Defeat of ‘China Hub’ or ‘Aerotropolis’ Bill a Significant Victory for Missouri Taxpayers

Posted on by Audrey Spalding

It was the “Big Idea” that couldn’t — and didn’t — pass. The defeat of a bill calling for the creation of a heavily subsidized “Midwest China Hub,” or “Aerotropolis,” in Saint Louis represents a clear victory for common sense and limited government. Government should stay out of the business of using taxpayers’ money to try picking economic winners and losers.

In retrospect, the wonder is that so many legislators from across the state rushed to support the bill. As proposed, the China Hub legislation would, over a period of years, distribute some $360 million in tax credits and other subsidies to private developers in and around the Lambert–St. Louis International Airport. To what end?

Supporters of the legislation made wildly optimistic claims. They talked about how this was a can’t-miss proposition that would create “thousands of jobs” and “jump-start” economic activity.

But where was the credible evidence to support the giddy optimism? Short answer: There was none.

Legislators of both parties were prepared to overlook the absence of serious economic analysis. Still more, they were prepared to ignore the absence of any firm statement from the government of China or leading international carriers that they would send more flights to Saint Louis if granted substantial tax credits.

An eight-page “study” by the Regional Commerce and Growth Association (RCGA) was indicative of the slipshod thinking behind the so-called “Big Idea.” The RCGA paper did not attempt to show any real link between the tax credits and increased flights. It somehow assumed that those flights would magically appear.

In response to an information request, the Show-Me Institute obtained a review from the Midwest-China Hub Commission that revealed internal doubts and inconsistencies.

First, it showed that facilities around the airport were already on the receiving end of a surprisingly large and unreported amount of government incentives — $93 million had already been authorized or expended, and another $192 million was available for future use. Second, the review conceded that “Many unknowns remain such as: catalysts for increased flights, cargo market share capture, background analysis, etc.” The commission also noted that the China Hub legislation “may incentivize facilities that have only a limited relationship to the Air Cargo facility.”

In a series of commentaries, policy analysts at the Show-Me Institute showed how the proposed legislation was likely to lead to an underwhelming result — supporting existing operations at Lambert, and contributing to the growth of still more surplus or unneeded warehousing facilities in or around the airport.

In the end, Missouri lawmakers could not agree on a comprehensive set of changes that would both sunset tax credits in other development areas and still leave room for a fresh set of new tax credits for the China Hub in Saint Louis.

The Show-Me Institute instilled a badly needed sense of reality in the whole debate.

Tax credits are not free money. Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation. There is a long and dismal history illustrating the multiple failures of heavily subsidized commercial enterprises.

Instead of awarding more tax credits to favored individuals and industries, legislators should do something truly innovative: They should lower taxes across the board for all Missourians. That way, economic growth can occur organically, and in areas that legislators might not expect.

Any attempt to call a special session of the legislature for the purpose of resurrecting the China Hub idea should be rejected. If this idea really is a can’t-miss proposition, entrepreneurs in the private sector will find a way to make it happen. Our state lawmakers are not equipped to pick economic winners and losers.

Andrew B. Wilson is a fellow and Audrey Spalding is a policy analyst with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

 

Ms. Harbin Goes to Washington

Posted on by Christine Harbin

Today is my last day at the Show-Me Institute. Beginning next month, I will work at the Center for Fiscal Reform at the American Legislative Exchange Council (ALEC) in Washington, D.C. I am thrilled about my new role, but I will miss working at the Show-Me Institute.

Missouri public policy has its problems. Lawmakers have a terrible habit of trying to pick winners and losers in the market, even though they have such a bad track record of doing so. We’re relying on government to make the choices that individuals should be making for themselves in the private sector. Lawmakers are addicted to targeted tax credits and tax-increment financing (TIF) — even though these programs repeatedly fail to deliver on their promises.

Despite this state’s problems, Missourians have a lot to celebrate in public policy. Many great things are going on here. Missouri has fewer occupational license requirements than other states, which means that Missourians are more free to earn a living. Plus, Missouri has low state taxes on booze, cigarettes, and gasoline. It also has the Hancock Amendment, which limits state spending and requires that voters have the final say on tax hikes. (Wouldn’t it be great if the Hancock Amendment existed at the federal level?)

We’re taking many steps in the right direction toward limiting government and protecting individual liberty. For example, Missourians were among the first to oppose the federal takeover of their health care, and we haven’t given up. As another thing I find promising, the Saint Louis Land Reutilization Authority (LRA) is accepting more offers to buy vacant property (thanks largely to the efforts of my colleague Audrey Spalding).

I’m confident that Missouri, and other midwestern states, will be leaders in limiting government and getting the economy back on track. This change will be driven by individuals acting entrepreneurially in the private sector, however — not by the hand of government.

See you later, Show-Me State.

Property Taxes in Saint Louis County

Posted on by David Stokes

I appeared on KMOX radio with John Hancock and Mike Kelley this morning to discuss property taxes. I appreciate both of them giving me the opportunity to appear alongside new county assessor, Jake Zimmerman. You can listen to the broadcast here, if you missed it, and if you are as interested in property taxation as I am — or if you just want to learn more about how to appeal your assessment and ultimately lower your taxes, which is also a perfectly fine reason to listen. Please stay tuned for some major work from the Show-Me Institute on property taxes, soon to be released by Christine Harbin and me.

I received a text message from one friend after the show stating that he planned to be the first person in Missouri history to appeal his assessment in order to get it higher, not lower, per our joke about that on the show. So, it is good to know that I accomplished something this morning.

