Nixa Will Have A CID To Kick Around Some More

Posted on by David Stokes

A Community Improvement District (CID) proposal in Nixa, Mo., which had been lying dormant for a few months, resurfaced at a city council meeting this week. That is unfortunate. At the very least, the Nixa City Council should reject the proposed board of directors for the new district, which has three of the five members from the same family (see page 3 of this file). That is not the way to operate public dollars, unless you want to make Nixa, Mo., more like Sauget, Ill.

I also hope city officials will require the businesses to post notification of the extra sales tax at the front door and the check-outs, so that shoppers can make an informed choice. (The state legislature needs to correct the mistake that applies notification rules only to TDDs and not to CIDs.)

Nixa is a very nice town and does not need to start playing the game of subsidizing private businesses with tax dollars. If they choose to start playing it anyway, I hope they make several of these improvements to the proposal. Nixa has some dedicated activists who have brought this matter to our attention, and I wish them the best in fighting this proposal in their community. Just like the proposed Tax Increment Financing (TIF) in Columbia, the worst part of this CID is the path on which it puts Nixa. Once you approve one of these types of programs, every development in the city is going to demand one. There is no end to the game until you have hollowed out your property tax base.

Letter To Editor in the Kansas City Star

Posted on by David Stokes

The Kansas City Star kindly published a letter to the editor from us the other day on the earnings tax. Our letter was in response to one of their editorials. Thanks to John Combest for linking to the letter. Because the letter is so short, it is reprinted below. Enjoy (if reading letters to the editor about taxation on political blogs is the type of thing you enjoy):

The Star’s Sept. 29 editorial, “Voters spoke: Don’t kill e-tax or hike debt levy,” criticized outgoing Kansas City Federal Reserve chairman Tom Hoenig for recommending that Kansas City eliminate its earnings tax. The editorial stated Dr. Hoenig’s comments weren’t backed up with facts.

All the “facts” Dr. Hoenig needs is that as a PhD economist who has spent 38 years with the Kansas City Fed, he knows that Kansas City’s earnings tax harms economic growth in the city. Studies document the harm local earnings taxes have on economic growth, including three relating to Kansas City by Missouri’s Show-Me Institute (which did recommend a way to replace the tax).

Even though a large majority of Kansas City voters chose to keep the tax, that does not prove those studies or Dr. Hoenig wrong. It proves that the people of Kansas City wanted to keep the tax for a variety of reasons, which is entirely their right.

But good economics and popular public policy don’t always go together, which is exactly what Dr. Hoenig has been trying to warn us about at the national level for the last three years as well.

 

What a Difference a Year Makes: Saint Louis City’s Land Bank, the LRA

Posted on by Audrey Spalding

In February of this year, the Show-Me Institute published a study by Policy Analyst Audrey Spalding, detailing the operations and history of the oldest land bank in the 50 states, Saint Louis city’s Land Reutilization Authority, The LRA. In 1971, the LRA was created with the state purpose to return tax defunct or abandoned properties into private, productive hands. What Audrey Spalding’s policy study, “Standstill: Is Saint Louis Hindering Development by Waiting for Large-Scale Miracles?” showed is a history of denying or delaying private citizens’ attempts to purchase land from the LRA. In this video, Spalding reports with relief that the latest LRA meeting represents a sea change in LRA operation, in terms of approving offers to buy property. At the September meeting, not one offer was rejected.

A Race to the Bottom

Posted on by Audrey Spalding

The Kansas City area made big news, but not in a good way. According to the latest data, the Kansas City area lost more than 12,000 jobs during the past year. That’s the second-largest job loss in any metropolitan area in the entire country. Only Atlanta lost more jobs.

There has been a lot of talk from legislators and others about how tax subsidies are an important policy tool that states can use to keep jobs within their boundaries. In recent weeks, both AMC Theaters and Jack Stack Barbeque made news because the companies moved from Kansas City, Mo., to nearby locations in the state of Kansas.

Previously, Missouri’s Department of Economic Development (DED) used the promise of more than $12.5 million in tax credits to lure the corporate headquarters of Applebee’s across state lines into Missouri.

But to what end? Jobs in the region are down, and the loss is nearly the worst in the country.

I was curious to see how the Missouri and Kansas bidding war fit within the job loss news. So, I looked at the Kansas City core metropolitan statistical area (the area that lost more than 12,000 jobs). I then checked the three companies that made news when they moved across state lines to see from where they moved and where they relocated. These three companies’ relocations resulted in elected officials calling for the use of tax incentives to lure companies from one state to another.

Jack Stack Barbeque: The company is located in downtown Kansas City, Mo., and announced plans to move just across the state line to Overland Park, Kan. It is not clear whether tax incentives will be awarded to the company. Both locations are in the Kansas City metro area.

AMC Theaters: The company announced that it was moving from downtown Kansas City, Mo., to Leawood, Kan., also just a short few miles. The state of Kansas reportedly offered about $47 million in tax incentives, or more than $100,000 for each job. Both locations are in the Kansas City metro area.

Applebee’s: The company moved its headquarters from Lenexa, Kan., to Kansas City, Mo., just across state lines. The state of Missouri offered about $12.5 million in tax incentives, or about $35,000 per job. Both locations are in the Kansas City metro area.

In the grand scheme of things, all of the taxpayer money used to lure one company or another a few miles doesn’t really matter when it comes to the health of the region. The Kansas City metro area still lost more than 12,000 jobs, including those jobs that moved across state lines. Moving companies a short distance merely rearranges the deck chairs, it doesn’t accomplish anything productive.

