Thanks to Government Incentives, It May Be Cheaper to Locate a Service Center in Columbia, Mo., than in India

The Columbia Missourian recently published a summary of the $31 million incentive package that the state and local governments are providing to IBM to persuade it to locate a service center in Columbia, Mo. It includes more than $28 million in state tax credits.

From the article:

State incentives:

  • $8.6 million through the Missouri BUILD Program
  • $14.7 million through the Missouri Quality Jobs program
  • $4.2 million in new jobs training
  • $300,000 for customized job training
  • $412,500 worth of recruitment assistance
  • Sales tax exemption on personal property under the Chapter 100 program

Local incentives:

The city of Columbia will buy the building at 2810 LeMone Industrial Blvd. for $3 million and will lease it to the company for $1 per year for 10 years with an option to extend it for an additional 5 years at the same price.

Boone County will provide a 50 percent property tax abatement on personal property for the depreciable life of equipment and will exempt personal property from sales tax.

According to another article in the Columbia Missourian, IBM has promised to bring 600 jobs to Columbia during the next 10 years. Given the $31 million incentive package, this means that taxpayers will be subsidizing each job by $51,670. Meanwhile, IBM will only have to pay its employees a minimum average annual wage of $43,750, and it will contribute zero property tax revenue. In exchange, IBM will provide exactly $10 in rent over 10 years.

Furthermore, because the city owns the property and is leasing it to IBM, the company will not have to pay property taxes on it — this is a bigger subsidy than the $3 million the city paid for the building. IBM will not be required to contribute personal property tax revenues for this facility to the state government, either.

The government shouldn’t carve out sections of its tax base, via methods like property tax abatements or tax increment financing, because this type of behavior shifts and increases the burden to those who do pay taxes. Additionally, this $31 million cannot be spent on other services, like education, or returned to taxpayers to spend in the private sector.

The incentives may increase employment in Columbia in the future, but given that the increase will come at such a supreme cost, it may not be worth it.

Columbia SWAT Officers Cleared

According to the Columbia Missourian, an internal investigation into the SWAT raid of Jonathan Whitworth’s home (which I have also covered here, here, here, and here) has cleared all the officers involved of any wrongdoing. Given my vociferous criticism of using SWAT tactics to serve search and arrest warrants for nonviolent crimes, you probably expect me to decry this decision as a miscarriage, but you would be wrong. From everything I know of the case, the officers did not violate any policies or statutes, whether federal, state, or local — but that’s precisely the problem. We need stricter rules for SWAT raids because under the rules in place at the time, there was nothing technically wrong with the raid.

As Radley Balko puts it, “this wasn’t a ‘botched raid.’ It was a routine raid. The police got the correct house. They found the guy they were after. They arrested him. No one was killed. Most of these raids don’t turn up huge stashes of drugs or weapons. Most result in misdemeanor charges.”

There is some reason to hope that — in Columbia, at least — using SWAT teams for nonviolent crimes will become the exception rather than the rule. Columbia Police Chief Ken Burton concedes that the department has “utilized SWAT routinely in circumstances and situations where we should not,” and promises that new reforms should cause the number of SWAT raids to “plummet.” Those reforms should be strengthened and expanded statewide to help ensure that SWAT teams are used for the intended purposes and not to shock and awe nonviolent people.

On Private Discrimination

Rand Paul, the newly designated Republican candidate for one of Kentucky’s seats in the U.S. Senate, has taken a lot of flack over the past couple of days as a result of his views on the landmark Civil Rights Act of 1964. MSNBC’s Rachel Maddow spent roughly 15 minutes of interview time with Mr. Paul trying to get him to directly express his belief that the government should not prohibit private business owners from engaging in racial discrimination. Rather than offer a soundbite that would allow political opponents to caricature him as a closet racist or opponent of civil rights, Paul first emphasized all that he found admirable and beneficial about the Civil Rights Act, then tried to express the difference between discrimination as a governmental policy, which he believes to be both abhorrent and unconstitutional, and discrimination as a private choice, which he believes to be both abhorrent and unwise, but beyond the proper authority of government to prohibit.

