Do the Ends Justify the Means?

I am in generally opposed to the use of tax increment financing (TIF), because I don’t believe the government should be in the business of picking economic winners and losers. But I felt it was only fair to point out that the use of TIF does not always result in disaster, as is exemplified by the case of Brentwood Promenade. A recent St. Louis Business Journal article describes the success of the project, for which the city of Brentwood issued a $21.5 million bond backed by TIF financing in 1997. On March 1, the city of Brentwood made its final payment and dissolved the TIF district two years ahead of schedule. The city now stands to collect about $2 million in annual sales taxes from the shopping center’s tenants, which include Target, Trader Joe’s, and Bed Bath & Beyond. This will provide the city with a projected 33-percent increase in sales tax revenue. Property taxes from the 25-acre area have grown from approximately $60,000 a year to about $900,000 a year today. This success of this retail center (success that is obvious to shoppers trying to find a parking space on a weekend) is also credited with increasing additional investment in the city, as exemplified by the increase in the amount of new home construction in the city.

But, as anyone who has lived in the St. Louis area for a long time knows, tax increment financing is not always so successful.  The St. Louis Business Journal article reminds us of the year 1991, when the city of St. Louis backed the bonds for Midland Group’s $53 million St. Louis Marketplace. When the retail center didn’t meet revenue projections, the city was on the hook for $3 million. Also instructive is a January 2009 report by the East-West Gateway Council of Governments, which found that 80 percent of TIF money during the previous 15 years was devoted to retail projects, and that instead of creating growth, the process has simply moved temporary growth around.

Even when TIFs are successful, such as in the case of Brentwood Promenade, there are numerous other concerns with using this financing method. Although TIFs are intended to be used to develop “blighted” areas, they are often utilized in areas where development would have happened anyway, which deprives municipalities of revenues in the short term that are instead being used to pay for the project. Even worse, the designation of “blight” can allow the government to condemn property through the use of eminent domain.

But perhaps the most insidious trait of tax increment financing is that it gives government the power to decide exactly which developments will take place, and where, rather than allowing development to happen as it naturally would under market conditions. The economic advantages afforded to those who receive the TIF open the door for political favoritism, which should have no place in development. Equally important, it is not the government’s responsibility to oversee retail development — which, as the East-West Gateway report shows, characterizes the overwhelming majority of these projects in the St. Louis area. So, even when these retail projects are successful and the city benefits, do the ends justify the means?

The Private Provision of Mass Transportation

This is an extremely interesting (and relatively short) video, made by PBS’s Frontline and NPR’s Planet Money, about the private buses in Haiti called “tap-taps.” The buses shuttle residents of Port au Prince around the city for just a few pennies per trip, which is necessary because most Haitians make less than $2 a day. The buses are extremely competitive and completely unregulated, so the owners of the buses have devised a method of signaling which buses are well-maintained and staffed by good drivers, and which aren’t: elaborate murals painted on the sides of the buses. If an owner is not willing to stringently maintain the outside of the bus, chances are the internal workings and driver leave something to be desired as well.

If post-earthquake Port au Prince can operate a cheap and efficient system of mass transportation, it stands to reason that much richer American cities like Saint Louis can, as well. There are, of course, many differences between the markets for mass transportation in Saint Louis and Port au Prince. Only 3 percent of Haitians own cars, and Port au Prince has more than 73,000 people per square mile compared to fewer than 6,000 per square mile in Saint Louis city, so there is much higher demand for mass transportation in Port au Prince than in Saint Louis. Still, there are clearly numerous people in the area that use some form of mass transportation, so private buses are at least a possibility … or they would be if they weren’t essentially outlawed in order to give Metro a mass transportation monopoly.

We need not eliminate Metro to find out whether a competitive system can replace the current monopoly. If Bi-State simply allowed private bus lines to compete, and the cities and counties in the area loosened the regulations on jitneys and taxis, we could very well see many cheaper and more efficient transportation alternatives emerge. Metro would still have an unfair advantage because of its public subsidy, but we could decrease that subsidy and use the savings to instead institute mass transportation vouchers for people below a certain income level. These people could then use the vouchers to ride the transportation system of their choosing.

