Proposals for New Hotel Taxes in Suburban Saint Louis Misguided

Posted on by David Stokes

Unlike most other taxes within Saint Louis County, the hotel tax is nearly always the same wherever you stay. That’s because hotel taxes in the county have, for 20 years, operated through a countywide pool that supports the regional work of the St. Louis Convention and Visitors Bureau, funds major county parks, and pays off the bonds used to finance the Edward Jones Dome.

The pooled nature of the tax also reduces the incentive for city planners to attempt to use tax dollars to lure hotels to their municipality. Outside of a pooled tax system, cities will frequently promise away property taxes, which in large part fund other government agencies, in exchange for the hope of being able to keep the bulk of the resulting increased sales tax revenue. A pooled system greatly reduces this practice, because cities share tax revenues. This practice makes everyone better off, because it allows market forces to dictate where hotels are located, rather than leaving it to government planners.

Two cities located in Saint Louis County are now proposing local hotel taxes. Voters in Clayton and Richmond Heights will decide on Nov. 2 if they want to institute the tax. Voters prefer taxing other people instead of themselves, so I will be pleasantly shocked if the proposals fail. But just because voters will likely approve the tax does not make it sound policy. Hotels already pay substantial commercial property taxes and business license fees to the cities in which they are located. The guests themselves also pay the standard city sales tax on their rooms. These taxes already account for the public services used by hotel guests during their stay.

The hotel tax system is similar to another successful pooled tax for many cities in Saint Louis County — the sales tax pool. Cities within this pool have seen less usage of tax increment financing (TIF) and other forms of incentives. Indeed, all the prominent cases of eminent domain abuse in the county have occurred in cities that are outside of the sales tax pool, such as Sunset Hills and Rock Hill.

If every city in the county is authorized to adopt its own hotel tax, you can rest assured that some cities will offer property tax abatements and other incentives to persuade hotels to move there. We have already seen that scenario with the retail industry in the county. The end result does nothing to increase total economic growth for our region. Instead, it only benefits select cities at the expense of school districts and other taxing bodies.

The structure of the tourism tax pool benefits our entire area. Most importantly, it allows hotel owners to invest in their businesses without fearing they will be put at a tax disadvantage to competitors in neighboring cities. This is no theoretical risk: One project in Richmond Heights has already been put on hold because of the potential tax increase. The pooled tax approach also allows for coordination in advertising our city to potential conventions and tourists. This author does not necessarily like using tax dollars to run ads in Des Moines urging people to come to Saint Louis, but it would be far worse if those ads said, “The 12 residents of Champ, Mo., encourage you to visit their village.”

If cities want to grow business within their communities, they should focus on keeping taxes on businesses low, and not imposing additional taxes on select industries — as the cities of Clayton and Richmond Heights currently propose — or on business in general, as Clayton is also doing with its commercial property tax rate increase. Pooling taxes works for the cities in the sales tax pool, and it has been working for the hotel and tourism industry in Saint Louis. Voters in Richmond Heights and Clayton should consider the costs associated with these hotel tax increases, and the state legislature should consider rescinding the ability of cities in Saint Louis County to enact their own hotel taxes. The county’s existing hotel and tourism taxes are more than sufficient to accomplish their purposes: to advance both the city and county of Saint Louis as a whole, not 92 separate municipalities.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

 

Giant Disappointment for Kansas City

Posted on by David Stokes

A City Council committee in Kansas City has tabled (aka, killed) a proposal that called for simply studying the idea of contracting out the management of certain city assets. Like almost every major city, Kansas City is facing long-run budgetary difficulties. To give one, large, specific local example, Kansas City has a signed agreement with the federal government to invest $2.4 billion in its sewer system over the next 25 years.

Mayor Mark Funkhouser courageously proposed merely looking at the possibility of contracting out city services. Much of this proposal followed up on work he did as Kansas City’s auditor. Not surprisingly, city unions went ballistic, because it’s well known that taxpayers now work to support government employees, not the other way around.

I hope that Kansas City reconsiders this rejection — and that St. Louis embraces the potential — of contracting or privatizing city services while they still can do it from a position of strength. Eventually, they may be forced to do it because of economic realities, and then they won’t be in a position to get the best agreement for taxpayers.

Suffocating Neighborhoods, Parcel by Parcel

Posted on by Thomas Duda

We hear it all the time, that the growth of government stifles innovation and crowds out individual agency. One rarely sees this concept writ so large and discernibly upon the landscape, however, as when encountering abandoned, publicly owned properties.

Consider 4634 Cottage Ave., pictured below in August 2010. Until 1999, it was in private ownership following its construction in 1906. A sign reading “Private Property NO TRESPASSING” hangs ironically on one of the building’s boarded door openings, a vestige of the structure’s past life as an income-producing property.

