Page 688 – Show-Me Institute

When Is a Home Not a Home?

Posted on March 2, 2010May 5, 2026 by Audrey Spalding

On Feb. 23, I wrote about the proposed “open space” that NorthSide Regeneration LLC, has planned for the company’s $8.1 billion development of the city of Saint Louis. According to NorthSide’s plans and other publicly available documents, at least four owner-occupied homes are slated for open space.

When discussing the possibility of eminent domain, NorthSide representatives, including developer Paul McKee and attorney Paul Puricelli, have stated that eminent domain won’t be used to take owner-occupied residences. The specificity of the qualification “owner-occupied residences” should make anyone looking into the project take pause. After all, there are many types of properties that are important to lives and livelihoods that aren’t owner-occupied residences — for example, businesses. In the latest Show-Me Report, I profile Fehlig Brothers Box & Lumber, a business slated for open space.

She Fell In Love With The Drummer

Posted on March 1, 2010May 5, 2026 by Christine Harbin

The city of Duluth, Minn., made the band Wilco and its members honorary citizens. Not to be outdone, the city of Madison, Wis., my stamping ground of 6 years, has proposed to do the same thing. Last week, Alderwoman Satya Rhodes-Conway and 10 cosponsors filed a resolution in the Common Council in Madison. It goes like this:

WHEREAS, Wisconsinites generally have a love/hate relationship with all things from Illinois but the sold-out crowd at the Overture Center on February 20, 2010 had only love for this band from Chicago; […]

In an article in the Duluth News Tribune, Madison Mayor Dave Cieslewicz pokes fun at the situation. I realize that he’s joking, but there’s a sad element of truth in his statement.

“If it’s a typical resolution for the city of Madison, it will be referred to 20 different city committees, it’ll be amended and we’ll probably vote on it in August 2012,” the mayor said.

On the one hand, although the Common Council could spend its time more productively, at least it isn’t passing resolutions that limit personal liberties or promote fiscal irresponsibility.

However, as Sarah Brodsky has communicated on this blog, legislating state symbols encourages people to ask the government to affirm their preferences. I happen to enjoy listening to Wilco, but why should it matter to me that Ald. Rhodes-Conway and Mayor Dave do as well? In a recent blog post, Mayor Cieslewicz confesses that he doesn’t like John Mayer. Does this mean that I shouldn’t like him too? If John Mayer is barred from becoming an honorary citizen in Madison, does he face a barrier to performing concerts in Madison?

I hope that Mayor Cieslewicz is only joking about this, too:

There are also questions being raised about where honorary citizens would be allowed to live. Some have suggested a referral to the Zoning Code Revision Advisory Committee to mull that one over, though the City Attorney has hinted darkly that he won’t allow it.

I hope that these cities stop short of providing tax advantages to their honorary citizens. I wouldn’t be that surprised if they did, though; Midwestern states have already demonstrated a willingness to bend their tax codes in an effort to attract glitz and glamour.

How Should We Pay for Transportation in Missouri?

Posted on March 1, 2010May 5, 2026 by David Stokes

Today’s Southeast Missourian asks the above question about Missouri transportation funding in an editorial (link via a certain Mr. Combest). They leave it as an open-ended question, asked as a follow-up to a presentation by the Missouri Transportation Alliance at a recent forum in Cape Girardeau.

This is one question for which the Show-Me Institute has some answers. And, yes, those answers might have to include a gas tax increase. They should also include a dramatic expansion of tolling — and, if that tolling is done via public-private partnership (PPP), then it wouldn’t first be necessary to amend the state’s Constitution (at least, according to MoDOT’s opinion). The important thing, in my opinion, is to keep any tax increases as analogous as possible to user fees, like the gas tax, and away from general taxes that move in the wrong direction by externalizing internal costs. We should be striving to internalize costs to the greatest practical degree, such as through gas taxes, tolling, and license fees, not the other way around.

For more information, read the op-ed I wrote on the subject of private financing for Missouri transportation, the related testimony I provided, and our primary studies of tolling, PPPs, etc.

A Short Rejoinder

Posted on February 26, 2010May 5, 2026 by John Payne

First, I’d like to thank Hugh Scott for his response to my op-ed arguing against expansion of the MetroLink system. I doubt we will ever see completely eye to eye on the subject, but an informed dialogue can still be illuminating for everyone involved.

