The Not-So-Special Session: Lessons Learned From a Public Policy Viewpoint

Posted on by Andrew B. Wilson

Talk about laying an egg! Missouri lawmakers are going
home at the end of the 50-day special session of the legislature with
little to show for their exertions.

While that is not the worst of all possible outcomes, it
represents a failure of leadership on multiple levels. Missouri Gov.
Jay Nixon should not have called the session. Leaders of the
Missouri House and Senate are equally to blame. They should have
made it clear to the governor that he would be wasting their time –
and, more importantly, taxpayers’ money. In fact, they wrote a
public letter to the governor requesting that he call a special session.

Just as Missouri Sen. John T. Lamping (R-Dist. 24)
predicted at a public event at the Show-Me Institute on Tues., Oct.
4, the special session has foundered on the vain hope of a grand
compromise between two fundamentally-opposed viewpoints —
with leading figures in the Senate wanting to make major
reductions in Missouri’s sprawling and out-of-control tax credit
programs . . . and House leaders prepared to extend hundreds of
millions of dollars in new tax credits to support a “Midwest China
hub” or “Aerotropolis” at Lambert-St. Louis International Airport.

In Lamping’s analysis, there was never any real possibility
that Aerotropolis subsidies could win legislative approval on a
standalone basis. They were therefore tied to deep cuts in other
programs — including tax credits for low-income housing and
historic buildings, with strong support from special interests of their
own. Hence the deadlock.

What, then, are the lessons learned from this inconclusive
and not-so-special session of the legislature?

While Sen. Lamping may be right about the tactical reasons
for the impasse in the legislature, I would point to a deeper
underlying cause. Simply put, the China hub had a big credibility
problem. No one — even the supporters — seemed to believe the
extravagant promises that were made on its behalf.

St. Louis Regional Chamber and Growth Association (RCGA)
claimed that $360 million in tax credits and other subsidies for
Aerotropolis would create tens of thousands of new jobs and generate
nearly $34 billion in economic activity over a 20-year period — paying
back the original investment in taxpayers’ money more than 100 times
over.

But did anyone believe that? It is a tell-tale sign of weakness that
some of the strongest supporters of Aerotropolis subsidies framed their
arguments almost as if they were buying a ticket for Powerball. While
freely admitting to considerable skepticism about whether “Missouri can
or will pull off the China hub deal,” they insisted that it was worth taking
a shot anyway — given a huge potential payout.

President Barack Obama, it may be noted, has used similar
language in talking about placing “bets” and being prepared to “double
down” in spending on clean energy, electric cars and other politically favored
enterprises or industries.

Sorry, Gov. Nixon and Mr. President, but few taxpayers these days
like the idea of political leaders playing hunches with hundreds of
millions or even billions of tax dollars. To the contrary, more and more
people are inclined to blame excessive government spending and
interference in the marketplace for the sorry state of the economy.

Over the past few years, policy analysts at the Show-Me Institute
have cited numerous instances, in St. Louis, Kansas City and other places
around the state, where targeted tax credits have failed to produce
promised economic results. The list includes failed shopping centers, the
stalled “Ballpark Village” in downtown St. Louis, and other economic
wonders that turned sour. And this is a lengthening list as we have seen
recently with other tax-favored enterprises defaulting on debts in Moberly
(Mamtek) and in Kirksville (Wi-Fi Sensors).

When the legislature reconvenes in January, let us hope that our
lawmakers realize their own limitations when it comes to picking winners
and losers. That is a task best left to the marketplace. The government
may have a role in creating infrastructure that can be used by anyone, but
targeted tax abatements are a form of corporate welfare — favoring one
group of businesses over others.

In 2012, the governor and the legislature should conduct a
thorough reexamination of the state’s 61 different tax credit programs,
with the objective of channeling the savings from those that are
terminated to all Missourians – through permanent reductions in taxation.

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

Making a Good System Better: Suggestions for Kansas City Government

Posted on by David Stokes

All politics, as they say, is local. But the politics in some
places (think St. Louis and St. Louis County) are much more local
than in other places that have a smaller number of elected officials
and governmental entities serving larger populations (think Kansas
City and Jackson County).

As a policy analyst who has studied local and municipal
government for many years, I know there is solid economic
evidence that having too many elected officials often leads to higher
levels of spending. On balance, therefore, I prefer the Kansas
City/Jackson County system to that of its eastern Missouri rival.

