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.

The Missouri Cigarette Tax: A Partial Solution to Kansas’ Economic Woes

Posted on by Amy Lutz

I grew up in the border town of Atchison, Kansas, and vividly recall the perpetual eastbound traffic across the Amelia Earhart Bridge as my fellow Atchisonians made the trip into Missouri. They hoped to take advantage of the lower excise taxes on cigarettes, gas, and alcohol.

A gas station and liquor store were located just across the border on the other side of the bridge; their parking lots rarely had an open space. Conversely, in Atchison, the liquor bottles and cigarette packs collected dust on store shelves while gas pumps remained unused. The higher excise taxes in Kansas on these products drove business away from my home state and into her eastern neighbor’s economy.

This scenario soon may become a distant memory. The American Cancer Society is leading a coalition that submitted a ballot initiative to the Missouri Secretary of State on Sept. 20. The proposed measure is expected to generate $308 million annually through tax increases on tobacco products, primarily cigarettes.

A similar initiative failed in 2002 and 2006. Like the 2006 vote, this initiative includes a proposed 80-cent increase in the cigarette tax, bumping the total tax to 97 cents if passed. This proposition, however, will not affect just the Show-Me State, but surrounding states as well, a point the Show-Me Institute has covered in the past. As David Stokes, a policy analyst for the institute, alluded to in an Aug. 4 blog post and video, Missouri’s neighbors often are propelled to make tobacco purchases in this state because of its attractively low cigarette tax.

The cigarette tax in Kansas now stands at 79 cents, 18 cents cheaper than the proposed tax increase in Missouri. What is intended to be a profitable deal for Missouri will prove to be more beneficial for the state of Kansas. The incentive for Kansas to cross the border in pursuit of a cheaper pack will be eliminated. Missouri stands to lose some revenue from the current cigarette tax; other revenue-increasing proposals, such as the fair tax, would not balance out this budget loss.

Should this initiative pass, the eastbound cigarette-seeking Kansans who flood into this state might be replaced by Missourians driving in the opposite direction.

In Memory of Ed Robb

Posted on by David Stokes

All of us at the Show-Me Institute were shocked and saddened to hear of the sudden passing of Dr. Ed Robb. Dr. Robb was a wonderful economist who took his ideals and beliefs into the marketplace of American politics. As a member of the University of Missouri Department of Economics, he directed a fiscal policy research center at MU. He also was a great teacher who taught courses on public finance economics to generations of MU students. He served on our Board of Scholars during the short period between his service as a Missouri state representative and his successful campaign for Boone County Commissioner. (See page 4 for a description of his participation in one of our Columbia lectures.) More important, however, was his unofficial involvement with the Show-Me Institute as a friend and economist. I know that Dr. Joe Haslag, Dr. Michael Podgursky, and others at the institute, will miss him dearly, and Boone County has lost a community public servant. 

Ed Robb, Rest In Peace.

Nothing Says ‘Progress’ Like a Vanity Trolley Project

Posted on by Patrick Ishmael

Will Kansas City be bringing streetcars back to Main Street? If events from early this week are any indicator, maybe. Sure, the trolleys may be five times the price of a bus line, but if you’re a city and have money to blow, this is the price you pay for cutting-edge technology (emphasis mine):

On Tuesday, a key Kansas City transit group unanimously endorsed a plan that would put the downtown route primarily down Main, not Grand Boulevard.

The city’s Parking and Transportation Commission approved a consultants’ recommendation, which favored streetcars over rapid buses on a two-mile route from the River Market to Crown Center.

“A Main Street streetcar is the superior alternative,” project manager Charlie Hales, with HDR Engineering, told the commission.

This calls for a Kansas City trolley soundtrack. Hit it, Johnny!

For those unfamiliar with Kansas City’s politics, the idea of bringing rail lines in one form or another has been kicked around exhaustively for the last two decades, to the point where currently there are actually two competing passenger rail proposals: the Main Street trolley and, no joke, a $1 billion-plus rail project that perpetual rail proponent Clay Chastain has put forth. While the prospects of Chastain’s proposal (again) look bleak, supporters of the trolley project are pumping theirs up at a fraction of that price — a cool $100 million.

But even Chastain, of billion dollar rail fame, won’t rally behind a trolley project:

One outspoken opponent [of the trolley project] is Clay Chastain, who has mounted numerous unsuccessful attempts to bring light rail to Kansas City. Chastain has once again gathered sufficient signatures to place a $1.4 billion light rail system before voters next year, but the City Council has not yet approved it for an election.

“You’re not going to take a streetcar to the airport,” Chastain said Tuesday when told about the commission’s recommendation. “This is not the major response we need to build a world-class transit system.”

When Clay Chastain says your project is impractical, that’s saying something.

Of course, Kansas City’s not the only major metropolitan area in Missouri that might put hundreds of millions of quarters on municipal rails. St. Louis is putting together a trolley project that would run from Forest Park to the Delmar Loop — locations that Metrolink already serves, and within walking distance of the #1 Metro bus.

To give you an idea of the sort of distance we’re talking about here:

View Larger Map

The estimated cost for the roughly 2-mile line? About $50 million.

Are these projects really the best use of taxpayer dollars? At least one form of public transit already serves both areas, and in the case of St. Louis’ proposed line, there are two. The money the respective cities would spend on these projects couldn’t be spent on other pressing municipal matters. What would the cities forgo by rebuilding rail lines that were torn out long ago?

In this economy, Kansas City and St. Louis need…trolleys? Really?

US-China Chamber President ‘Doesn’t See Significant Economic Value’ in Midwest China Hub

Posted on by Patrick Ishmael

Missouri Digital News reports in a series of segments this morning that Siva Yam, president of US-China Chamber of Commerce, is cautioning Missourians to lower their expectations of what an Aerotropolis at Lambert would mean to the region.

US-China Chamber of Commerce President Siva Yam says Missourians shouldn’t expect too much from Chinese investment.

“There has been an illusion that Chinese investment are coming to America and help the economy. “

Yam says most of the investments from China are looking for research and sales opportunities, rather than hiring laborers.

I wrote on Monday about the “mistakes” that were made that China Law Blog identified with regard to Mamtek. CLB calls it the “China is rich. We want money. Therefore this is a good deal” syndrome. Economic activity requires more than just a connection to China.

Yam seems to agree. In fact, it’s not the St. Louis economy that a China Hub would mainly help, Yam says. It’s the city’s PR.

Yam says the publicity values are what St. Louis and Missouri really benefit from.

“It’s a good news for St. Louis not from an economic perspective, but having a China hub would basically help St. Louis proceed itself to be more international in the future.”

We’ve been skeptical of the job estimates given for the project for a long, long time. It’s amazing that at this late stage in the session, the president of the USCCC is basically saying Aerotropolis is a giant public relations project.

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