Before I respond directly to any of Scott’s points, let me just clarify something that may have been unclear from the op-ed (a 700-word format does not allow for full explanation of every point): I was not arguing against the proposed half-cent sales tax. My point was that we should not expand the MetroLink system into areas with relatively low population densities because the lines would have low ridership and be even more heavily reliant on tax dollars than current lines.

Scott observes that the flexibility of buses is a disadvantage as well as an advantage, a point well-taken. Light rail is undoubtedly better than buses when it comes to understanding routes. However, the question is whether that disadvantage outweighs the advantages of flexibility and lower costs that buses provide, and my answer is that it depends on population density. The denser an area, the more rail should be preferred to buses, and vice versa.

With regard to the possible lines of MetroLink expansion, Scott is perfectly right that Metro does not plan on expanding the system without federal funds to diffuse the costs of constructing the line(s). However, even if a new line would not cost area taxpayers a cent to build, it could still be a bad deal for them if very few people rode it and they were then on the hook for operating costs. Again, my argument is that the best method of forecasting ridership is through population density. Aside from the north-south corridor, none of the proposed lines come close to matching the densities found along the current lines.

Finally, I agree that MetroLink performs well against the light-rail systems of other cities, but that is a relative metric when the question should be an absolute one: Do the benefits justify the costs? Even existing lines do not meet the profit-loss test used in the private sector, so light-rail systems are not efficient by our most common metric for success. Perhaps we need another absolute standard we could use to determine which light-rail lines are successes and which are failures, but for now the best that can be said is that it is unclear whether the benefits of MetroLink expansion would outweigh the costs.

Metro Board Member Responds to Show-Me Institute Op-Ed

Posted on February 26, 2010May 5, 2026 by Eric D. Dixon

The Show-Me Institute recently released an op-ed by research assistant John Payne, titled “Adding New MetroLink Lines Too Costly, Inefficient.” The piece appeared on the Riverfront Times blog on Feb. 15, along with comment from the paper, and ran in the St. Louis Business Journal on Feb. 19.

We recently received a thoughtful response from Hugh Scott, III, who has been a member of Metro’s Board of Commissioners for nearly five years, commenting on Payne’s op-ed. In the interest of furthering dialogue about important issues like public transit funding, his entire letter appears unedited below:

As even noted anti-tax advocate Glenn Beck acknowledged on his show yesterday, (2/22/10) some taxes are necessary. In the case of public transit, I would maintain that taxes supporting these systems inure to the economic benefit of metropolitan areas. Public transit enables people to commute to jobs and transit centers provide a critical mass of customers for businesses located near them. Not only does Metro employ 2000 St. Louisans but it assists countless thousands of workers to get to jobs in healthcare, retail, manufacturing and distribution. For many of these commuters, no public transit would mean no job.

Show-Me Research Assistant John Payne misses the mark in his article, “Adding New MetroLink Lines Too Costly, Inefficient.” While he tacitly agrees that public transit is important for our community, he advocates opposition to the proposed referendum for a ½ cent sales tax on the April ballot. The focus of his criticism is on the part of the proposal which suggests some the addition of light rail corridors. Extending light rail is however, not the major thrust of the proposal.

Throughout its history, BiState (Metro) has not had sufficient dedicated taxes to support its operations. It has relied on the beneficence of the City of St. Louis and the adjoining Missouri and Illinois counties, the States of Missouri and Illinois, and the Federal government to provide operating subsidies. Some of these entities have been generous over the years. Others have been quite parsimonious. In all cases, awarding of funds is arbitrary and Metro must beg for money from its stakeholders on an annual basis. If Metro is expected to operate in a business-like manner, it must have a stable reliable source of revenue. This, in fact, is what the April 6 ballot proposal is really all about.

When the last tax measure failed in a very close vote in November of 2008, Metro was forced to cut 40% of its bus and train service and 400 staff members. This resulted in the loss of at least 5000 jobs in our community. While half of these cuts were quickly restored due to the receipt of emergency funds from St. Clair County and the State of Missouri, deeper cuts will be necessary if the proposed tax is not approved by the voters. With the approval of the new tax, pre-2009 service will be restored and the current system will be able to operate on a stable financial footing for the first time in memory.

