Bill McClellan on Property Taxes and Country Clubs

Posted on by David Stokes

I am a huge Bill McClellan fan. For those of you outside of St. Louis who are not familiar with him, he is the primary columnist for the Post-Dispatch. My stepfather is a friend of his, and I have had the pleasure of meeting him a few times, including going to a Cards-Cubs game with him a few years ago.

McCellan had a very interesting column this past weekend, about how the state assesses golf course property. He claimed that state officials are “subsidizing” private country clubs by charging lower taxes than they charge for public courses. This is a very exciting topic for geeks like me, because the nexus of property taxation and country club golf is something I am well qualified to write about.

This question is similar to the debate we have had in the comments sections of other posts about tax incentives and abatements. One view — let’s call it the “low taxes at all costs” view — is that lower taxes are always good, in every case, for anyone, for whatever reason. Another view, which I generally hold, is that taxes should be low, but that they should also be as evenly spread out as possible — a view which can, in certain instances (like TIF), lead to arguments against lower taxes for certain taxpayers in favor of lower taxes across the board.

Golf courses in Missouri are assessed at the residential property rate of 19 percent — except for municipal courses, which are tax exempt, as McClellan states. The dispute at the heart of his column is that country club property other than the course itself, such as a clubhouse, is also taxed at the residential rate, while public course property, like a driving range, is taxed at the commercial rate of 32 percent.

How do these differences work out in practice? Tower Tee, the public par-three course in Affton — which lies at the heart of McCellan’s column, and which almost every St. Louisan is aware of — paid $77,692 in property taxes for 28 acres during 2008, according to St. Louis County public records. It paid those taxes on an appraisal of $3,162,700 — about 85 percent of that in the commercial classification.

Glen Echo Country Club, in nearby north St. Louis County, paid $65,128 in property taxes on 130 acres, with an appraisal of $3,252,800 — all residential.

Westborough Country Club, in the Webster-Kirkwood area, paid $95,057 on 73 acres and an appraised value of $7,476,600 — almost all of that at the residential rate.

So, the total tax bill for Tower Tee does not seem out of line or unfairly high here. Consider that the main reason it is smaller than the bills for other courses is that it’s a par-three course. If it were a full-sized course, that land would be taxed at the lower residential rate.

The general consensus among those I discussed this with here at the Show-Me Institute was that the overall rates should be equalized, and that the total property for all golf courses should be taxed at the lower residential rate. Some thought that a land-heavy use such as a golf course deserves some type of general tax reduction, so as not to price the game out of the ability of most people to play. This sort of falls in line with how we all agreed it made sense to tax agricultural property at an even lower rate than residential or commercial, at 12 percent.

While I have no problem with lowering the tax rates on public golf courses, I was somewhat alone in disagreeing with McClellan by not seeing anything wrong with the current situation. One of the differences between commercial and residential assessments is that the former aren’t set just based on market value, the way homes are. Commercial assessments can be set several ways, and one of the most common methods involves expected income generation. A popular driving range like Tower Tee is going to generate a substantial cash income, and that is one reason its commercial assessment is so high. It would be unrealistic to attempt to assess the property of country clubs in that fashion, because they are not trying to generate a profit from their property. Although commercial property can be assessed by market value of the land, the primary alternative use for land golf course land is to turn it into housing developments, so perhaps that’s an argument in favor of applying the residential rate.

The most important thing to me is that the clubs, even as non-profit entities, are still paying substantial property taxes — as they should be. They all have to compete against municipal courses, which pay no taxes at all. I hardly think the rest of us you are subsidizing country club membership just because state law sets their property tax rate at 19 percent. Again, though, I see nothing wrong with lowering the rates for public courses, too, in the interest of equity.

Then again, maybe Rodney Dangerfield was right in what he said about country clubs. (Scroll down about 49 clips.)

Do We Need a Competitive Society or a Cooperative Society?

Posted on by David Stokes

What is more worthwhile, playing a sport to win as part of a competition or just playing it for fun, without keeping score and making sure everyone gets to participate? (I am talking about adults here.) The answer pretty obvious, at least to me. Playing a sport as part of a competition, either against others or against yourself (as with golf), is a far more worthwhile exercise in life.