It’s true that a strict libertarian or free-market perspective might prevent the government from interfering when individuals choose to act in a discriminatory fashion. This may make people uncomfortable. But, as Mr. Paul pointed out, the very idea of freedom requires us to tolerate certain decisions that we might find distasteful, in order to ensure that we have the liberty to make decisions that others might find distasteful. For example: Our nation prizes freedom of expression so much that our constitutions deny governments the authority to restrict or punish speech, even if the ideas expressed are almost universally regarded as offensive. Respect for this form of freedom is so ingrained in our culture that its wisdom is only rarely challenged. Mr. Paul was trying to help Ms. Maddow understand that, similarly, if one believes in individual liberty then one must necessarily be prepared to tolerate the fact that some individuals will use that liberty in ways that others might find offensive.

The proper question, I believe, is how best to deal with those situations when they present themselves. Where speech is concerned, if someone says something offensive, the ideal solution for those offended would be either not to listen to that speaker or to respond with their own speech. Likewise, the best response to discriminatory business establishments would have been for others to boycott the offending establishments and/or to open non-discriminatory establishments of their own. The same principle can be applied to businesses that refuse to hire or promote qualified minority or female applicants. These discriminatory decisions create an opportunity for competing businesses to hire those same applicants — which, presumably, will allow them to offer higher-quality services than the discriminatory employer. The effect might not be immediate, but eventually it will become plain that discrimination is both foolish and costly.

It is also vitally important to remember that governmental power is a double-edged sword. A power that can be used in ways of which you approve can also be used in ways that you find repugnant. The problem of segregation/desegregation is a useful example, because the governmental action at issue represented flip sides of the same freedom-denying coin. In much of the Jim Crow South, segregation was not optional. Those allowed to vote — almost exclusively white people, many of whom had an interest in maintaining a privileged status in society — elected representatives who decided that individual business owners were not permitted to offer a desegregated environment. Thus, all people were forced to live with governmentally enforced segregation. After the Civil Rights reforms were enacted, individual business owners were not permitted to offer a segregated environment — all people were forced to live with governmentally enforced desegregation. At all times, individual citizens had only a limited ability to make these choices for themselves.

In a libertarian or free-market paradigm, the government would not have the authority to dictate these matters to individual in either direction. The government’s sole responsibility would be to ensure that those who sought actively to harm others would be brought to justice and, if necessary, their victims compensated for any demonstrable, quantifiable injuries suffered. Those who believed strongly in the importance of segregation would be permitted to live out their choice — but would also be forced to suffer the disadvantages that would flow from their choice. Those who favored integration would realize a unique competitive advantage that, eventually, would reveal the wisdom of that approach.

To sum up, governmental control over the decisions that individuals may make for themselves presents a seductive shortcut for those who believe that the world ought to be ordered in some particular way. But not only does it represent a denial of individual liberty, a government vested with the power to dictate decisions made by its citizens can very easily turn against those who had hoped to use it to pursue their vision of a “good” society. As George Washington once warned: “Government is not reason; it is not eloquence; it is force! Like fire, it is a dangerous servant and a fearful master.”

KC Pitch Blurb About St. Louis Offers Insights to Government Structure

Today’s Kansas City Pitch has a short story on a new Brookings Institution study that places modern American cities into various categories. According to the study, Kansas City and St. Louis are different types of cities, which is not surprising to anyone who has spent much time in both. Speaking for myself, I get a different urban feel in Kansas City than I do when home here in St. Louis. It’s not better or worse, and I doubt I could define it much further, but I definitely sense it. But this really isn’t the point of my post.

