Hot New Argument for Tax Breaks in Kansas City: Abate My Taxes, Or I Just Might Build a QuikTrip

Posted on by Patrick Ishmael

Taxpayer-subsidized apartments or $1 buffalo chicken hot dogs? How will I ever decide? (Emphasis mine.)

Read what David Martin wrote in The Pitch:

The project, which has neighborhood support, sounds worthwhile. But there’s a catch. The public has to provide assistance. The developer is asking for a tax break worth $2.76 million.

The Kansas City City Council will be told that the project won’t work without the incentives. Yes, West 39th Street is vibrant with restaurants. Across the state line, the University of Kansas Hospital is expanding.

The developer concedes that the failed Qdoba sits on a valuable piece of land. But here’s where the proposal begins to look like blackmail.

“Sure, it’s an attractive piece of property for development for lots of different uses,” Aaron March, an attorney working for Price Development, tells The Pitch. “But if we were just in it for the money, we would sell it to McDonald’s or QuikTrip. But we’re not.”

[…]

So what will you have, Kansas City, a spiffy new apartment building or a McFlurry? “If you’d rather have a convenience store or a gas station or a fast-food restaurant,” March says, “then don’t give the incentives.”

This is the view from the property’s doorstep.


View Larger Map

It takes real je ne sais pas quoi to go to the government, concede that your property’s valuable, and then claim that if you don’t get a tax abatement, your only option would be to build a gas station or a fast food joint. That may be business as usual these days when it comes to the private sector’s interactions with the government, but it’s bad business, and bad policy.

An Open Letter to Jamie Allman and 97.1

Posted on by Rick Edlund

Jamie,

I hope all is well in “common sense radio” land. I heard you had John Beck, your senior vice-president, on with you this morning, and that you or he gave us a mention. I appreciate that, but I continue to be mystified that you and/or Mr. Beck won’t allow one of our policy analysts on your program to discuss the Aerotropolis proposal.

We here at the Show-Me Institute have studied and written about this bill for months. To simply claim, as I’m told Mr. Beck did, that we are against all tax credits is shallow, at best, and in this case, completely misses the point. The fact, as we have pointed out in numerous op-eds, papers, blog posts, videos and radio and TV interviews, is that Aerotropolis remains a massive tax credit giveaway program that may well leave Missouri taxpayers picking up the tab.

Mr. Beck, who is also a board member of the RCGA, clearly doesn’t see it the way we do. That’s fine, but isn’t this topic important enough that your listeners deserve to hear both sides of the debate? I repeat what has become a long-standing offer to have one of our policy analysts come on your program to talk about Aerotropolis.

I await your call.

Best,

Rick Edlund
Communications Director
Show-Me Institute
314-454-0647

Property Taxes in Missouri: Police, Fire, Municipal Bands?

Posted on by David Stokes

In this comprehensive look at property taxation in Missouri, Show-Me Institute Policy Analyst David Stokes highlights examples of all the things supported by property taxes. Also included is a look at what sorts of things work well when funded by property taxes and what sorts of things don’t.

 

Read the full policy study here.

Read the related case study here.

Property Taxes in Missouri: Are You Paying for a Municipal Band?

Posted on by David Stokes

In this short video, Show-Me Institute Policy Analyst David Stokes gives an overview of a few things funded by property taxes. He also offers a prescription for which sorts of things work best when funded by property taxation, and which sorts of things don’t.

 

Read the full policy study here.

Read the related case study here.

See the full video discussing examples of all kinds of property taxes here.

A Reminder: Tax Credits Are Not Free Money

Posted on by Bruce Stahl

First, a picture:

map
Click picture to see Patrick Ishmael’s recent post on the DED and tax credits.

Every dot represents an address in Saint Louis that has been issued Missouri Department of Economic Development (DED) tax credits since 1999. The larger the dot, the greater the tax credit. Contrary to the misconception of many, these tax credits represent real taxpayer money: money that could have been used for other government functions, but wasn’t.

Let me give an example of how this all works with a quick story.