However, that is not to say that Kansas City — or any other
metro area — has devised the perfect system. The following are three
suggestions for changes to government in Kansas City and Jackson
County that I believe would benefit the citizens.


First, at-large elected officials should be truly at-large.

Both Kansas City and Jackson County should do what
Independence does, and have their at-large elected officials
represent the entire city, or county, without being expected to partly
represent districts or wards as well. There are economic studies that
demonstrate lower spending in cities with true at-large elected
officials.

Though Kansas City and Jackson County councils both elect
councilmembers at-large, those at-large officials are also designated
to represent certain areas. This mitigates one of the major benefits
of electing officials at-large, which is to avoid a situation in which
politicians compete to bring home the most pork for their districts.
For at-large officials who are truly at-large, every spending decision
presents a cost that the entire population bears.

Last year, Kansas City’s The Pitch documented how one
district’s at-large councilmembers wanted to spend more than $1
million acquiring new parkland within their district even though
(according to the Pitch) the city is having trouble maintaining the
parks it already operates.


Second, Kansas City municipalities should privatize their local
utilities.

Unlike many of parts of Missouri, most cities in the Kansas City
area have municipal water utilities. Independence even has a municipal
electric utility. The private sector is entirely capable of providing those
services to the public in a more efficient manner than local governments.
These municipal utilities should be auctioned off to private companies.
That would raise hundreds of millions of dollars for the Kansas City area.
At the same time, it would expand the property tax base by putting those
assets on the tax rolls; shrink the public-sector workforce; and relieve
fiscal pressures on local governments.


Third and finally, Kansas City should reform the manner in which
it makes tax incentive decisions such as tax increment financing (TIF).

Kansas City citizens and officials should work with state
legislatures to alter how TIF decisions are made in Kansas City. Cities
currently dominate TIF commissions, and are generally focused on their
own well-being with little thought given to schools and other independent
taxing districts. Cities can even override a TIF commission’s rejection of
a plan with a simple super-majority vote of the city council. Counties are
far better able to look at the big picture, and county officials are
responsible to all of the citizens that a TIF affects. Local TIF commissions
should be changed and the statewide rules amended so that only counties
may enact TIFs. This includes ending the ability of cities to override the
TIF commission. This change would likely result in fewer TIFs, with a
greater appreciation for their effects on the entire community when they
are enacted. In essence, Jackson County, not Missouri’s TIF capitol,
Sugar Creek, would be making tax decisions that affect all of Jackson
County.

The Kansas City region has generally chosen a government system
with fewer elected officials and larger, more efficient governments. That
system has served the area well, but these changes could make it even
more cost-effective and responsible to the citizens.


David Stokes is a policy analyst at the Show-Me Institute, which promotes
market solutions for Missouri Public Policy.

A Streetcar Too Far: Vanity Rail Lines Are a Waste of Kansas City Tax Dollars

Posted on by Patrick Ishmael

The first line of The Associated Press article said it all: “The trolley
is making a comeback.”

Sure, the article conceded, trolleys had been falling out of favor
with the public for years, but “[n]ow gas prices, air pollutants and
spiffy promotional campaigns are making people more aware of the
trolley as mass transit.” One trolley company even said that at least
10 cities were “studying or planning or requesting funding for new
light rail vehicles.” On that list: Kansas City.

Sounds like trolleys are the fresh, happening thing these days when
it comes to municipal development, except for one important thing:
The article quoted here is from 1975. As long-time residents can tell
you, Kansas City does not have a streetcar today, and it’s hard to
argue that streetcars made a substantive “comeback” in the 1970s,
or since.

But will Kansas City soon bring streetcars back to its Main Street?

Maybe, if the city has its way. Last month, the Parking and
Transportation Commission and the Kansas City Council approved
a plan to install $100 million worth of trolley lines following a 2-
mile route running from the River Market to Crown Center.

That’s $50 million per mile; a ludicrous expense, and that’s in the
context of a city that has seen its share of ridiculous rail proposals
over the years.

Indeed, the idea of bringing rail lines in one form or another has
been kicked around exhaustively for the last two decades, and there
are, in fact, two competing passenger rail proposals in Kansas City:
the Main Street trolley and, no joke, yet another $1 billion-plus rail
project that perpetual rail proponent Clay Chastain has proposed.