Today, the multi-family dwelling is in a perpetual state of decay because of its status a property owned by the Land Reutilization Authority (LRA).

Private owners in a free market have vastly different incentives than do government agencies to ensure the health and vibrancy of assets under their control.

This month’s meeting of the LRA Commission will be held on Wednesday, Oct. 27, at 8:30 a.m. in the board room of St. Louis Development Corporation, on the 12th floor of 1015 Locust St. in downtown St. Louis.

Ethanol Update on Recent Policy Decisions and Options

Posted on by David Stokes

I am to ethanol what Chrissy is to tax credits, so I have been mildly remiss in waiting a few days to write about the latest on the massive scam economic growth opportunity that is the ethanol industry.

First, the bad news, which is really not all that bad — yet. The Environmental Protection Agency (EPA) approved increasing the amount of ethanol allowed in the standard blend of gas, from 10 percent to 15 percent. The important thing to note here is that the agency has allowed such an increase, not required it. There is really no argument against allowing the option for retailers who wish to undergo the expense in order to sell a higher blend, or to consumers who choose to buy that higher blend. So, as long as it remains an option rather than a rule, I see nothing wrong with the EPA’s decision.

The fear, of course, is that states like Missouri will subsequently require the higher blend for gas sold in the state. We currently have a ludicrous law that requires a 10-percent blend of ethanol in Missouri gas, whether we want it or not. If the state were to increase that requirement now, it would be a sick joke. I am tepidly optimistic that this won’t happen, because the higher blend is not recommended for most old cars.

I agree with this part of the article suggesting that, minus the requirement, most gas stations won’t choose to sell the higher blend, and we might not have much to worry about:

Critics said the decision could be a frustration to drivers and argued that many retailers will opt not to sell the higher blend because of the expense of adding new pumps and signs.

In places where there is enough demand, retailers will choose to sell it. Customers should also be informed enough to realize that the suddenly cheaper option at the pump might not be right for their cars. If everyone read this blog, they would already understand this.

On to the potentially more exciting news: getting rid of federal ethanol subsidies entirely! The main ethanol support programs are scheduled to expire at the end of the year, and Congress has yet to renew them. Abolishing these subsidies — or, more accurately, just letting them expire — would be the sole crowning achievement of the 111th Congress. Seriously, getting rid of those subsidies would be a victory for markets and freedom, and a loss to rent-seekers everywhere. The 111th Congress would deserve praise for letting them expire.

Columbia: The (Subsidized) Silicon Valley of the Midwest?

Posted on by Christine Harbin

From an article in the Columbia Daily Tribune:

To bring a potential 120 new jobs to Columbia, the state has presented 3M with a $4.27 million package of incentives. Most of that will come in the form of tax credits; about $1 million is grant money.

My intention is not to fault individuals and companies for taking advantage of the resources that are available to them. Instead, I argue that taxpayer monies should be put toward the best uses, and I have difficulty believing that concentrating the benefits on the favored few and diffusing the costs on the rest is an optimal strategy.

Considering only the amount expended via tax credits, the state government is spending $27,250 per job (plus dead-weight loss). When the grant money is included, the state is spending $35,583.33 per job. Is this level of subsidy the best use of taxpayer monies, particularly at a time when the state government has decided to make cuts to other services, like education and public safety?

Subsidizing select businesses and industries is an admission by the state government that the cost of doing business is too high in Missouri. As an unfortunate consequence, the businesses and individuals that remain in the tax base are left to pick up the tab, which makes it even harder for them to compete. Instead of distorting the playing field with generous incentive packages, the state government should focus on providing a favorable business climate for all individuals, businesses, and industries, not just a select few.

Given its long history of layoffs in the Columbia region, how can government officials be certain that this company will actually deliver on the 120 jobs that it promised? Companies in other states have failed to deliver on the jobs promised in exchange for receiving taxpayer monies, and it is likely that the same may happen in Missouri.

No One Wants to Poison Their Customers

Posted on by Mary Chism

In August, consumers across America were frightened by news of a salmonella outbreak traced to several farms in Iowa. The brands that distribute eggs from the area recalled half a billion eggs, prompting some citizens to call for increased FDA intervention. In a letter to the editor of the St. Louis Post-Dispatch, Matt Erickson, an associate of Missouri Public Interest Research Group (MoPIRG), encouraged voters to “support quick passage of the FDA Food Safety Modernization Act to increase the frequency of inspections at food factories and give FDA the authority to issue mandatory recalls so that we can keep unsafe food off grocery shelves and off our dinner tables.”

What many people do not realize is that every time a food recall is issued, it is done voluntarily by the food manufacturer. This makes sense, because a food brand or restaurant that gives food poisoning to its customers will face legal and financial consequences, not to mention gaining a nasty reputation. How many people still carry negative brand associations from the E. coli outbreaks of 1993? If a food manufacturer has reason to suspect that a shipment of food may be contaminated, it is very much in their best interests to make sure that not one bite of that food is ever eaten.