Other short term (1-5 year) priorities include implementation of a bus rapid transit system similar to the “higher speed bus routes” advocated by Payne, adding amenities such as a “smart card” fare system, and beginning planning for more light rail. These programs will be implemented only after the pre 2009 service is in place and only when funds are available. The five year plan does not call for construction of new light rail corridors.

Putting a light rail extension in service will take a minimum of ten years. It will also require large amounts of federal funds in order to build. Metro does not believe that the community should “foot the bill” for any Metrolink expansions without the majority of the funds being provided by the federal government. Instead Metro is asking for funds to begin the planning process so that when federal funds become available for light rail expansion, St. Louis will be in line. It only makes good sense to spend some money on planning. Otherwise, federal money for light rail will go to other cities and St. Louis will be left out.

Payne tries to make a case for increased bus service as opposed to more light rail. He asserts that buses are a better form of transit because they are cheaper and provide more flexible route opportunities. This was precisely the argument made by former BiState CEO, Col. Rudolph Smyser in the 1960’s when he ordered the shutdown of the last of the street car lines in St. Louis.

While it may be argued that buses are superior to light rail from an economic standpoint, flexibility of routes is precisely the problem with buses. Businesses which might prosper by being near a transit stop do not locate near bus stops because a bus stop might easily move to another street or corner. Many non-transit dependent customers will not ride buses because it is often difficult to know where the bus is going. With streetcars, subways and light rail, one need only look at a map showing landmarks or look down the track to know where the car is headed.

In some ways, Metro has successfully mitigated the confusion caused by changing bus routes by creating a hub and spoke system integrating buses and light rail. Thus a person who boards a bus that says “Clayton Station” can expect to travel to the Clayton Metrolink station. Similarly, a passenger who boards our most heavily traveled bus route, Grand Avenue, can be confident the bus will travel north or south on Grand without deviating. In a sense, our increased market share in buses may be in part attributed to our lack of flexibility with routes not the reverse.

In conclusion, Metro has built a world class transit system which integrates bus and rail service quite successfully. While our population density might be low for light rail travel our market share compared to peer group cities is very high. Light rail continues to gain popularity from non-transit dependent riders and nationally, our market share is in the top three cities in our ten city peer group. The April ballot proposal is about preserving this fine system. Our first priority must be to stabilize the existing system. Future planning is always important but it comes further down the list of priorities.

“Rightsizing” Kansas City School District Potentially the Right Move

Posted on February 26, 2010May 5, 2026 by Caitlin Hartsell

A map of the schools and their proposed status, according to the plan released by the Kansas City School District.

Click to enlarge.

Superintendent John Covington has a new vision for the Kansas City School District, and it involves halving the number of schools in the district from 61 to 31 or 30. Initially, the “rightsizing” plan sounds drastic, but Covington is adamant. The school district, which had 75,000 students 20 years ago, now has only has 17,500 students and 50-percent occupancy.

The plan (from what has thus far been released) may bring a much-needed change. By consolidating facilities, the school district can better allocate funds tied up in buildings and redundant administrative costs. The district has faced low test scores and budget deficits, and officials hope that this radical change will improve both. As for the cost:

As it stands, the District receives about $12.8 million net monthly less than what that it needs to sustain operations. Fortunately, the District currently has about $91.2 million in its operating fund to coverage the shortage. The Right Sizing plan will drastically reduce costs and wipe away the $12 million deficit. As with your personal budget, the District’s goal moving forward is to not spend more than the revenue it receives.

Given the reduction in student population, rightsizing looks like it could be a step in the right direction, but a full analysis will have to wait until more details are released.

“Fair Tax” Math, Elucidated

Posted on February 25, 2010May 5, 2026 by Christine Harbin

The purpose of this post is to walk through the math that Dr. Joseph Haslag and Abhi Sivasailam used in their case study, “Previous Estimates Overstate ‘Fair Tax’ Rates, Harms,” in an effort to be completely transparent.