But even Chastain, the name and face behind KC rail for years, won’t
rally behind a trolley project.

“You’re not going to take a streetcar to the airport,” Chastain told The
Kansas City Star. “This is not the major response we need to build a
world-class transit system.”

When Clay Chastain says your project is impractical, it just might be
impractical.

Missing in all of the streetcar talk is any substantive discussion of why
these projects are necessary, or even desirable, especially in today’s
economic circumstances. Kansas City and other cities removed their
trolley lines decades ago in no small part because trolleys were
impractical for their times, and the impracticality problems of trolleys
remain to this day. The Parking and Transportation Commission’s own
report puts the expense of trolleys at five times what a comparable bus
costs, and that’s assuming there are no cost overruns in the trolley line’s
construction.

But let’s break this municipal issue down to its most salient and important
question: Is a trolley project really the best use of already-depleted
taxpayer dollars? The money Kansas City would spend on these projects
couldn’t be spent on other pressing municipal matters. What would the
city forgo if it rebuilds rail lines that were torn out long ago?

In this economy, Kansas City needs… trolleys?

Really?


Patrick Ishmael is a policy analyst at the Show-Me Institute, which
promotes market solutions for Missouri Public Policy.

The Job-Killing Effect of the ‘Do Something’ Mentality

Posted on by Andrew B. Wilson

The big news last week was a dismal national jobs report.
According to the U.S. Department of Labor, there was zero job
creation in August. But hang onto your hats. This week, the call will
go out for “bold” and “innovative” counter-offensives on the jobs
front at both the state and national levels.
The real question is whether either of the proposed
government-funded and government-led counter-offensives stands
any real chance of success.

With the state legislature meeting in a special session this
week, lawmakers from both parties are prepared to argue in favoring
of extending $360 million in proposed tax credits to support the
creation of a “Midwest China hub” or “Aerotropolis” at Lambert-St.
Louis International Airport. Based on previous comments, some of
them will admit to a large degree of skepticism about the possibility
that Lambert will evolve into a major cargo hub, but they will go on
to say it is still worth taking a shot at making it happen — given a
huge potential payoff in jobs and increased economic activity.

And on Thursday evening, President Barack Obama will no
doubt echo some of the same sentiments when he addresses a joint
session of Congress on the subject of job creation. We can’t afford to
stand around and “do nothing,” he or his supporters will suggest.
But there is nothing in the history of our state or nation that
suggests government intervention in the marketplace is an effective
tool for job creation. Indeed, when governments use taxpayers’
money in trying to pick economic winners and losers, they almost
invariably pick losers and compound failure.

Milton Friedman, the great economist, observed that people
have every incentive to economize and to get as much value as they
can for each dollar they spend when they are shopping for
themselves, but they are far more likely to be careless or wasteful
when they are spending someone else’s money for the benefit of
others. This is the case when you use an expense account to pay for
someone else’s lunch.

It is also the case when politicians or lawmakers pretend to have the
needed knowledge and expertise to channel a large sum of taxpayers’ money
to selected businesses or industries on the theory that these politically favored
and politically-dependent enterprises will do a bang-up job of
promoting the public good.

Politicians often argue that even one job created through tax credits or
subsidies is better than none. But this ignores the opportunity cost of
expending large amounts of taxpayers’ dollars for little economic benefit. If
the government takes a million dollars to create one job, that’s a million
dollars that could have gone to more efficient and productive ventures in the
private sector — creating stronger and better jobs for more people.

If Missouri lawmakers have some $360 million to spare and want to
put it to good use, they should return the money to all of the citizens of this
state through tax cuts or refunds. As Friedman pointed out, they will know
how to get the most bang for the buck.

The federal government should heed the same advice when it comes
to making a choice between expanded public works or reducing taxation,
leaving people free to choose how to spend a greater share of their own
income.


Andrew B. Wilson is a fellow at the Show-Me Institute, which promotes market
solutions for Missouri Public Policy.

Occupation as Aggression – And Public Theater

Posted on by Andrew B. Wilson

What does it mean to ‘occupy Wall Street,’ “occupy KC,” or occupy any one of dozens of other cities.

Plainly, it is more than the exercise of peaceful assembly and free speech. The protesters have had almost two months to express their complaints about corporate greed, income inequalities, and the whole notion that life isn’t nearly as fair as it ought to be. What more can they possibly say that they haven’t already said (however obtusely) a hundred times?

