Papa John’s and The Case of the Over-Regulated Food Trucks

The St. Louis Post-Dispatch reports that the city has sent out new maps setting out where food trucks can set up shop downtown. Already restricted, the location possibilities for food trucks appear to be getting even more limited, and that’s bad news for food trucks and customers alike.

The updated map draws a 200-foot no-parking-zone around every brick-and-mortar restaurant in the Downtown Vending District, which runs roughly from 18th Street east to Interstate 70/55 and from Cole Street south to Chouteau Avenue.

The trucks also are not allowed within 200 feet of other types of street vendors or within several blocks of Busch Stadium, America’s Center and the Edward Jones Dome. A previous version of the map included suggested areas where food trucks could park; the new version does not.[…]

“Like any new industry or trend, as soon as everyone jumps in, the regulations follow, which often makes sense. In this case, I think the city is over-regulating,” Pi Pizzeria owner Chris Sommers said. “They do need to protect existing businesses, but the 200-foot rule plus the silly Cardinals and Convention Zones are too much.”

You can find the new map here. As we’ve noted in the past, creating special protections like these runs afoul of good policy and the facilitation of greater consumer choice. The city’s new map accentuates and enhances these ongoing mistakes.

For instance, why in the world does Starbucks need protection from taco wagons? Starbucks sells coffee and pastries. That has nothing to do with the food that, for example, Seoul Taco sells.

starbucks

Why can’t a mobile sandwich shop like Taste-D-Burger set up shop on a block where a bevy of sandwich shops — upscale and down — are already competing against one another, and many for years?

sandwich

Why is there a halo around this storefront when The Crack Fox doesn’t even open until 3pm, well after the food truck lunch rush?

crackfox

And here’s my favorite: Why does Papa John’s, which can deliver pizzas across the food truck map, get protections around its brick-and-mortar store, and get de facto protections for its delivery routes around the brick-and-mortar stores of others?

papaj

I have to disagree with the owner of Pi’s assessment that the city needs to be “protecting” existing businesses. There are blocks upon blocks of downtown real estate where lunch is served in permanently-located restaurants well-within the 200 foot halos the city has constructed around neighboring shops — permanent locations that are almost certainly greater threats to each other than the food trucks themselves. But even if you wanted to make sure taco joints weren’t being displaced by mobile taco stands parking on their doorstep, the present regulation is far too over-broad to equitably accomplish that goal.

A food truck taco stand couldn’t sell tacos within 200 feet of a storefront that’s closed at lunch, for Pete’s sake. That’s a policy that Saint Louisans will have a hard time digesting.

What Do You Get When More Than 70 Percent Of Voters Support Anti-TIF Candidates?

Apparently, you get a TIF (Tax Increment Financing) anyway. The Ellisville City Council appears to be going forward with a TIF plan despite the overwhelming opposition to it within the city. How can I say “overwhelming opposition”? Well, earlier this month, the two anti-TIF candidates for mayor received more than 70 percent of the total vote. Seems like strong evidence to me that the people of Ellisville do not want this tax giveaway. But city officials nevertheless are going forward with it. Last night, the TIF received preliminary approval, and it is set for final passage in another two weeks. If this passes, it would be one of the most appalling decisions by an elected body I have ever seen. “Let’s enact terrible economic policy AND ignore the will of the voters at the same time!”

The vote last night was 5-2, with the newly victorious anti-TIF mayor and one city councilmember (who also ran for mayor opposing the TIF) voting against it.

I predict the Ellisville charter rules on referendum and recall will quickly become very important in Ellisville if the TIF passes — along with Missouri TIF-related case law involving referendums from this lawsuit.

Missouri TIF Update

Tonight is the big night in Ellisville. The just-announced closure of the Best Buy in town should make the choice easier for the city to just join the county sales tax pool, as the difference between what Ellisville would get as an “A” (point-of-sale) city and a “B” (pool) city is now much closer.  It should not be used as an excuse to enter into the proposed Tax Increment Financing (TIF). Cities do not have to play this game. They have a way out – the sales tax pool.

A new Walmart is opening in Jefferson County. Yes, it got a TIF. The property taxes will now be frozen for all the other taxing districts. So, someone please explain to me how the school district is going to pay for educating the kids in the 180 new homes that are part of the project, when those homes will not be paying the necessary marginal taxes for the schools. Oh yeah, the school district will seek to raise taxes on everyone else . . .

Meanwhile, in more positive news, Florissant officials are set to vote next week on approving a development for a Walmart that is being built without a TIF. The Florissant City Council rejected a TIF last year, but the project is going forward because this particular plan makes economic sense. I commend Florissant officials for their discipline, and hope this serves as an example to cities throughout Missouri. This is a good opportunity to remind people that I have nothing against Walmart – just the subsidies that usually accompany it.

Finally, here is the Show-Me Institute’s latest study on the basic structure of TIF.

Richmond Heights: TIF Gone Bad

Richmond Heights is the latest city in Missouri to dangle Tax Increment Financing (TIF) incentives in front of hungry developers seeking taxpayer assistance. Well, not really the latest. You see, Menards and Pace Properties are just the most recent on a long list of suitors who tried to develop Hadley Township, east of Hanley Road between Dale Ave. and Bruno Ave.

According to the St. Louis Post-Dispatch, Richmond Heights has been entertaining proposals since 2003. Things looked great back in 2006, when the Richmond Heights City Council found a serious suitor in Michelson Commercial Realty and Development. But three years later, Michelson still could not get the financing together even with Richmond Heights officials pledging $46.2 million in TIF. The project was scrapped and Michelson pulled out of the 86 contracts it had signed to purchase all the homes and businesses in the affected area. All told, four separate development plan proposals just like Michelson’s failed.