Now, such competition needn’t always be dramatic. When my buddies and I play Wiffle Ball, it is hardly a fierce competition, but we do divide teams and make a game of it. The alternative — the cooperative game — involves giving everyone the same amount of swings at the ball, not keeping any score, not really trying, etc. That alternative is stupid and boring. The competitive game — and, I repeat, this is only barely competitive — is much preferable. Don’t get me started on how much fun it is to play competitive baseball, basketball, etc. Even when I ski, I always pay to do the slalom course a few times to compete against myself.

Years ago, I read a quote from a biographer of FDR who stated how we needed to create a cooperative society, not a competitive society — although I can’t now find this quote on the web. I am sure I had some type of gagging reflex when I read that. Obviously, there is a need for a great deal of both cooperation and competition in life, but would you rather live in a place where the primary goal involved everyone helping out everyone else, or everyone trying to be the best they can be? I know I prefer the latter, and that is how societies evolve, advance, change, and grow.  

Where I am going with this? Well, Mizzou researchers have found that the human brain grows most when associated with evolutionary competition. We all need cooperation in life, but it is competition that brings out the best in us and makes life the challenge and blessing it is.

Quo Vadis, Domine?

Posted on by Dave Roland

I’ve just had the chance to look at the papers filed with the city of St. Louis, requesting the formation of a TIF district in support of the NorthSide redevelopment plan. As I have noted before, the plan raises a number of different concerns. Today, however, I want to focus on a list of houses of worship and/or ministries that are included on the list of properties to be “acquired” in pursuit of the NorthSide plan:

Strangers Home Missionary Baptist Church, 1401 Biddle St.

Sunshine Ministries, 1520 N. 13th St. (I was very impressed by their recent newsletter.)

Faith Hope Charity Church of God, 2722 Sheridan Ave.

Southern Union Baptist Church, 2701 Cole St.

Shining Light Pentacostal Church, 3054 Sheridan Ave.

Evergreen Full Gospel Church, 2532 W. Hebert St.

New Union Vine Missionary Baptist Church, 3501 Evans Ave.

Greater Shiloh Missionary Baptist Church, 3516 Evans Ave.

Mount Tabor Missionary Baptist Church, 3513 Cass Ave.

True Grace Baptist Church, 2319 Cass Ave.

St. James Spiritual Church, 2400 Elliott Ave.

Starlight Missionary Baptist Church, 2601 Montgomery St.

Star Bethel Missionary Baptist Church, 3529 N. Jefferson Ave.

Please note, these are just the 13 properties listed as being actively used by churches. The TIF request includes many more properties that are listed as vacant, but are owned by religious organizations.

The concern here, of course, is that if the NorthSide developers consider these properties as necessary for the redevelopment, what happens if one (or more) of these houses of worship doesn’t want to sell its property or relocate? After all, churches are not like many businesses in the sense that they can simply find a new set of “customers.” To the contrary, many small churches — and especially those in longstanding communities like North St. Louis — continue to exist because they serve the same neighborhood families that have worshiped there for decades. If it becomes impractical for those families to continue gathering together (like, say, if their meeting place is taken away from them), the congregations will likely cease to exist. Would the redevelopers bulldoze these churches?

A Good Use of the Line-Item Veto

Posted on by David Stokes

Combest has a rundown of stories about Gov. Jay Nixon’s budget cuts. I think this is a excellent use of the line-item veto, and a good example of why the line-item veto is needed at the federal level. I’ll leave the full details of the cuts to the linked news articles, but, in short, Nixon used the line-item veto to cut $105 million and delay $325 million in spending. He will also be eliminating about 200 government jobs, on top of the 1,200 jobs cut in the original budget passed by the legislature.

I say, good for the governor. This is exactly the type of use for which I think the line-item veto was intended. As I understand it, the General Assembly will now vote on veto overrides for those cuts, but thanks to the line-item veto, the entire budget goes forward. (I am wearing my practical hat right now.) Hopefully, none of the cuts will be overridden — but, if they are, that just shows how the line-item veto can work within the Constitution.