In fact, given the administrative costs of running tax incentive programs, the Kansas City metropolitan area actually loses when the states attempt to lure companies away. We take tax dollars from the private sector to give to bureaucrats in the public sector whose job it is to figure out (i.e., use discredited economic modeling to guess at) which companies to attempt to lure across state lines. The money certainly could be put to better use, especially in light of some of the DED’s recent failures.

It’s time to stop playing petty economic development games and work instead on implementing public policies that have been shown to encourage economic growth, rather than shuffle it around.

I know it’s September, but a good place for us to start would be the list of New Year’s Resolutions for Missouri Public Policy that Policy Analyst Christine Harbin put together last year. Maybe there’s still some time to get started.

A Sign of Hope?

Posted on by Audrey Spalding

If you recall, earlier this year we published research showing that the city of Saint Louis’ land bank, the Land Reutilization Authority (LRA), frequently refused to sell its vacant land to private individuals. The agency is the the largest landholder in the city, and its statutory mission is to get vacant property back into private, productive use. By refusing to sell property, the LRA appeared to be hindering small-scale growth in the city.

So, I was happily surprised to see at the LRA’s monthly meeting today that the agency did not reject a single offer of the 25 it considered. (The agency did reject half of one man’s offer: He offered to purchase two properties, and the LRA voted to accept his offer for only one of those properties.)

This is big news! During an eight-year period, the LRA rejected more than 42 percent of the offers it formally considered. It now appears that the agency is working to accept or counter more offers to purchase vacant property in the city. In the entire eight years surveyed for our study, there was only one month during which the agency rejected zero offers — and that was after we started taking a close look at the agency’s operations.

The LRA’s lack of rejections this month is just the latest sign that the agency is thinking about ways to improve its operations. In March, the agency accepted more offers than it previously had been accepting, and lowered the price of some of its properties.  The agency also tweaked its policy to allow more individuals to purchase side lots.

I hope these changes are all signals that the LRA is working to sell more properties so they can be put back into private, productive use. Accepting and countering more offers is the latest development, and it certainly is a step in the right direction.

Just How Many Mamteks Are There?

Posted on by Audrey Spalding

After learning about the tax credit failure in Moberly that may cost the city millions, a TV station in Kirksville decided to check on a state tax incentive program in their area. In 2009, the state’s Department of Economic Development (DED) awarded a $1 million loan to a company called Wi-Fi Sensors.

In what now appears to be standard operating procedure, Missouri Gov. Jay Nixon visited Kirksville to announce the loan and to tout the promised jobs. His office also issued a press release, stating that “with Action Fund loans, high-tech companies like Wi-Fi Sensors can create quality jobs and help jump-start our economy.”

Furthermore, according to the governor’s press release:

The loan will allow Wi-Fi Sensors to expand its operation in Missouri. Under the terms of the loan, the company guarantees the creation of 40 new jobs and new investment of $4,069,000. While guaranteeing a minimum of 40 new jobs, Wi-Fi Sensors representatives believe they may create as many as 100 new jobs through this expansion.

Sadly, the TV station visited the Wi-Fi property on Monday, and found nobody. According to its report, Wi-Fi missed its first payment to the state in November 2010.

This sounds similar to the situation in Moberly. As you’ve read on our blog, the sucralose production company, Mamtek, promised more than 600 jobs and millions in investment to the city. The state promised millions in tax credits, and the city of Moberly backed $39 million in bonds for the projects.

And yet, Mamtek recently failed to make a debt payment, leaving the city on the hook for the money, and had not created the promised jobs.

Missouri senators are planning to investigate Mamtek, according to the Associated Press. Specifically, they want to investigate the DED’s role in the project.

But our state senators shouldn’t assume that Mamtek is an isolated failure. Tax incentives frequently fail to produce the jobs promised, and there have been many state audits and incidents suggesting that all is not right at the DED. Wi-Fi Sensors looks like the latest example.

We don’t have to look too far into the past to see other failures and near failures. Late last year, a company in Cape Girardeau promised 135 new jobs — if the state would kick in about $2 million in tax credits. It turns out that the head of that company was convicted of passing more than $90,000 in bad checks.

Policy Analyst Christine Harbin wondered at the time whether she should spend her time at the Show-Me Institute running tax credit recipients’ names through the Missouri courts database to see if she found any other matches.

Then, of course, earlier this year the DED awarded millions to a company for a development project that the courts had ruled as ineligible.

Don’t even get me started on the state auditor findings that the DED was inflating business creation and investment numbers reported for certain tax credit programs.

Like Chrissy, the Wi-Fi Sensors case has me tempted to go through the governor’s press releases touting job creation to see which projects are currently operational. Sadly, for Missouri taxpayers, the Mamtek and Wi-Fi failures suggest several others may have failed.

Did Hamilton, Madison, and Jay Overstate Their Case for Adopting the U.S. Constitution?

Posted on by Greg Aubuchon

Please join us for the Show-Me Institute Book Club on the second Wednesday of each month for scintillating discussions and free snacks. We are currently exploring The Federalist Papers by Alexander Hamilton, James Madison, and John Jay. Meetings begin promptly at 7 p.m. at the institute’s headquarters (4512 West Pine Blvd. in the Central West End). 

Questions to ponder if you dare:

Did Hamilton, Madison, and Jay overestimate the soundness of the federal design when advocating for the adoption of the U.S. Constitution? Why did Frederic Bastiat carry such a negative view of morality, law, and government? Has our federal government succumbed to many, if not most, of the corrosive influences Bastiat identified as likely to corrupt civil society?

Please join us for a lively discussion of life, liberty, and the pursuit of happiness. You may email the Book Club at [email protected]. RSVPs are appreciated.

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