Privatization of Parking Meter Collecting was Worthwhile Change for Saint Louis

Saint Louis Alderman Fred Wessels has filed a lawsuit regarding Saint Louis City Treasurer Larry Williams’ privatization of the city’s parking meter operations. One may certainly wonder if this lawsuit is political? Mr. Williams made the change to privatize the parking meter collections three years ago and the lawsuit was just filed now, two months before the two men (and several others) face off in an election for the city treasurer position.

There are some public services that should never be privatized, some that should always be privatized, and some that depend on certain factors. Parking enforcement is in the “always” category. Contracting out the enforcement of parking meters is something that the private sector can easily do, and should do. There is no reason parking enforcement jobs should be on the public dime, with the benefits, pensions, etc., that are included in government jobs. Mr. Williams deserves a great deal of credit for making this change and reducing the political imprint of his office to save taxpayer dollars. If Alderman Wessels was really so offended by the manner in which the privatization occurred, I think he should have contested the move long ago.

The Reason Foundation has done some excellent work on all types of parking privatization. To be clear, Mr. Williams has not gone nearly as far with this privatization effort as Chicago did – where the entire city street parking operations were contracted out. All Williams did was contract out the collection of money from meters – the city still controls the rates, meter placement, etc. I do not support privatization law enforcement functions, but meter enforcement is hardly that. I view meter collection as a support service to law enforcement, like the mechanics who work on the police cars or the clerks who manage the department documents. You do not need a police officer to do it, and you do not need a government employee to do it.

Now, if Mr. Wessels wants something to legitimately criticize Mr. Williams for, how about the dearth of readily available data on the city treasurer’s office? This post would have been a longer and more detailed defense of the city treasurer’s privatization effort if I had easy access to the budget data from the office. (This is a blog post, not a policy study, so I do not have the time to gather data which should be up on the city website.) The city’s budget division only has very cursory information available on the treasurer’s office and the parking meter fund. So, whomever among the five candidates for the office wins in April, I hope they improve the available information for the office.

Money Down a Drain: The Millions Spent on Missouri’s No-Show Feb. 7 Election

Missouri lawmakers are feeling embarrassed. And well they should be. The representatives of the Show-Me State were shown up as knaves (worthy of foolscaps) when they called a statewide election and nobody came.

Or very few did. The state’s 454 polling places were empty for hours at a time as less than 8 percent of the state’s registered voters showed up to vote in the state’s presidential primary elections on Tues., Feb. 7.

In this case, the fault lies not with the voters — for failing to exercise their civic duty — but with the legislators, for refusing to call off a meaningless election.

In going ahead with a “non-binding” election that was empty of any real purpose, Missouri lawmakers on both sides of the aisle knowingly and shamelessly put taxpayers’ money to waste – treating the $7 million cost as a mere trifle.

“In the 10 years I’ve been here, this is the dumbest thing I’ve seen the legislature do,” Missouri Sen. Kevin Engler (R-Dist. 3) told the Show-Me Institute. “We spent $7 million — or just about $25 a vote — in an election in which not even one out every 12 people voted. This is an election that did absolutely nothing — while we as a state are firing hundreds of people in trying to cut a half a billion dollar budget deficit.”

This is how it happened.

Last year, the state Republican Party hoped to steal a march on other states in moving the state’s presidential primary to an early date. It hoped thereby to command greater national attention. But the national party foiled the plan. It passed new rules to punish states trying to hold early primary elections — refusing to recognize the results in seating delegates to the national convention Aug. 27-30 in Tampa Bay, Fla.

Recognizing the problem, the Republican-controlled Missouri Legislature approved a measure last spring that would have reset the primary to a later date and made it binding. On unrelated grounds, Missouri Gov. Jay Nixon vetoed the larger legislation that contained the new primary date. Another effort to reset the primary date failed in a special session last fall.

However, even after the state Republican Party decided to hold a March 17 caucus to determine the state’s delegates to the national convention, some Republicans in the Senate continued to trumpet the people’s “right to vote” in the now devalued primary, even though the practical effect of the vote would be slim-to-zero.

Sen. Engler described the money and effort wasted on the primary as “a bi-partisan failure” which could have been avoided if elected officials of both parties had been less cavalier about wasting taxpayers’ money. He noted that all eight of the Democrats in the Missouri Senate joined Republicans in voting to keep the primary election in February.