As soon as I read the list of cities to which St. Louis is judged as being similar, the issue of government structure jumped out at me:

St. Louis fell in the “Skilled Anchor” category. These cities are typified by slower growth, lower diversity and higher educational attainment. Baltimore, Pittsburgh, Akron and New Haven are other Skilled Anchors.

Which two American cities have a metropolitan government structure most like St. Louis? Baltimore and Pittsburgh, and I doubt anyone would dispute that. Baltimore is also an independent city-not-within-a-county, like St. Louis, and the metropolitan Pittsburgh and St. Louis areas are the two most fragmented in the country (as defined by government units per capita).  Both of these cities, especially Pittsburgh, were covered in detail by my “Government in Missouri” policy study. (For the fragmentation info, check out Table 9 on p. 29, and read endnote 23.)

I am not trying to draw any causation here, or even really any correlation. It may be just coincidence that St. Louis, Baltimore, and Pittsburgh are all judged as similar cities by the measures of the Brookings Institution. But then again, perhaps the similar government structures have resulted from how the three communities have adapted to various changes over time, now bringing them into similar circumstances.

The Right to Have a Peaceful Life in a Quiet Subdivision

Greenberg's yard art. Photo by the Post-Dispatch
Lewis Greenberg's yard art. Photo from the St. Louis Post-Dispatch

A Ballwin-area retired art teacher was sentenced to jail time on Monday for non-compliance with two city ordinances. The ordinance offender, Lewis Greenberg, is charged with littering and storing hazardous materials.

The photo above is of Greenberg’s offense. He maintains that the structures in front of, around, and behind his house are art. Although art isn’t easy, these structures do look like abstract sculpture. The tangle of wood and metal, Greenberg told the Post-Dispatch, represents the Holocaust.

Greenberg’s neighbors, however, don’t appreciate his yard art. And, they haven’t liked it for a long time. In 2007, a woman from the area blogged: “OK, so where does Greebergs right trump the neighbors right to have a peaceful life in a quiet subdivision?”

Writes a commenter on the most recent Post-Dispatch article, about Greenberg’s sentencing:

If he wants a yard full of junk – then he can move out in the country where there are no rules. In a town and a subdivision where there ARE rules – he is BREAKING THE LAW and it needs to go….

Well, not quite. Greenberg’s art is on his property. He isn’t breaking a law just because what he has built on his property is unusual and doesn’t quite fit in with the Ballwin-area aesthetic. There is no right to uniformity.

Some neighborhoods do have codes, such as the one enforced in Shaw, that can limit what individuals can do with their property. It appears that, although the City of Ballwin has an extensive housing code, Greenberg’s neighborhood doesn’t have a rule to protect itself against his abstract yard art. Instead, the city has charged him with littering and storing hazardous materials — charges that seem like a stretch.

A survey of the Ballwin City Code reveals that the term “litter” refers to substances that could injure a person’s feet or car tires, trash and debris, earth left from an excavation, and traffic obstructions. Clearly, Greenberg’s lawn art doesn’t fall into the first, third, or fourth definitions of litter. And, although commenters hasten to compare his art to junk, can items strategically placed in order to construct sculptures on a person’s private property really be classified as trash?

As for the hazardous materials charge, it could be argued that children could run onto Lewis’ property and hurt themselves. However, unlike a person keeping dangerous animals on their property, if anyone hurts themselves on Greenberg’s property, it is entirely that person’s fault. Furthermore, if a person did hurt themselves while on Greenberg’s property, that person could attempt to find recourse through the court system. It’s not the city of Ballwin’s place to stop low-risk accidents from occurring through prior restraint. If it were, the city should immediately crack down on the construction of swimming pools.

I suspect that the neighborhood’s problem with Greenberg’s lawn art is not one of danger, but one of annoyance. It is unfortunate that the City of Ballwin is claiming to protect the safety of “the children” in an effort to censor Greenberg. Instead of reacting in this negative way, the annoyed neighbors could have realized what Mr. Plumbean and his neighbors realized:

My house is me and I am it. My house is where I like to be and it looks like all my dreams.

