Clutching the Sewers: The Foul Smell of a Missed Opportunity

Posted on by Bruce Stahl

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

Posted on by Bruce Stahl

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?

Posted on by Josh Smith

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

Posted on by Michael Rathbone

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

Posted on by Joseph Haslag

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

Will Missouri Impose One Mandate As It Fights Another?

Posted on by Patrick Ishmael

Regarding health care, Missouri’s legislature is getting it right on at least one front. On the one hand, it is working to close legal loopholes that could allow a health insurance exchange to be implemented unilaterally in the state capitol, either by administrative or gubernatorial fiat. There are lots of reasons to oppose implementing an Obamacare exchange in the state, but there should be little dispute that if it is going to be implemented, it needs to go through the proper legislative channels.

What should raise concerns, however, is whether state legislation that mandates optometrist eye exams for incoming kindergartners is right for Missouri. At least one state commission does not think so, which does not even begin to address the philosophical consistency question implicit in the move. The St. Louis Post-Dispatch reports (emphasis mine):

Calling the law ineffective and a financial burden on families, a state commission recommended that legislators drop the exam and instead beef up vision screenings by school nurses. The state’s eye physicians and surgeons embraced that approach.

Optometrists, however, are mounting a big push to get the Legislature to renew the exam requirement, which is slated to expire this June. The Missouri Optometric Association has hired 11 lobbyists. More important, they have a key ally: House Speaker Steve Tilley, an optometrist.

Tilley, R-Perryville, put the optometrists’ bill on a fast track — it is headed to the House floor after a packed committee hearing last week — while he bottled up the alternative, the school nurse bill, by not referring it to a committee.

Caught in the political crossfire are families who may have to shell out $100 for a child’s eye exam, because private medical insurance generally won’t cover it.

The chair of the Children’s Vision Commission, Oscar Cruz, is not impressed about the merits of the current law. “It’s a political process, unfortunately,” he said. And then there is the fiscal note.

The fiscal note on the optometrists’ bill suggests the state could use a $99,000 appropriation earmarked for blindness screening and treatment to pay for exams for about 6,637 uninsured kindergartners and first-graders in districts without kindergarten.

But that would average out to only $15 an exam. Mickey Wilson, director of the Legislature’s Oversight Division, said the analysis assumes that some optometrists would do the tests for free, or at a reduced cost.

That sounds like an awfully big assumption, and it does not even answer concerns for insured children whose plans would not cover the exams, the cost of which would fall to Missouri’s parents. The commission notes that outfitting school nurses to perform eye care screenings makes more sense.

Cruz said screenings by school nurses catch about 95 to 97 percent of eye problems that can damage vision on a long-term basis. Forcing 65,000 kindergartners a year to get comprehensive eye exams, he said, is “an incredible waste of resources.”

Only two other states — Kentucky and Illinois — have similar eye exam mandates. Is imposing an onerous mandate on Missouri families really the right course, especially as the legislature (very publicly) fights the onerous Obamacare mandate? The inconsistency should cause some pause.

Missouri: Where the Women Are Strong, the Men Are Good Looking, And Every Teacher is Above Average?

Posted on by Audrey Spalding

Last week, Ben Barnes, a Show-Me Institute intern, wrote about the teacher tenure reform bill that Missouri legislators are considering. Reforming teacher tenure may seem like an abstract concept, but the consequences of our current law are very real.

Eric Hanushek, of Stanford University, found that a good teacher can help a student learn one and a half years of material during a single academic year while a bad teacher might only be able to help a student learn half a year’s worth of material. In other words, a good teacher can help a student achieve three times as much educational growth as a bad teacher. A push for teacher tenure reform is not just about holding teachers accountable, it is about creating a way for school districts to get rid of ineffective teachers in order to help students learn more and from better teachers.

It appears that teaching is one of the most secure jobs in the state of Missouri. According to national data, few Missouri teachers are terminated in a given year.

But, I am curious about specific school districts, not just an estimated average across numerous schools. For school districts throughout the state, what number of teachers were terminated during the past 10 years? Are most dismissed teachers new to the profession (and have not yet achieved tenure), with very few being dismissed after achieving tenure? We are still doing research on this issue, but the preliminary data looks like teaching has an extraordinary level of job security.

Consider the following:

  • In the past 10 years, the Cape Girardeau School District, which employs approximately 350 teachers, has terminated just two tenured teachers.

  • During the same time, the Parkway School District, which employs more than 1,200 teachers, has terminated five.

  • The Springfield School District, which has more than 1,600 teachers, has terminated fewer than 10 teachers in the past five years.

  • The Van Buren School District, in its response to a Sunshine Law request, noted that “no teachers …were asked to leave, were terminated, or were fired by the district” during the past 10 years.

  • The Shelby County R-IV School District has not terminated any teachers during the past 10 years.

  • The last time the Gilman City R-IV School District terminated any teachers was during the 2002-03 school year. That year, two teachers were terminated.

Perhaps Missouri is inundated with high-quality teachers to the point that, over a 10-year period, some school districts have termination rates of as little as 0.4 percent. But, the case may be that poor teachers continue to teach at school districts that cannot (or will not) terminate them for performance reasons. And this means that some Missouri students will continue to receive a low-quality education.

Instead of keeping on the best and the worst teachers, it is time let school districts encourage the worst teachers to find new jobs, while rewarding the best teachers with pay boosts. Missouri House Bill 1526 is certainly a step in the right direction.

Is Franklin County Violating The State’s Blaine Amendment?

Posted on by Brennan Connor

A recent article on emissourian.com questioned whether a Franklin County program violates the Missouri Constitution.

Franklin County has and continues to violate the state’s Constitution by allocating hundreds of thousands of taxpayer dollars annually to fund counseling and antibullying programs in area private schools.

That’s according to Tony Rothert, legal director for the American Civil Liberties Union of Eastern Missouri.

The Blaine Amendment of the Missouri Constitution prohibits the use of public funds to support or sustain any school controlled by any religious creed, church, or sectarian denomination. The Missouri Supreme Court previously struck down statutes requiring that bus services and textbooks be provided to private school students. 

Annie Schulte, executive director of the Franklin County Children and Families Community Resource Board (FCCRB), raised a number of arguments detailing why the program does not violate the Missouri Constitution; unfortunately, none of them are very persuasive. The use of public funds to support a sectarian school is unconstitutional, whether the funds are paid directly to the school or indirectly support the school. The Franklin County program is also not analogous to Title I. Title I grants bypass the state and local agencies and go directly to independent contractors. Because no state or local agency ever controls the funds, they are not “public funds.” The FCCRB, on the other hand, is a local agency and does control the funds. 

The fact that the Franklin County program seemingly is unconstitutional is an illustration of how the Blaine Amendment currently stands as an obstacle to the freedom of school choice for students in failing districts, such as Saint Louis and Kansas City. As University of Missouri-Columbia Professor Michael Podgursky argued, the rigidity of the Blaine Amendment is keeping students stuck in unaccredited schools following the Missouri Supreme Court’s Turner decision. While the Supreme Court of the United States held that a voucher program for students to attend a private sectarian school does not violate the federal constitution, it is clear that a similar program would be struck down in Missouri. If the state cannot provide private school students with books, buses, and (probably) counseling services, a voucher program stands no chance of passing constitutional muster.

It is unfortunate that students at private sectarian schools likely cannot receive counseling services from the Franklin County program, but students who are stuck in unaccredited, failing schools is a much bigger issue. Given accredited public schools’ unwillingness to accept students from failing districts, these students may remain stuck until the Blaine Amendment is repealed.

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