Getting a Grip on the Cost of Public Transit

Ballooning gas prices have encouraged more people to utilize St. Louis’ public transportation options, according to a story published in the Post-Dispatch. The dollar figures discussed in the article got me to thinking about how much public transit costs the average taxpayer in the St. Louis metropolitan area.

Last month saw the highest utilization of public transit in decades, at 5.5 million passenger trips during the course of the month, or an average of 177,500 passenger trips a day. We can safely assume that the number of unique passengers is no more than half that number, because most people would be using the bus or train for a round trip of at least two boardings. So, on average and at the absolute height of ridership, roughly 90,000 (about 3 percent) of the St. Louis metropolitan area’s 2.8 million residents are using public transit on any given day.

Metro required $230 million to operate its buses and trains this year. Twenty percent of that amount (about $46 million) was collected from ticket sales. The remaining $184 million came from area taxpayers, no more than 3 percent of whom were likely to use public transportation on any regular basis. That means that every man, woman, and child in the area faced an average of $65 in additional taxes to subsidize the operation of Metro’s buses and trains — services that 97 percent of those taxpayers are rarely (if ever) using.

Additionally, St. Louis County is asking its taxpayers to approve a ballot measure this November that would raise the local sales tax rate to generate an extra $80 million annually for bus transit and Metrorail. Assuming that most county residents do their shopping in the county, each of the county’s 1,000,000 residents will be shouldering an average of an additional $80 per year to subsidize public transit.

To be perfectly clear where I stand, I take Metrorail between my house and the office about twice in any given week. I would likely chip in an extra two or three dollars per trip in exchange for reducing my and my neighbors’ tax burdens by $60 or so, and knowing that we would only have to pay for the service when we chose to use it. I do understand, however, that many people are perfectly willing to pony up tax dollars for a service they think will be of use to those who can’t afford their own vehicles. I was just kind of stunned by the realization of just how much each St. Louis–area resident must currently be forced to pay in order to keep these services going, and I felt like it was important for someone to offer some perspective on how much public transit is costing the average taxpayer.

Removing the Beer Goggles

InBev’s attempt to purchase Anheuser-Busch has caused a big stir in the news and politics lately. Justin and Patrick have already substantively commented on the issue.

Referring to Anheuser-Busch, the News Tribune quotes Missouri Sen. Claire McCaskill:

"[…] This is a company that’s been profitable year in and year out and has provided good middle-class jobs in America. It feels like to too many people in our country right now that these are the kinds of jobs that are going away."

This seems a bit confused. It assumes that if InBev does successfully purchase Anheuser-Busch, it will move the production facilities overseas. This isn’t necessarily the case. In fact, in the same article, InBev CEO Carlos Brito is contends:

"What we’re proposing basically is really to take an American brand, so successful as Budweiser, and unleashing that to the world via our distribution system," Brito said.

Taken at face value, this quote suggests that there is no reason to assume that InBev wants to move the production of Anheuser-Busch beer overseas. Even if this were right, the idea that the move would cause job losses to the U.S. is still misguided. A certain Frenchman is always relevant. The problem lies in focusing only on what can be easily seen — the jobs lost overseas. A careful analysis will also reveal what is unseen.

If InBev were to move Anheuser-Busch’s production facilities overseas, suddenly a large amount of consumption goods in the U.S. would be imported rather than produced domestically. If this occurs, the importer (in this case, InBev) can do one of two things with the U.S. dollars it receives: invest in U.S. assets or purchase export goods. To the degree that the former occurs, domestic industries are able to expand and create new jobs with the increased investment. In the latter case, export industries see increased demand and respond by ramping up production, creating new jobs.

The net impact of the move overseas on job creation is ambiguous without empirical data, but it isn’t obviously negative (or positive, for that matter) because there are effects running in both directions. The likely long run effect would be minor, if there is one at all. This is assuming that all else is held equal, of course. Without any evidence to suggest that the net effect would be negative, inferring that it would be negative is a bit rash.

One might argue that this is all well and good for an entire country, but what is at stake in this case are the jobs of Missourians — or, more accurately, St. Louisians. This argument is also misguided. The above analysis applies no matter where the border of the domestic region is defined, whether it be St. Louis or your own backyard.

This Bud’s for Them

We’ve praised Sen. Claire McCaskill repeatedly on this blog, but her comments about the InBev deal deserve some response:

“I was very upfront,” McCaskill said of her discussion with [InBev’s CEO Carlos] Brito. After offering him a Budweiser and sipping one herself, she told him she would “do everything I could to stop this sale from going through … It’s a bad idea. I don’t want you to buy it. The people of Missouri don’t want you to buy it.”

Politicians never seem to understand how capitalism works. The InBev deal is not the government’s decision or the people of Missouri’s decision. It is the decision of the shareholders of Anheuser-Busch. If shareholders reject the InBev deal, AB stock will plummet. But that is the shareholders’ decision, not ours.