Fewer Missourians Employed in Movie Industry Than Before Film Tax Credits Began

Last month, the Mackinac Center for Public Policy published a press release stating that fewer people are now employed in the movie industry in Michigan than before the state began to provide tax credits to filmmakers:

“Film incentive supporters often point to particular jobs generated by the program’s subsidies as evidence of its success,” [Mackinac Center Fiscal Policy Analyst James] Hohman said. “But the reality is that the state is redistributing millions of taxpayers’ dollars to one industry that happens to be employing fewer people.”

Unfortunately, this trend holds true for Missouri, as well.

Using the state cross-industry estimates from the Bureau of Labor Statistics website, I isolated the “motion picture and sound recording industries” category (NAICS code 512) for Missouri, from years 2002 to 2009. Using the 2002 Economic Census, I isolated this information for 1997. (I was unable to find this data for 1998 to 2001 online, but I will continue to look.)

Average Employment Film Industry

There were 4,143 people in Missouri employed in this category in 1997, and 3,949 in 2009. This means that more people were employed in the industry in Missouri before the state began offering targeted tax credits in 1998.

To further illustrate this decline in movie-related jobs in Missouri, I downloaded Industry Information by NAICS Sectors from the Missouri Economic Research and Information Center website. I isolated the following occupations: “Film and Video Editors” (OCC_CODE: 27-4032), “Actors” (OCC_CODE: 27-2011), “Producers and Directors” (OCC_CODE: 27-2012 and 34056), and “Camera Operators” (OCC_CODE: 27-4031, 34026, 89713). This produced the following graph:

Film Employment by Occupation

  • “Film and Video Editors”  increased, but only marginally. This occupation rose from 130 in 1997 to 300 in 2009.
  • The “Actors” category decreased most significantly. This occupation employed 1,540 Missourians in 1999, and 700 in 2009, which represents a decline of 54 percent. The lowest number of actors employed was 430, in 2003.
  • The number of “Producers and Directors” peaked at 1,170 in 1998, and didn’t return to this level until 2009.
  • “Camera Operators” neither increased nor decreased significantly during this period.

The data show that the film industry in Missouri hasn’t experienced significant job growth as a consequence of film tax credits. In fact, the number of Missourians employed in the film industry has decreased. Why, then, has the Missouri state government spent approximately $13 million over the last 10 years on this program? Why are there continued calls for expanding this program?

St. Louis Follows Kansas City by Moving Forward on Privatizing Animal Shelter

The Suburban Journals has an updated piece on where the city of St. Louis stands with its animal shelter. According to the story, the city has learned from Kansas City that privatization can work in this area:

“The nonprofit groups appear to have worked well in other cities of our size, and this was kind of the route that they wanted to explore first,” Hane said.

Kansas City is among the cities where an outside group has taken control, Hane said.

The city deserves credit for its willingness to go with privatization here, but I don’t understand the favoring of a nonprofit over a for-profit model:

A veterinarian with extensive experience with animal welfare groups has proposed an alternative. He wants to run a for-profit operation at the Gasconade shelter – a proposal that runs counter to the city’s wishes.

I am not saying the for-profit idea should trump the nonprofit, just that the choice should be made according to who can best provide the necessary services, rather than whether the operation hopes to earn a profit. (The fact that the vet who wants to run a for-profit shelter was a little late in submitting his proposal should not be a big deal.) After all, the privatized shelter in Kansas City is run by a veterinarian, and is nominally a for-profit enterprise — although I think it operates in more of a gray area. I really doubt the vets who run the shelter are making a large profit doing their amazing work in caring for lost, abused, and neglected animals.

As a dog lover with great memories of Harvey, Casey, Marleigh, and other dogs my family and I have had, I love seeing the city realize that there options exist outside of the government for providing this necessary service. It is also great to see one big  Missouri city learning from another.

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