I deeply hope the president gets the line-item veto some day. I don’t share concerns about too much executive power in this case, because the Congress could still override any individual veto. But I am pretty sure I will have some disagreement among the commenters.

Drama Over Free Lunches

Posted on by Caitlin Hartsell

Monday night, Keith Olbermann designated Missouri state Rep. Cynthia Davis as his “Worst Person in the World,” while labeling Missouri voters as “idiots” and “buffoons.” What raised Olbermann’s ire enough to place Davis at the same level he’s used for brutal dictators? Davis wants to cut back on free lunches to poor children over the summer, especially for children over 16. The state spends about $5.80 per child per day for a free lunch and breakfast, but Davis has said she thinks that kids at age 16 should get jobs and work to pay for their own lunches. Olbermann attacked her lack of compassion and called her an “inhuman monster.”

Granted, Davis went about addressing the issue clumsily, saying, “Hunger can be a powerful motivator.” She does, however, make a valid point (which went unmentioned on blogs and in the Post-Dispatch) that parents still receive the same amount of food stamps even if their kids are receiving free food from other government programs, and that it should be the parents’ job — not the state’s — to teach children about nutrition. She also suggests that funds might be better spent in an effort to teach parents the value of nutrition so that they can instill this knowledge in their children at home, rather basing such programs in schools.

It appears that Davis wants to reduce government welfare spending, but this may not have been the best issue to tackle. At least, she could have attempted to formulate a more elegant argument. Considering that the state spent $7 billion on primary and secondary education in 2006, the $10 million cost of the school lunch program is small potato chips. Davis tries argue against unencumbered welfare expansion, but with a few minced words she destroyed what should have been a powerful message.

Decreasing the state’s dependence on welfare programs is a worthwhile priority, but starting with children’s programs is not likely to garner positive attention. There are, however, other ideas that could work as more pragmatic solutions to combat welfare expansion: Charles Murray, of the American Enterprise Institute, argues that every American adult should be given $10,000 per year ($3,000 of which must be used on health insurance — one appealing alternative to the health care reform proposals currently in vogue), and that welfare programs should simultaneously be eliminated. By giving people an option (and money to use), Murray’s plan would put decision-making in the hands of individuals. At this point though, it’s important for Missourians to look at what can be done to reduce welfare expansion gradually within the state, without focusing first on cutting the type of programs that lead to being demonized and dismissed.

One could argue that the program’s $10 million budget should not be spent by the government at all, but if the government is going to spend the money (and it will), it’s probably better that it feed poor children than for it to become another drop in Metro’s leaky budget or any other economy-draining public program.

Rise of “Rubber Rooms”

Posted on by Abhi Sivasailam

Economists have long been wary of unions and the distortion their presence imposes on markets.  In theory and often in practice, labor unions benefit “insiders” at the expense of those outside the union.  Unions are criticized for artificially inflating the wage rate above the market level, thereby reducing a firm or industry’s demand for labor and consequently reducing employment, contributing to dead-weight loss, and increasing prices for consumers.

Knowing this, I have come to generally regard teachers’ unions with some reservations. Then I see this. Apparently, 700 teachers of the New York City Public School system — those who are accused of misconduct and are waiting to appeal their case — are sentenced to communal “rubber rooms” during the workday, where they are free to engage in personal activities unrelated to education and still draw compensation from state coffers:

Because the teachers collect their full salaries of $70,000 or more, the city Department of Education estimates the practice costs the taxpayers $65 million a year. The department blames union rules.

“It is extremely difficult to fire a tenured teacher because of the protections afforded to them in their contract,” spokeswoman Ann Forte said.

City officials said that they make teachers report to a rubber room instead of sending they home because the union contract requires that they be allowed to continue in their jobs in some fashion while their cases are being heard. The contract does not permit them to be given other work.

New York is not the only city with a variation of these rubber rooms; the Los Angeles school district employs similar practices when handling issues with 178 of its teachers.