The (eternally) pending developments have sent the neighborhood into a state of disrepair. Richmond Heights City Manager Amy Hamilton told the Post-Dispatch prior to the City Council’s latest vote that more than 35 properties are in “poor or severely deteriorated condition, and the majority of these properties are owned by land speculators.” Hamilton blames speculators and absentee landlords for the degradation, but more likely, Hadley Township property owners are responding to the incentives the city has offered. Who would really invest significant time and money in home improvements while the city unsuccessfully plots deal after deal to snatch up their properties?

And what do Richmond Heights taxpayers get for all their trouble? With Menards, they get yet another big-box home improvement store on South Hanley Road. If the market really drives Menards, Lowe’s, and Home Depot to locate within a half mile of each other, that is great. But it should not be government’s role to plan the local economy. More importantly, however, taxpayers get to finance $19 million of Menards’ $56.1 million development and $26.6 million of Pace’s $125 million development. (Bonus!)

This really is TIF at its worst.

At Least We Are Transparent About Our Cronyism In Missouri!

The Pew Center on the States has published a review of the transparency of state tax incentive programs. Some Missouri legislators, of course, are big fans of tax credits — the Missouri government issued about $500 million last year, and during the 2011 legislative session, some legislators pushed very hard for legislation to create nearly another $400 million in tax credits.

Perhaps because these handouts consume so much of our state budget, our government does pay some attention to where the money is going. As such, Missouri ranked high as one of the states that is “leading the way” in the Pew Center’s study.

While tax credit transparency is a laudable goal, it has accomplished little. Many of our state politicians call for tax credit reform, and then support tax credit programs soon thereafter. Consider Missouri Gov. Jay Nixon, who made news last year when he told journalists that it was time for tax credit reform. And yet later that year, he urged legislators to pass expansive tax credit legislation.

Our state may have a somewhat transparent tax credit system, but taxpayer dollars continue to be misused. Just last week, Missouri Journal reported that Brown Shoe received $2.4 million in jobs training tax credits this year — and is laying off 132 workers. Missouri Journal has also reported that Ford Motor Co. received $1.85 million in job training tax incentives, despite plans to lay off more than 1,000 Missouri workers temporarily. This would have been surprising, if it had not happened before: Despite issuing many of its employees pink slips, Liberty Mutual remained eligible for job creation tax credits.

And, regular Show-Me Daily readers certainly are familiar with the state-level reviews of tax credits with a 2010 audit report that found that the state Department of Economic Development had inflated some job creation numbers associated with tax credit awards, and another 2010 state audit report that found that tax credits are more expensive than advertised. The Governor’s Tax Credit Review Commission report had all kinds of strong recommendations for tax credit reform, but those have, perhaps predictably, not been implemented.

I wonder, if Missouri is considered to be “leading the way,” what is going on in states that Pew considers to be “trailing behind”? It seems we have all kinds of accountability problems with our tax credit programs.  Sadly, transparency seems to have given our politicians enough information to provide tough talk about reform, but not the gumption to implement it.

More Than A Third Of Missouri Is Blighted

More than a third of the state of Missouri — 24,870 square miles — is in enhanced enterprise zones (EEZ), areas that must be declared blighted in order to be created. The enhanced enterprise zones cover an area the size of West Virginia. These zones are appealing to local governments because businesses in the area become eligible for certain state and local tax incentives. But regardless of the desirability of enhanced enterprise zones, the notion of blight has lost substantial meaning when it characterizes a third of the state.

Blight is not benign. It can lead to eminent domain abuse. As long as it is this easy to blight a property, no home or business is safe. This is the fear of CiViC, the citizen group that has arisen in Columbia, Mo., to resist the EEZ being considered there. The group fears the city’s blight declaration will lead to eminent domain abuse.

EEZs are in red (map as of 2011)
EEZs are in red (zone boundaries as of 2011)

Consider: the definition of blight for the purpose of establishing an EEZ is exactly the same as the definition of blight for statutes explicitly granting eminent domain privileges. The implication is it can be just as easy to declare blight for eminent domain as it has been to declare enhanced enterprise zones in more than a third of the state.

Clearly, it is time to reform the definition of blight and separate it from the use of eminent domain. This separation has been granted to farmland, and it should be extended to all types of property.

Beer Wars

The future of the state’s beer market potentially is about to change, and not for the better. That is, if some legislators in Jefferson City get their way. The Missouri Senate is considering Senate Bill 876, in which the main provision states that no brewer, brewer employee, nor brewer affiliates “may have any financial interest in a beer wholesaler, or serve as a director, manager, employee, or agent of a beer wholesaler.”

There is an exception for small breweries (those that produce less than 10,000 barrels a year) owning wholesalers that sell only those breweries’ beers. My question is, why is the state interfering in beer distribution in the first place? Is there a great harm that the state needs to address? Is there anti-competitive behavior occurring? I have not seen an argument being made for this bill on its merits. However, I can see a potential negative. Middlemen, such as beer distributors, succeed when they add value to the process. Such middlemen can be important components of economic organization, but that is only if they add value to the process; state officials should not mandate them into existence.

While there are some legitimate roles for the government in regulating alcohol sales (i.e., age restrictions), the provision that would be created in this proposal is not one of them. If brewery officials do not think it is to their benefit to own or have a financial interest in wholesalers, they will make that decision. However, I do not see why the state should involve itself even more in the market with a mandate for the distribution system of a certain product. SB 876 is another example of the state meddling in areas that are best left to the market.

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