David Stokes on KMOX Radio Tomorrow Morning With Hancock and Kelley

Posted on by David Stokes

Show-Me Institute Policy Analyst David Stokes will be appearing at 10:00 a.m. tomorrow on KMOX radio 1120 AM with John Hancock and Mike Kelley, who are guest-hosting for Charlie Brennan. The topic will be property assessment and taxes. David will be discussing the issues raised in this op-ed on reassessment, and previewing his policy study and case study on the subject of property tax capitalization, cowritten by he and Christine Harbin, both to be released soon.

1252 Academy Is Approved for Sale!

Posted on by Audrey Spalding

Today, the Land Reutilization Authority (LRA) — the government agency that is also the largest owner of vacant land in the city of Saint Louis — finally approved Anthony Barber’s offer to purchase 1252 Academy Ave. This is an incredible departure from the LRA’s actions in recent years, and exactly the kind of response that we at the Show-Me Institute have been advocating after nearly a yearlong investigation of LRA policies.

1252 Academy Ave.

After all, the LRA had rejected Anthony Barber’s offer to purchase the property in 2010 because, the agency said, “the parcel is being held as part of a larger development site.” The LRA did not specify exactly what the larger development site was. Barber had plans to build a barbeque restaurant at 1252 Academy, he had the support of his alderman and neighborhood association, and he even had the menus for his restaurant planned out. But, in 2010, that apparently wasn’t enough for the LRA.

Nearly a year later, after the publication of Show-Me Institute research showing that the agency rejected almost one out of every two offers to purchase vacant city property, a few months after the head LRA commissioner resigned from his post, after an LRA commissioner met with the Show-Me Institute to discuss ways to change the LRA process, and soon after the LRA began to make positive changes to its administrative policies, the LRA accepted Barber’s offer.

By accepting Anthony Barber’s offer, the agency has broken its nearly decade-long track record of rejecting offers to purchase 1252 Academy. As detailed in my study of the LRA’s practices during the past eight years, the agency began rejecting offers on the property in 2001. Again and again, the LRA said that the property was “being held for development.”

Hopefully, the LRA will continue on its path of accepting more offers to purchase property. Only by doing so does the city have a chance at returning the more than 9,000 vacant properties owned by the LRA back into private, productive use.

Disincorporation Nation and the Sage of Saint George

Posted on by David Stokes

Say the title line like you’re Casey Kasem introducing a one-hit wonder disco group from the 1970s.

Saint George is moving ahead with the disincorporation proposal. After a series of scandals in this small, south Saint Louis County speed trap with a city (like Prussia’s historic description as an army with a country), enough of the residents are fed-up that they are thinking about getting rid of the entire city.

At a meeting the other day about the subject, county officials discussed how the county would be able to provide services within Saint George if the city disincorporated. How would the county be able to do that without having to raise taxes on everyone? Part of the answer is the sales tax pool. Saint George receives $225,917 per year from the pool. If it disincorporates, all that money will go back into the pool, and a good portion of it would go to Saint Louis County government. That would be new revenue for the county that would allow it to provide services to Saint George without any need for a tax increase.

I wish the residents luck as they begin this process. City services in Saint George have long been funded by the writing of speeding tickets for other residents of south county. (According to Wikipedia, 28 percent of the city’s budget comes from traffic fines.) Places that provide government services to a small number of people by abusing the legal system like this probably should not exist in the first place. Saint Louis County will be fully capable of providing the services that the city residents need.

A ‘Hotel California’ for Bartle Hall

Posted on by Patrick Ishmael

For classic rock fans, the Eagles’ ballad “Hotel California” brings with it the surreal image of a roadside inn populated by tortured, captive souls. The song describes the fate of the hotel’s residents, paradoxically opining that after you check in, “you can check out any time you like, but you can never leave.”

The Eagles couldn’t have written a more succinct fiscal description of the $300 million hotel that Kansas City officials want to build downtown, a project likely to be backed in some way by the city’s taxpayers. But Kansas Citians shouldn’t let themselves be captive to another “big idea” pet project promoted by its political class, and should press city officials to drop the plan.

Consider where the hotel would be built: between the recently expanded Bartle Hall Convention Center and the recently constructed Power & Light District (P&LD). City leaders, including Kansas City Convention and Visitors Association President Rick Hughes, hoped Bartle’s 2004 expansion would double the number of conventions the city hosted each year.

Yet conventions haven’t doubled.

The P&LD now has the city on the hook for $10 million in public subsidies each year until 2033, because the district’s present revenues aren’t sufficient to fund its existence.

Even Bill Lucas, president of the city’s hotel steering committee, can’t guarantee that the project wouldn’t be a financial sinkhole. “We’d about have to double our convention bookings” to make the hotel feasible, Lucas recently said.

Let’s recap: 1) The Bartle expansion was supposed to double the number of conventions the city booked, but didn’t. 2) The P&LD was supposed to revitalize downtown, but is now draining millions each year from the budget. 3) As Mayor Sly James put it in February, a hotel is now being proposed to “offset some of the problems” in the P&LD. 4) But, in order to save the P&LD, the hotel needs Bartle … to double its convention bookings.

And around we go.

The project doesn’t make sense on an economic level, either. The fact that private actors haven’t built this hotel suggests that there isn’t a market for one. Moreover, if subsidies from city officials distort Kansas City’s hotel market by giving preferential treatment to the project, existing hotels will see business siphoned away. That isn’t economic growth; that’s economic suffocation.

The project is simply a bad idea. If taxpayers want to avoid getting trapped in their own freshly built Hotel California, they should instead force their political class to book them at the Hotel Free Market. I hear it’s a lovely place. Much less expensive, too.

Patrick Ishmael is a policy analyst at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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