In the root sense of the word, to ‘occupy’ a place is to seize it from someone else. In just that sense, the Soviet Union ‘occupied’ Poland in September of 1939.

In the public theater going on in our cities today, the occupiers lay claim to the ground that they occupy — chanting “Whose Streets? Our Streets” and refusing to leave, regardless of city ordinances forbidding the pitching of tents in public places and regardless of the entreaties of elected officials asking them to leave.

According to their argument, the occupiers have reclaimed public space for the “99%” — meaning everyone outside the tiny group of people (the richest “1 percent”) who supposedly control almost all wealth and power. Of course, it is preposterous for the protesters to claim that they speak for 99% of the country — or, indeed, for anyone other than themselves.

Nevertheless, in cities across the country, mayors and other public officials have gone along with this fiction and bent over backwards in trying to accommodate the occupiers.

That was the case in my home city of Saint Louis, where 60 or so protesters were camped at Kiener Plaza, two blocks away from the city’s baseball stadium. At first, Saint Louis Mayor Francis Slay, a Democrat, went out of his way to welcome the “Occupy residents,” as he called them. He offered the occupiers a free permit to gather at the plaza and openly expressed his willingness to overlook the violation of various city ordinances.

Said the mayor in a blog post on Nov. 4:

During the weeks it has been camped here, Occupy St. Louis has had the opportunity to make its points heard during some very high profile events, including a presidential visit (on Oct. 5) and the World Series.

I emphatically disagree with those who say that allowing the encampment to remain during those events showed St. Louis in a bad light . . . Moving the Occupy residents simply to deny them a chance to tell their story to a large audience would have been wrong-headed and wrong-hearted.

But with the Christmas season drawing near (a big event at Kiener Plaza), the mayor wearied of the street theater. He announced that he would put an end to the occupation — promising only to give the group 24 hours’ notice before police would be called. In response, the Occupy St. Louis group accused the mayor of bending to the will of corporate leaders — the dreaded 1 percent. At a meeting with the mayor’s staff, occupiers expressed their outrage by showing up with money taped to their mouths.

The drama ended in the early morning hours of Nov. 12. That is when Saint Louis police arrested 27 remaining protesters and cleared the plaza of tents and signage.

If any moral may be drawn from the “big-hearted” mayor’s falling out with those he so recently lauded as having “important things to say about the direction of the country,” it is this: You can please professional agitators and self-proclaimed victims some of the time, but you will never be able to please them all of the time.

In truth, the protesters in Saint Louis and other cities have no claim to special treatment in the use of parks and other public places — apart from their willingness to flout the law.

The violation of city ordinances may sound like no big thing — against the immensity of the First Amendment guarantees of free assembly and free speech.

But no one ever denied free speech to the protesters. It is they who put the liberty of others in jeopardy. City ordinances that prohibit the pitching of tents in public places ensure that no one group can seize these places and deny or inhibit others in the use and enjoyment of the same space.

In other places around the country, city officials should follow the Saint Louis mayor’s example: They should strike the tents and stop coddling the occupiers.

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

Public Parks Problem, Part 2

Posted on by Michael Rathbone

I want to keep our loyal readers informed on the latest developments regarding the Saint Louis County park budget issue. David Stokes, a Show-Me Institute policy analyst, gave a great rundown about Saint Louis County officials considering closing some county parks because of budget problems. Apparently, Missouri Gov. Jay Nixon is offering assistance to the county in managing some parks:

Nixon said that he had offered assistance to [Saint Louis County Executive Charlie] Dooley. In particular, the governor mentioned Lone Elk Park, which is adjacent to Castlewood State Park. Nixon said such a state-county operation there would save money.

Lone Elk Park is adjacent to Castlewood State Park and a previous article states that the county was considering transferring Lone Elk Park to the Missouri Department of Conservation. The governor claims that a shared management operation would save money. I haven’t seen any data to support this claim, but IF it is true, then the idea can be viewed as having some merit.

However, it seems odd that in this article, the topic of privatization was barely mentioned, except in this brief statement:

[Saint Louis County Chief Operating Officer Garry] Earls initially said that some of the parks, including Lone Elk, could be sold. However, Dooley dismissed that possibility at a special budget meeting Tuesday night.

