan., are likely to become much more profitable and
Missouri will experience a loss of cigarette revenue because fewer
cigarette will be sold on the eastern side of the border.
Amy Lutz is an intern at the Show-Me Institute, which promotes market
solutions for Missouri public policy.
Proposed Franchising Law A Convoluted Mess
As a lawyer whose job here includes reading laws and legislation much of the day, there are few things that irk me more than poorly-drafted copy. (Sometimes I even wonder whether some laws are poorly drafted on purpose.) But exquisitely complex sections like this one from Missouri Senate Bill 837 really take the cake:
It is the general assembly’s intent that this subdivision be interpreted as set forth in the Missouri cases of High Life Sales Company v. Brown-Forman Corporation, 823 S.W.2d 493 (Mo. 1992) and Brown-Forman Distillers Corp. v. McHenry, 566 S.W.2d 194 (Mo. 1978), rather than in Missouri Beverage Company, Inc. v. Shelton Brothers, Inc., 796 F. Supp. 2d 988 (W.D. Mo. 2011), aff’d, 11-2456 (8th Cir. February 28, 2012). Further, the general assembly declares that the federal court’s interpretation of this subdivision set forth in Missouri Beverage Company, Inc. v. Shelton Brothers, Inc., 796 F. Supp. 2d 988 (W.D. Mo. 2011), aff’d, 11-2456 (8th Cir. February 28, 2012) should be abrogated in favor of the preceding cases . . .
In a nutshell, the Missouri Legislature is referencing court rulings while trying to write a law instead of . . . actually writing the law. This is one of those proposed sections that make lawyers and special interests salivate and just about everyone else grimace in distaste and confusion. Unless you know what the court cases cited here do and do not say, it is almost impossible to understand how to best comply with the law. In a very real way, the law being “created” is not itself in the law. That is laziness, or worse.
What makes this particular instance especially bad is that it is fairly clear, given the apparent source of the law’s impetus, that this new, convoluted law could ultimately hurt consumers. The jumble of cases laid out above does not make that reality even remotely clear, which may very well be the point.
But whatever the reason for this proposed legislation, that it has been written in this form without clearly and unambiguously articulating what the new law will actually be as a result of this section — and relying on courts to de facto make the law through this sort of legislative reference — should be frustrating to taxpayers, policymakers, and companies alike. The legislature can, and should, do better.
Power & Light District Gets A Wall Street Journal Feature, With Predictable Results
For our regular readers, the fact that the Kansas City Power & Light District (P&LD) is hemorrhaging taxpayer money is no surprise. For those just finding out about the problems that have beset P&LD over the last few years, the Wall Street Journal’s report on the city’s budgetary mismanagement is as sobering as it is galling. The headline puts it succinctly: “Urban Center Is Budget Hole.” (Video via Tony’s Kansas City.)
The P&LD was a bet made in the 2000s that will cost the city $10 million-plus per year for years to come. Yet, the city refuses to learn its lesson. Kansas City officials persist in pursuing a massive new publicly-financed hotel project downtown and an expensive new streetcar system that will burden local businesses with taxes they do not want. We are talking about a city with one of the worst debt loads and tax levels in the region, and the solution — with the benefit of hindsight — is more debt and higher taxes? Pair it with the ongoing border war the city has with its Kansas rivals, and it is clear that the city is not embarking on a credible development strategy, but a road to ruin.
Oscar Wilde wrote in The Picture of Dorian Gray that “there is only one thing in the world worse than being talked about, and that is not being talked about.” Kansas City is getting its press for sure, but as it does its best to keep up appearances with its spend-spend-spend strategy, it ratchets up the risk of debasing its tax resources, wrapped within that thin, debt-laden facade. On the outside, things may look good. On the inside, the city is almost assuredly disfiguring itself, one act at a time.