It’s possible that the public transportation system would still outperform the private sector, and the devil is always in the details, but economic theory and massive amounts of historical experience show that monopolies are inefficient and charge high prices while competition improves products and lowers prices. We should not expect mass transportation to be any different; the burden of proof should be on those who defend the monopoly system. If private mass transportation can operate in Port au Prince, where per-capita income is less than 1/35 of the level in the United States, it’s at least worth trying here.

Private Airport in Branson Seems to Be Flying Along Smoothly

As you may or may not know, America’s only privately owned and operated commercial airport is located in Branson. It opened right around a year ago, and from what I can tell everything seems to be going well. The Springfield Business Journal has a write-up on the expansion of flight at  Branson airport, and it also made Robert Poole’s recent Reason Foundation newsletter on airport issues.

Kansas City has considered this idea, and it would be wise for St. Louis to consider it as well. The idea that only the government can operate our airports may be deeply imbedded in public opinion, but private operators could certainly undertake airport operations if given the opportunity. Hopefully (and apparently), Branson will show us the way.

Another Instance of Parents as Teachers Participants Serving as Research Subjects

When I blogged about a North Carolina Parents as Teachers program that encouraged participants to join a research study, I hadn’t heard of any Parents as Teachers programs in Missouri asking participants to do something similar. It turns out that Parents as Teachers has enrolled Missourians in research; in this study conducted by professors at Washington University and Saint Louis University, the entire set of subjects comprised only Parents as Teachers participants. The study examined the relationship between parent behaviors and child nutrition.

In accounts of the activities and benefits of Parents as Teachers, supporters describe the program’s role in promulgating information that has previously been gleaned from academic research. If Parents as Teachers is also itself facilitating research with participants as subjects, that fact should be considered in debates over its funding.

Missouri Legislators Decline to Name an Official State Dog

The Missouri House of Representatives defeated the bill that would have inducted the Newfoundland breed and Seaman, the dog that accompanied Lewis and Clark, into the list of Missouri’s official state symbols.

Some state representatives objected to an official honor for Seaman because they thought there wasn’t enough evidence that he traveled through this state:

“If we’re going to have an official dead dog for the state of Missouri, we should have some evidence that the dog actually went to Missouri,” said Rep. Vicki Englund, D-St. Louis County.

Others commented that, now that Missouri has plenty of official symbols, “enough is enough.”

I’m happy with the results of the Missouri House’s vote, and I hope that Newfoundland fans will find ways to promote the breed outside of government. It just isn’t practical for the General Assembly to confer honors on everyone’s favorite animals. At some point, enthusiasts have to step back from lobbying the state and take their message directly to their fellow Missourians.

Teacher Union Advocates Get Schooled in Debate

Intelligence Squared is a public charity dedicated to providing a public forum for intelligent discussion on a wide range of important and/or controversial issues. They host Oxford-style debates in which teams of three argue opposing sides of a motion. Before the debate begins, the live audience members register their opinions on the topic, and they do the same after the debate so that, in effect, observers can discern which side’s arguments the listeners found most persuasive.

On March 16, the topic up for debate was whether teacher unions should be blamed for failing public schools. Arguing that teacher unions should not be blamed were Randi Weingarten, the president of the American Federation of Teachers; Gary Smuts, a superintendent of a successful public school district in California; and Kate McLaughlin, an elementary school teacher in Lowell, Mass. Arguing that unions should be blamed were Dr. Terry Moe, a senior fellow at the Hoover Institution at Stanford University; Rod Paige, former U.S. Secretary of Education; and Larry Sand, a teacher from Los Angeles.

The debate itself is incredibly interesting and well worth watching for anyone interested in the topic of education reform. Although the details of the debate are too numerous to go into here, I will give you an idea of how it turns out.