Regardless of the prevalence of this practice, the image of teachers being given a $65 million subsidy anywhere to play board games is stunning. This is clear evidence of union power run amok — no longer serving the best interests of children, but rather of those protected by the system. To my knowledge, Missouri’s school districts do not suffer from such extensive waste, but we would be wise to be wary of ceding such market power.

Statistics That Defy Belief

Posted on by Dave Roland

Andrew Coulson of the Cato Institute had to publish a correction regarding his calculation of the per-pupil spending taking place in the District of Columbia’s public schools. He had previously stated that D.C. was spending $26,555 per student. Since then, the DCPS has admitted that their enrollment numbers were inflated by four thousand students — meaning that the actual amount of money the school district spent per student is between $27,400 and $28,900.

Keep in mind that students in D.C.’s public schools routinely rank dead last in academic achievement.  Also keep in mind (as Coulson noted) that students in the D.C. voucher program are being educated for no more than $7,500 each.  And, three years into the voucher program, the voucher students are reading two grade levels ahead of their peers back in the traditional public schools.

So, D.C. has two significant approaches to public education, one of which is horrifically expensive and demonstrably ineffective, and the other of which is dirt cheap and shows great promise. Which one do you think is getting shut down?

The Future of Charter Schools

Posted on by Sarah Brodsky

Andrew Coulson writes at Cato@Liberty about the regulation that invariably accompanies public education funding. He predicts that regulation will catch up with charter schools and halt their progress. He sums up his opinion thus:

If you want to know what charter schools will look like in a generation or so, just look at the public school status quo.

I agree that money brings state directives with it (which is why I’m surprised by this call for state funding of private schools on the Panama City Renaissance School blog) but I think charters will have a lasting effect on the U.S. education market. By the time new regulations are written, charters will have changed people’s expectations about what schools are like, and there won’t be any going back to the one-size-fits-all schoolhouse.

In districts where charter and traditional public schools compete, parents are becoming comfortable with the idea that they don’t have to send their kids to a school based on geography. They can choose a school based on academic specialty or other preferences. (And in cases where parents do want to send their children to the closest school, that school could turn out to be a charter.) Charter school parents also know that if the school disappoints them, they can go right back to the traditional district.

As choices flourish, I think we’ll see children learning from different kinds of schools in the same day. A child might attend a charter school, take an online course through a traditional district in the afternoon, and then head to a private tutoring center for homework help.

Unions may influence contracts at charter schools, but they won’t change the fact that parents choose charters, combine them with other options, and can also choose to leave — characteristics of charters that are just as important as the structure of their contracts. And online charter schools are so different from brick-and-mortar schools that traditional teachers union procedures won’t always be applicable to them. Unions won’t be able to turn online schools into traditional ones no matter how much they tinker with contracts, which is why they’d like to shut down the online schools in Oregon.

Metro Gets Federal Boost

Posted on by Caitlin Hartsell

The Federal Transit Administration is designating $7 million for Metro operations in St. Louis, so it can increase bus services that were cut because of the lack of funding.

This federal aid is only a temporary fix for the costly Metro system. Metro has a government-subsidized monopoly that is siphoning taxpayer money: In its 2008 annual report, the Metro system earned $63.5 million in revenue while expending $307 million — operating at a $243.4 million loss, about 4/5 of its cost.

Public transit provides a great service to cities and urban areas, and usually cannot be operated on a cost level. However, there are ways to make transit more cost-effective. Wendell Cox’s study of Denver transit shows a great example of a more efficient transit system that used private competition. By having private companies bid for subsidies from the government, the government saved significantly. (Denver saved over $100 million yearly after 10 years, about 40 percent of the initial cost.)

Instead of applying federal Band-Aids that do not fix the problem, we should apply the principles of competition. Federal aid and tax increases (like the upcoming vote in 2010) are only temporary solutions.

To read more about Show-Me Institute’s different takes on the Metro system, look at David Stokes’ testimony to Metro’s Board of Commissioners and these op–ed articles.

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