Food companies sometimes even pay organizations such as Rapid Recall Exchange to give them advance warning of any possible need for a recall. Restaurants and grocery stores don’t want to get sued for making a customer ill, but, more importantly, they do not want to become famous as the business that sells contaminated food.

It is terrible and frightening that Americans were exposed to salmonella poisoning, but this means that egg producers are being subjected to increased scrutiny from all around, so that this is unlikely to happen again soon. Increased FDA oversight would make it harder for food producers to get food to the consumers, which would raise the cost of food, not to mention requiring more tax dollars to run the investigations.

Charlie Arnot, CEO of the Center for Food Integrity, points out in his letter to the editor of the Kansas City Star that:

Americans have the right to expect farmers, food processors, restaurants and grocery stores to act responsibly. But placing restrictions on the food system and limiting the nation’s ability to produce food will decrease the availability of food choices for all of us […]

The proposed Food Safety Modernization Act raises another question: how often would the government officials have to check the food to be effective? Every day? At every source? Food contamination can also come from fast food workers, waiters, flies in the kitchen, or even a family member cooking for you — not just from the farm or factory. There is no possible way to ensure completely that food is safe to eat and not poisoned, no matter what level of regulation the government enacts. Fortunately, the manufacturers of food want to keep us healthy enough to keep buying their products.

Multiple Choice: You Will Be Graded on This

Posted on by Mary Chism

Q: Four drivers are traveling down Highway 70, going approximately 55 mph. Allen is drunk; Betty is 85 years old and has trouble seeing clearly and reacting quickly; Clarence is coming off of a 27-hour shift at work; and Deandra is happily texting while listening to ABBA on an oldies station. Which of these drivers is the most dangerous, and who most deserves a ticket?

A: Whoever causes an accident.

This is a trick question, designed to make you think about which driving distractions are actually dangerous. Some people get in collisions when there is no identifiable distraction, but the list of possible distractions is endless, including a blinding glare from the sun, kids in the back seat, and hilarious bumper stickers on other cars. One important aspect of driving, or just being on the road, is safely negotiating the hazards that come one’s way.

In the Springfield News-Leader, Timothy Cloninger postulates that texting is no more dangerous than other driving distractions, and requests that both drivers and lawmakers exercise common sense in assessing the danger (emphasis mine):

Distracted driving is the problem, not texting. Existing laws already cover this, including careless driving, driving without due care and attention and reckless driving.

Cloninger also points out that legislation against texting while driving could simply encourage violators to pay more attention to hiding their behavior:

Even if you believe it should be illegal, a law that specifically calls out texting is impossible for police to proactively enforce: One, it’s too easy to avoid detection: simply hold your phone in a lower, more dangerous position.

Show-Me Institute research assistant John Payne stated on this blog that “a newly released study by the auto insurance industry found no decrease in auto crashes in states that enacted laws banning texting or talking on a hand-held cellphone while driving.”

While creating more legislation may seem like a proactive way to protect us from one another, this is not necessary if there are already laws that prohibit dangerous driving. Most people want to drive safely and will go to great lengths to avoid a collision. I personally wish that drivers would not text or play with Foursquare while operating a vehicle. Yet I respect their rights to make their own decisions, and I evaluate their driving safety based on how many accidents they are involved in, rather than on what they were doing at the time.

Progress on Red-Light Cameras

Posted on by David Stokes

There’s some good news on this front: The Missouri Department of Transportation (MoDOT) has halted allowing any further red light cameras on state roads while it studies the issue. My opinion is this is a very difficult issue to study, so I think a proper study should take at least 20 years to perform. By that point, we will all probably have permanent government microchips implanted in our permanently attached safety helmets, so red-light cameras will be totally moot.

MoDOT’s current director cuts through the canard that cities advance suggesting the cameras are there for safety purposes (parentheses in the original):

“Whether speed or red-light running cameras, they are taking this and using it as a moneymaking, revenue-generating activity, and that’s not fair,” [interim state Transportation Director Kevin] Keith said. “I can’t say everyone is doing it. We have enough indications that there are (communities) doing that. It gives us pause.”

If anyone out there actually believes what the cities say about safety, I have a toll bridge over Lake of the Ozarks to sell you. It’s the only one in the state, so it’s pretty valuable.

There are benefits to having a large number of small governments in Missouri, and particularly in St. Louis County. There are also costs. The primary benefit is the difficulty of enacting comprehensive government planning in an area with so many separate governments. The two primary costs are the fiscal cost of redundant services and the consistent abuses of traffic regulations for revenue purposes by small cities. I commend MoDOT for attempting to halt some of those abuses.

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