I did vote on Feb. 7 — but only out of curiosity. I went to my polling place in Saint Louis’s Central West End at 5 p.m. Only eight other people were there — all of them poll workers. I was the only voter.

This much is certain: An overwhelming majority of Missourians voted with their feet in paying no heed to a meaningless election. And if there is any further lesson to be drawn, it may be this: If the Political Class is so careless in spending millions of dollars of your money, can you trust them in spending billions, or even trillions?

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

A Steaming Pile of Pension Debt

How many of you are making progress climbing out of your personal debt hole? The financial meltdown of 2008 should have taught us the lessons of excessive debt and living beyond our means. Yet even if we are now making progress in balancing our personal finances, have you considered other debts that lurk in the shadows? Such as public pension debt? If not, ask yourself how much pension debt we, the taxpaying citizens of Missouri, actually owe to state government retirees.

Begin by thinking of a pension fund as a pool of investments (like stocks, bonds, etc.) that are purchased from money that employers contribute. These contributions and investments hopefully grow enough over time to cover the future retirement benefits of retired employees. But when employers fail to remit sufficient contributions, and when investments do not grow fast enough, the amounts of money available to pay retirement benefits fall short of the promised benefits. When this occurs, you have an unfunded liability. And because we are discussing public pension funds (where the government is the employer) future taxpayers are on the hook for the unfunded liability. And a looming fiscal crisis ensues.

We have reviewed the most recent comprehensive annual financial reports of five large statewide public pension funds in Missouri. The unfunded liabilities of each are listed below:

Missouri State Employees Retirement System (MOSERS): $2.4 billion

Missouri Local Government Employees Retirement System (MOLAGERS): $900 million

Public School Retirement System (PSRS): $5 billion

Public Education Employee Retirement System (PEERS): $500 million

County Employees Retirement Fund (CERF): $130 million

That is a total of just under $9 billion in unfunded liabilities that we owe to current and future public retirees! That is $1,500 per man, woman, and child in Missouri. And this includes only five public pensions (while these are among the largest public pensions in Missouri, there are approximately 130 public funds at the local and state level). This debt exceeds Missouri’s total general revenue collections for fiscal year 2011 ($7.1 billion, see the table on page 10 of the governor’s fiscal year 2013 executive budget). Taxpayer, beware. How many of the remaining 125 pensions operate in the red and how much do we really owe after they are accounted for?

Now, of course, if the economy and stock markets recover, the picture improves somewhat. But not by as much as you may suppose. Stay tuned for further discussions on that point.

Clutching the Sewers: The Foul Smell of a Missed Opportunity

Last week, the Arnold City Council decided against selling its sewers to Missouri American Water. It appears that the elected city officials did not care for the terms of the sale. From the Arnold Patch:

“It was clear that not enough assurances could be provided to ensure the protection of the City’s residents or the City employees who were proposed to join American Water,” [Arnold Mayor Ron] Counts said in a news release on Friday afternoon.

Any city should consider the costs of a decision, and I am glad that Arnold took the time to analyze those costs before making a decision. However, I believe there are benefits which may outweigh the costs. Should the city ever again be presented with the opportunity to sell its sewers, I hope city officials will fully consider the advantages of privatization. Here are a few examples from an op-ed that I wrote on the topic, untimely published five days after the decision not to sell (untimely due to bad luck, not a lack of effort):

  1. Arnold’s sewers are in dire straits. The city would face less of a financial difficulty if it relied on private capital to fund renovations and repairs.
  2. Private ownership leads to more efficient uses of labor and capital. Privatization can produce savings relative to bureaucratic management.
  3. The city of Arnold would obtain monetary benefits from the sale. When Florissant sold its water utility in 2002, it was able to establish a $10 million reserve fund. Arnold could use the revenue to establish its own reserve fund, pay down debt, or lower taxes.

For more Show-Me Institute commentary on privatization, click here.

Selling the Sewers: The Sweet Smell of Success

Officials for the city of Arnold, Mo., are studying the possibility of privatizing the city’s sewer system. This would be a positive development for several reasons.

First, the city could raise a large amount of money through the sale of its sewer system — possibly millions of dollars. This could be used to pay down debt, invest in needed public services, or lower taxes. The city of Florissant used the revenue from the 2002 sale of its water utility to finance several public improvements and establish a $10 million reserve fund.

Second, privatization would turn the sewers into a taxable asset. This means additional revenue for the municipality, possibly easing the tax burden on existing residents and businesses.