Before the debate, 43 percent of the audience said that unions were to blame, 24 percent said they were not to blame, and 33 percent were undecided. After the debate, 68 percent said that unions were to blame, 25 percent said they were not to blame, and only 7 percent remained undecided. In short, only one percent of the audience’s undecideds were persuaded by the union advocates, while 25 percent were persuaded by the union’s detractors.

Columbia Board of Education Candidates Discuss Cafeteria Food

The Columbia Daily Tribune asks school board candidates which improvements they would like to see in school lunches. One candidate mentions local food in his response:

Nutritional Services is working with vendors to provide food and educational opportunities from local food producers and farmers to reduce the impact CPS has on the environment and to educate students about where their food comes from.

The assertion that local food is superior for environmental reasons comes up often in local food debates. To understand why districts should not conflate local food with environmentally friendly food, I recommend reading Caitlin Hartsell’s excellent post about why growing food closer to consumers is not always better.

In addition to in his claim that local food is better for the environment, the candidate says that purchasing food locally will teach students where their food comes from. I don’t know how he expects the food to do that. From the students’ point of view, food from Missouri looks the same as food from Illinois or food from Indiana. Of course, teachers could point out to students where the food originated from, and they could conduct lessons on where the food was cultivated and harvested — but they could do that just as well if the food came from a different state. In fact, if the place where cafeteria food is grown is to become a subject of study, it might be better to buy food from a distance. That way, students can learn about a place with which they wouldn’t otherwise become familiar, instead of focusing their local area, which they already know something about from experience.

This Just In: Health Care Legislation Passed by Congress Has Unintended Consequences

On Friday, U.S. Reps. Henry Waxman (D-Calif.) and Bart Stupak (D-Mich.) sent a letter to AT&T and several other companies requesting that they verify that the health care bill’s passage will indeed cost the corporations additional expenses. This came after AT&T, which employs 9,000 people in the St. Louis area, said it would record a $1 billion non-cash charge during the first quarter of 2010 because of the tax changes associated with the bill. Under the new law, companies will continue to receive a tax-free subsidy of 28 percent on programs to provide their employees with prescription drug benefits, but they will no longer be able receive the double benefit of deducting the value of the subsidy on their taxes. AT&T said that they will evaluate possible changes to the active and retiree health care benefits offered by the company.

So, let’s recap: The United States Congress passed a bill that makes tax changes. Those tax changes will by design affect corporations’ balance sheets and generate more revenue for the government. When corporations inform the public of these effects, members of Congress request verification of the accuracy of these effects, merely because they contradict what the legislators expected and said would happen.

In the letter, the congressmen state that the bill is “designed to expand coverage and bring down costs,” which makes AT&T’s claims “troubling.” The key word here is “designed.” The legislation may indeed have been designed with the intention of reducing costs, but that doesn’t mean it will actually have that effect when implemented. The letter also cites reports from the Congressional Budget Office and the Business Roundtable projecting that premiums could decrease during the next six to 10 years as a result of the reforms. The report by the Business Roundtable says that “if enacted properly, the right legislative reforms could potentially reduce [premiums] by more than $3,000 per employee” (emphasis added). So, this depends on the right reforms being enacted in the proper way (which we know almost never happens), and then premiums could potentially be reduced. The congressmen neglect to mention in their letter that this report also has a section titled “Risks Could Jeopardize Cost Reductions,” which points out that revenue raisers such as a “high-cost” tax could make health insurance costs worse for affected plans and employees.

The worst thing about this is that the government is asking a private company to explain its accounting, something they have no authority to demand. Beyond filing their taxes accurately, AT&T has no obligation to the government to explain itself, only an obligation to its shareholders. The shareholders are perfectly capable of “verifying” the company’s financial information on their own. The congressmen’s request that AT&T justify the increase in expenses reflects the apparent unwillingness of many legislators to acknowledge the unintended consequences of their legislation.

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