First, they estimated the average family size in Missouri:

average family size = (size of Missouri population) ÷ (number of resident filers)

= 5,778,901.81 ÷ 2,626,773.55 = 2.2

Next, they estimated the size of the average rebate value, using the federal poverty threshold approximation associated with a family of 2.2, which is $15,393:

average rebate value = federal poverty threshold approximation × sales tax rate proposed in HJR 36

= $15,393 × 0.0511 = $786.58

Then, they estimate the cost of the rebate system, which is equal to the amount of rebates awarded:

(average rebate value) × (number of families qualified for the rebate) = (cost of rebate system)

$786.58 × 2,626,773.55 = $2,066,167,540

Lastly, they compute ?, the revenue-neutral tax rate:

? = (government revenue + cost of rebate program) ÷ (aggregate personal consumption)

? = ($7,117,761,408 + $2,066,167,540) ÷ $158,531,333,333 = 0.0579313171 = 5.793 %

where government revenue equals the sum of individual income, corporate income, and sales taxes.

We see that the size of the tax base, ?, decreases if the amount of exemptions increase. This indicates that the sales tax needs to be assessed on a broad base in order to for the rate to remain low. By decreasing the number of exemptions that exist in the status quo, Missouri can establish a sales tax rate that’s lower than other estimates have suggested.

In their case study, Haslag and Sivasailam explain that expanding the list of services that are taxed would not result in a dramatic increase in the cost of living. In a previous post to this blog, Sivasailam elaborated on this concept:

[I]t’s important to understand that a change in the tax code implies a change in incentives. People and firms alike respond to these changing incentives in many ways, including altering their supply and demand of goods and services. With that in mind, the claim that the prices on all goods and services would increase by the tax rate is misleading.

Symbolic Cider

Posted on February 25, 2010May 5, 2026 by Sarah Brodsky

Legislators in New Hampshire are debating whether to declare apple cider the official beverage of their state. As is often the case with proposed state symbols, the bill was submitted at the request of a group of elementary school students. Students at another school have lobbied for milk to receive the honor instead.

New Hampshire state representatives talk about the official beverage proposals as if naming these symbols actually accomplished something:

Rep. Leigh Webb of Franklin saw a problem with both drinks, saying, “Neither is unique to New Hampshire. […] It will help agriculture, but I’m not sure this is the way to do it.”

This legislator implies that state symbols have the power to shape consumption patterns and improve health:

State Rep. Brian Poznanski, a Democrat from Nashua, reflected on his youth in supporting cider.

“In junior high and high school, I drank sugar and more sugar,” Poznanski said. “There’s a huge obesity problem in this country.”

The students’ teacher has a more realistic perspective on state symbols, and acknowledges that an official beverage probably won’t change people’s actions any more than the official recognition of state animals does:

“My students wanted cider to be a symbolic representation of New Hampshire because of autumn and farm stands,” Nichols said. […]

“We have a white-tailed deer as our state animal, and I’m not sure what that does for the economy, but it’s symbolic because it’s here. That’s what the children were going for, not to exclude milk by any stretch of the imagination.”

It’s clear from her statement that some people already associate apple cider with the state of New Hampshire. Her students nominated it because they’ve seen apples growing and they’ve seen stands selling cider. Many other New Hampshire residents identify these familiar sights with their state.

People are justified in thinking of apple cider as symbolic of New Hampshire. But it’s a bad idea for New Hampshire to create a new state symbol recognizing it, for the same reasons I’ve opposed the proliferation of official symbols in Missouri. Long lists of state symbols encourage people to ask the government to sign off on their opinions and preferences. They give the impression that for a symbol to count, it needs a state imprimatur.

However, there is a positive aspect of state symbols that I’ve overlooked. When people watch their representatives argue about whether cider or milk should be the state beverage, they may conclude that legislators don’t share their priorities. This could prompt them to realize that if they want to get things done in their state, they’re better off finding solutions in the market. Elected representatives are often apt to shy away from making waves about the things that matter to their constituents and instead talk about less consequential things like official drinks. Maybe the official political fish should be the red herring!