Third, privatization often results in lower costs, higher efficiency, and better service. For instance, Oklahoma City partnered with Veolia Water for wastewater treatment in 1984, and by 2001 had reduced treatment plant costs from $14 million to $11 million dollars. As long as efficiency gains such as those in Oklahoma City are passed on to consumers, lower costs can lead to customer savings. And although government regulations tend to erode efficiency gains over time, the immediate benefits should not be ignored. 

Make no mistake: Arnold’s wastewater system is aged and in need of extensive overhaul and repair. Privatization will not change that. Over the next few years, a significant portion of the sewer system will reach the end of its usable life. When this happens, significant costs will be incurred to renovate the system. These costs will occur whether or not the sewer system is privatized, but privatization could help keep renovation costs as low as possible. Sewer user-fees have gone up twice in the last three years – and that is with government ownership of the system. 

Private utility ownership is common throughout Missouri. In neighboring Saint Louis County, almost every resident purchases water, gas, and electricity from private companies. Although sewer privatization is less common, it is not unheard of; Missouri American Water, for instance, has several thousand sewer system customers throughout the state. 

The possibility of public repossession of the sewer system is an important option to remember. In the sale contract, Arnold can reserve the right to take the sewers back if certain standards are not met. Such a provision can protect residents from the danger of quality degradation and monopolistic fees. Another protection is the Missouri Public Service Commission, which regulates fees charged by private utility companies.

Arnold’s privatization option appears to be an opportunity for comparatively lower sewer rates and additional city revenue. The city will have more money, sewer costs will be handled more efficiently, and any concern about the quality and price of service can be addressed in the sale contract. Selling the sewers appears to be a situation where both the government and the people it serves can benefit.

Bruce Stahl is a research assistant at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Standstill Part Two?

Show-Me Institute Policy Analyst Audrey Spalding is in Jefferson City today to give testimony about land banks.

The state legislature is currently considering legislation that would create a land bank in Kansas City with much the same power and authority as the Saint Louis land bank, the Land Reutilization Authority (LRA). Audrey’s policy study on the LRA, “Standstill: Is Saint Louis Hindering Development by Waiting for Large-Scale Miracles?” (published last April) provides important insight into the potential pitfalls of a land bank with expansive authority to acquire and hold property.

The lessons of the LRA are well worth considering for any proposed land bank. Lofty public policy dreams often run afoul of the law of unintended consequences, and the long history of the LRA may serve better as a cautionary tale than an achievement to be repeated.

Left Behind

A recent Wall Street Journal article notes the increasing push from state governments to eliminate or reduce personal income taxes. This article reinforces a previous point the Show-Me Institute made that a state’s tax environment does not occur in a vacuum. A state’s position regarding taxes can decline compared to its neighbors, even if it keeps its tax rates the same. Missouri recently eliminated the corporate franchise tax and yet it still risks falling behind other states who are taking even bigger steps toward lowering their tax rates.

Missouri Gov. Jay Nixon takes great pride in not raising taxes to close the state’s budget shortfalls. However, where is the big push for income tax reform in the governor’s agenda? In the Executive Budget for fiscal year 2013, Nixon does propose, among other things, $4 million to provide loans or other investment tools to help high-tech businesses create jobs through the Missouri Science and Innovation Reinvestment Act (MOSIRA) and $10 million for the State Small Business Credit Initiative to increase the amount of private capital made available to small businesses. Yet, there is no push to cut taxes across the board and these spending initiatives sound like the same tired and retread policies the state has taken when it comes to economic development (they also are not very successful; Missouri ranks 49th out of 50 states in job creation).

Kansas is looking to cut taxes, so is Oklahoma, while Tennessee has no personal income tax. These states are making the RIGHT moves to be more competitive and business-friendly. The governor should follow suit.

Failing State Experiments: Taxing Their Way Into Poverty

Early in the morning of February 8, 2012, Jonathan Williams of the American Legislative and Exchange Council (ALEC) and Joseph Haslag, University of Missouri Professor of Economics, presented their thoughts and findings relating to the current and potential future of Missouri's economy to an enthusiastic audience in the Show-Me Institute's office in the Central West End of Saint Louis. Among the topics discussed were the impact of tax rates and regulation on economic growth and investor uncertainty. An in-depth audience Q&A followed the presentations.

Jonathan Williams' PowerPoint

Joseph Haslag's PowerPoint

The Missouri Compromise — An essay on comparative tax rates and economic performance among states by Dr. Arthur Laffer

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