When I was growing up, I mowed my neighbors’ lawns for extra money. Economically speaking, this was a mutually beneficial exchange: I received $15, and my neighbor received a beautiful, cut lawn.

But now, let’s instead say my neighbor would not pay me more than $10, and I would not work for less than $15. I wouldn’t cut the lawn.

But what if the government promised me a transferable or refundable $5 tax credit for every lawn I cut – that is, a stipend against my taxes that I could redeem for cash or at near-face value to someone with a greater tax burden? I would cut the lawn because I’d effectively be receiving $15 for the work – $10 from the private sector and $5 from the government.

Yet how equitable is a system like that? Should the government give me tax credits to mow a neighbor’s lawn? If not, why not? The simplest response people have to this question is that in private transactions, parties negotiate for services. One way or another, the lawn gets cut; government distortion of the lawn-cutting market is unnecessary. Giving $5 to those who mow lawns is $5 less for roads, disaster relief, and other necessary government functions.

And yet, these market distortions nonetheless happen, even in generally no-nonsense places like the Show-Me State. More than $1 billion in tax credits have gone toward projects at about 2,200 Saint Louis City addresses, representing more than 45 percent of all the tax credits that the DED issued to the entire state. The problem? Saint Louis only makes up 5 percent of Missouri’s population.

A forthcoming case study will examine this issue further.

Kansas City’s Continuing Fight for Pension Sustainability

Posted on by Greg Aubuchon

Kansas City continues its mighty struggle to save its children and future offspring from the possible ravages of  pension-induced bankruptcy. The city has commissioned, for this purpose, its Pension System Task Force. In a recent Kansas City Star editorial, the paper notes, with healthy skepticism, the appearance of defined benefit proponent Hank Kim before the task force. According to the authors, Mr. Kim strikes a rather glib pose when addressing the issue:

While many states and cities are altering their defined benefit plans because of money woes, Kim doesn’t sound that worried.

•Kansas City task force chairman Herb Kohn has said the city should aim to have its pension systems funded at 90 to 100 percent. As of 2010, though, three systems were under 80 percent, a far cry from the 96 percent average in 2002.

Kim isn’t nearly that aggressive.

In May, when talking about the 78 percent funding average for state pension plans, Kim said that “78 percent is a number we’re very comfortable with.” In fact, he has indicated that a 70 percent level is fine, too, because Fitch Ratings considers that adequate.

Counterpoint: The Government Accountability Office calls for at least an 80 percent funding level. So do many pension managers.

Kansas City taxpayers deserve honest answers to a host of questions, not least of which is whether the city’s pension managers have adopted a reasonable discount rate in determining the current funding levels needed to sustain future payouts to retirees and their families. In today’s uncertain financial environment, is an 80 percent funded level benchmark reasonable? Should the pension systems continue to assume historical market return averages of 8 percent when determining current funding levels? If one were to substitute a more reasonable rate, given market performance over the last decade, of say 4 percent, then the degree to which the systems are currently underfunded grows.

Our children deserve our immediate attention to this matter. Missouri currently has approximately 130 state and local public pension plans.  What assurances are there that these are solvent in the mid- to long-term? Of course, one may counter, the systems are audited under the law. But so was Enron!

You may trust, but first verify.

China Hub Document: “We need someone, not a government agency, to make things happen”

Posted on by Patrick Ishmael

The quote comes from notes the NCBE made from a meeting with Jens Tubbesing, “the lead person for Aerostrata to develop airfreight feasibility study for China.” We’ve already revealed that Aerostrata’s preliminary report showed warehouse space at Lambert is already sufficient to sustain the sort of cargo activity contemplated by the China Hub. But as it turns out, the “Aerotropolis” project was indeed lacking in one important aspect: critical private sector interest.

The document, in its entirety, follows.


We must create the demand, political and economic timetables are not the same, need private business to take the lead, like a Ross Perot and his business now employing 27,000 in Dallas. We need someone, not a government agency, to make things happen.

As Mr. Tubbesing notes, “it’s all about demand.” Where’s the entrepreneur that would drive the Aerotropolis project forward and make it a success?

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