Competition in Health Care Insurance

Posted on February 25, 2010May 5, 2026 by Stephen Feman

Competition and choice are characteristics of a free and open marketplace. Some have suggested that a more open market for health care insurance could resolve a few issues in the present health care debate. That would help, because increased competition among health care insurance suppliers might reduce costs. This came to mind during the recent California health insurance shock. If you hadn’t noticed, many people were surprised when a leading California health care insurer proposed a 39-percent rise in the price of premiums for those individuals who buy their own insurance. It was noted that this price increase came at a time when the largest health care insurers had an average profit increase of 56 percent, even though the economy was down. As those insurers indicated, the profit had resulted from the prior year’s activities, while the proposal to raise premiums was related to an expected change in future costs.

Rather than paying this high premium, some purchasers may want to shop for something less expensive. Those insurance policy purchasers might want another company — perhaps one that reinvested some of its profits in a way that kept its premium prices lower. While trying to visualize how this might play out in Missouri, the question arose: Would people who find coverage unaffordable in this state buy less costly policies from another state, if available? Then, if some lower-priced policies were available, would some of the currently uninsured take advantage of that situation? If that were so, would that resolve some of the problems in our health care dilemma? Are we seeing a situation develop in which marketplace competition might benefit our community? To learn more about this, I thought it reasonable to see how this would express itself in Missouri.

My first concern was whether there were any significant barriers to such competition. This was examined by the O’Neill Institute at Georgetown University recently. As many know, states have a primary role in regulating their own health insurance industry. The federal McCarran-Ferguson Act spells out “the respective roles of the federal and state governments in regulating health insurance.” However, the O’Neill Institute’s answer, in rather general terms, is that this barrier can be bypassed. Although the existing act separates federal and state roles in regulating health insurance, the people at the O’Neill Institute believe that legislation could be designed around the business end of insurance, specifically relating this to interstate commerce. But the key point is that yes, it can be done.

Given that it can be done, is that what we want to do? What will happen if many people from Missouri buy less-expensive health insurance policies from a company headquartered across state lines called, say, Out-of-Missouri Co. (OOM)? One can imagine that if everyone purchasing OOM insurance stays healthy, more people would be insured but at a lower immediate cost. At first, that appears good. But what if my neighbor with hypertension and diabetes buys an OOM policy, too? If that happened, the managers at OOM would need to raise the premiums for everybody; that is because OOM Co. would be insuring more sick people. That could cause two results: 1) the people in OOM’s home state would have to pay a higher premium price, and 2) so would we. If the resulting price remains lower than any comparable Missouri price, we are better off; but we may have harmed our out-of-state neighbors by causing their prices to increase.

Perhaps we need to look at why the OOM policy was lower than the Missouri policy in the first place. There could be several reasons for this. Those that are most common are the following.

The people in the state where OOM is registered might be healthier than the people of Missouri. That could be true, but if OOM Co. were swamped with sick Missourians purchasing their policies, its costs would increase.

The insurance regulations in the state where OOM is registered might be different, and the insurance coverage being offered might not be the same as what is needed in Missouri. The regulations in the state where an insurance company is registered are ostensibly intended by that state to protect the residents from their most common problems. The distribution of disorders in Missouri may not be the same as in that other state, so the insurance may not satisfy Missouri’s regulatory requirements.

Health care costs vary geographically. As a result, insurance purchased in a state with less-expensive health care costs might not be sufficient in another state. As a result, the purchaser of OOM may have a greater out-of-pocket expense.

So, what would happen if we were to go ahead with this? It is expected that the first people that might take advantage of this are those who are currently uninsured. Those uninsured that are young and healthy would be rapidly accepted by the OOM insurer. Those that are less healthy might not be accepted by an OOM insurer, because of their preexisting disorders. A great many sick Missourians might be unable to buy this less expensive OOM insurance. That means that you and I could end up having to contribute to their care, and the result may be an additional expense to be borne by everyone in the state. But, in reality, this expense is not something new; we are already paying it now.

Interestingly, the Congressional Budget Office looked at this issue about five years ago. They found that if the benefits available from states with the lowest costs were in effect nationally, the price of individual health insurance policies for those able to purchase them might be reduced by an average of about 5 percent. So, it seems that Missouri’s young healthy uninsured would be able to purchase OOM health insurance, and each purchaser might save about 5 percent. But an unintended consequence could be an increase in health care costs for everyone else.

Well, that is one choice. As the health care debate continues, we will have to look at some of the others before deciding which option we want.

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