Prudence would suggest that the county not dismiss privatization (or ANY potential solution) out of hand. Shouldn’t the county consider privatization as a possible course of action before sharing park management with the state? If there ARE obstacles to privatization, what are they? The only obstacle I could find is in this piece of information from the Southeast Missourian:

Officials said deed restrictions and covenants would prohibit the sale of most of the parks to private individuals.

However, Lone Elk Park does NOT have a deed restriction on its sale so the above restriction would not be applicable. Are there any other reasons the county would not consider privatization of Lone Elk Park?

As David mentioned in his post, the Reason Foundation has done a good analysis of park privatization, and the conservancy model of non-profit, public-private partnerships operating a park has been tried successfully in Tower Grove Park. County officials have not given a reason why following the Tower Grove example would be a bad idea, and unless there is a deterioration of Tower Grove’s situation, shouldn’t Saint Louis County investigate privatization of Lone Elk Park if a private operator can be found to manage it?

Truth in Tax Credit Advertising?

Posted on by Audrey Spalding

The St. Louis Business Journal reported that Post Holdings Inc. (the cereal company) would get millions in state and local tax incentives. The company could get up to $3.8 million in Missouri Quality Jobs tax credits, and another $20 million from the city of Saint Louis.

Look, we all know that tax credits have a bad track record of success. Quality Jobs tax credits are especially infamous in Saint Louis, because of Liberty Mutual. The company sent pink slips to many of its employees, and told those employees that they could apply for lower-paying jobs.  Surprisingly, the Missouri Department of Economic Development said that Liberty Mutual remained eligible for the tax credits.

Of course, Quality Jobs tax credits are supposed to go toward creating high-paying jobs.

But today, I’d like to commend the creative designer who created the Business Journal graphic below. At first, it may seem like an ordinary cereal box. But, instead of the usual commercial claims, this cereal box proclaims that it is “Packed with $20 million in industrial revenue bonds,” and “INSIDE: $3.8 million in tax credits.”

I only wish that the designer had incorporated some fine print. Perhaps: “Job creation numbers have not been verified. Up to $20 million in bonds may be used for the project, which may not be good for the city of Saint Louis’ financial health.”

Graphic by the St. Louis Business Journal.
Graphic by the St. Louis Business Journal.

Special Interests Inhibiting Joplin’s Recovery?

Posted on by Greg Aubuchon

Remember the May 22 tornado that ripped through Joplin? There were 161 people killed and more than 7,000 residences destroyed.  The Associated Press has reported a 17-fold increase in building permits for the city of Joplin since the tornado:

The city has issued an average of $35.4 million in permits per month since the tornado. Before the tornado, the city averaged just over $2.1 million a month in building permits.

Despite this evidence of a robust private market, the Missouri Housing Development Commission has:

. . . committed about $100 million in tax credits and loans over the coming decade to spark the construction of low-to-moderate income rental units and single-family, owner-occupied homes in the Joplin area.

At least two issues come to mind. First, are taxpayer-funded tax credits necessary to rebuild Joplin? After all, human history proves that individuals and private markets are more than capable of rebuilding housing and infrastructure following natural disasters. Second, even if one were to concede the efficacy of public subsidies, there is no doubt in my mind that public dollars, once committed to disaster relief, must be spent on behalf of the public in an efficient and responsible manner. That leads to the crux of the matter.

The housing commission will require contractors, as a condition of receiving rebuilding tax credits, to pay the federal prevailing wage to their construction workers. And the controlling federal pay scale for occupations has quadrupled in some cases, as the St. Louis Post-Dispatch reported:

[A] Sept. 30 revision of the federal wage rules significantly increased those amounts. For example, the federal prevailing wage for a carpenter in the Joplin area rose from $7.98 an hour to $21.47 an hour plus $12.65 in benefits. The federal prevailing wage for a roofer in the Joplin area rose from $7.25 an hour, which matches the general federal minimum wage, to $21.30 an hour plus $8.08 in benefits.

So what is the purpose of the tax credits? If it is to get the most bang for the buck in providing critical assistance to low- and middle-income residents, efficiency requires waiving the wage standard for this project. The $100 million only goes so far, and artificially elevated wages means fewer homes built under the tax credit program. On the other hand, the tax credits and prevailing wage changes may have mixed purposes, not all of which seek what truly is best for the displaced and less fortunate in Joplin.
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