More from the article:

Speaking to reporters after, McCaskill blasted the proposal as a “premium profit for hedge fund investors” and said A-B is a strong company that has provided thousands of good middle class American jobs.

Anheuser-Busch displaced thousands of good middle class American jobs last year when it bought out Pennsylvania’s Rolling Rock. And despite a website that looks very familiar to another local website, there was no outcry (or even a tear) from Missouri public officials.

“We do not have a ?For Sale’ sign on our front lawn in America,” she said.

Well, then maybe the government shouldn’t have gotten to the point where the American people owe $9.2 trillion dollars (of which about a third was accumulated under President Clinton, and another third under President Bush). If I owed trillions of dollars in debt, I might have to sell off a few possessions, too.

The Post-Dispatch (surprisingly) ran a pretty good reality check on the AB deal. And yours truly did, too.

A Post About Foreign Ownership That Has Nothing to Do With InBev!

Attorney General (and gubanatorial candidate) Jay Nixon was asked at a recent forum about his transportation plans. KY3’s Political Notebook has the clips and coverage. The best thing I heard was when the he stated that toll roads and truck-only lanes are "on the table." I was less pleased to read this (it’s not in the clip, so I’m trusting KY3’s account, here):

Signals that public-private partnerships to manage Missouri roads give him "deep concerns," because of the potential for foreign ownership . . . Still, Jay Nixon leaves "everything on the table."

Having co-written an entire study of this subject, let me repeat that there is no "ownership" in a public-private partnership. The private partner leases an existing asset, or obtains the right to build and operate a future asset, but does not own it. The people of Missouri, through state government, would always own any infrastructure built or operated under PPPs.

As for the "foreign" part, I can’t fathom why this bothers so many people so much in these cases. It’s just a frickin’ road. (As an aside, I can understand why potential foreign ownership of Anheuser-Busch bothers people.) There are plenty of American campanies that can bid on these projects, and the leading international companies that do this type of transportation PPP are based in Australia and Spain. If we were to decide that we needed to really finish what we started in 1898 and return to war against Spain, like Rome v. Carthage, it’s not as if a Spanish company that built and operated a Missouri bridge could take the bridge and move it back to the Iberian Peninsula. This is foreign investment in America, that could potentially provide new transportation infrastructure only at a cost to people who choose to use the asset, and unlike the AB/InBev situation, no current jobs would be at stake. Why this upsets so many people is beyond me. …

The Economic Impact of the Missouri E-10 Ethanol Mandate

Today the Show-Me Institute released a new case study about Missouri’s requirement that gasoline sold in the state must contain a minimum level of ethanol. Responding to a study by The Missouri Corn Merchandising Council that touted hundreds of millions in savings for Missourians, case study authors Justin Hauke and David Stokes point out that the inclusion of additional factors, such as the cost of ethanol subsidies and the decreased energy output efficiency of ethanol-blended fuel, means that Missourians will see a net loss of nearly $1 billion in the next 10 years.

From the case study:

Ethanol mandates will not solve Missouri’s energy problems. Contrary to the results implied by the MCMC study, ethanol mandates will not translate into fuel savings for Missouri consumers. In contrast, Missouri consumers can expect to pay more because of E-10 legislation than they would have paid otherwise.

Hauke also addressed ethanol mandates recently in this blog, noting that these subsidies hinder Missouri’s efforts to eliminate "excessive, job-killing revenues" from the state budget.

The full case study can be found on the Show-Me Institute website.

Springfield Decision on the Fence

Today’s Springfield News-Leader has an article by columnist Sarah Overstreet that highlights an ongoing battle about city codes between Springfield and an area business owner. Tom Ray put up a fence around his property after leasing the space from businessman Jim Morris, and this has caused quite an uproar. By putting up this fence — on his property, mind you — he apparently has turned everyone in Springfield against him. See, Ray has the unfortunate circumstance of being located in the same shopping complex as a favorite local restaurant, The Pizza House, and apparently customers don’t like to see a fence when they are eating their pizza. The article points out that customers "found it forbidding, ruining the friendly feeling they’d grown accustomed to," and notes that the parking lot is now shorted a few extra spaces because of the fence. The article also recognizes, though, that those missing sparking spaces belonged to Morris, and were not intended for the use of visitors to nearby establishments.

City officials investigated and initially found that Morris and Ray were within their legal rights to build the fence. However, after public outcry following an earlier column, city officials investigated the matter again and this time found several obscure ordinances forbidding the fence. I’d argue that these ordinances tend to trample property rights and hinder personal freedom, and it would be nice if city officials seemed more concerned about these business owners’ property rights rather than appeasing the adjacent owners who find the fence "forbidding."

After his second review, the Springfield code administrator declared the fence a public nuisance. The article summarizes one of his findings this way: "the structure is built or used in violation of the building, plumbing, electrical, fuel gas or zoning ordinances of the city."

I am struggling to understand how a fence on one’s own personal property can be declared a public nuisance. Is it because it doesn’t allow for visitors to nearby businesses to park on Morris’ property anymore? Or is it because nearby business owners don’t want to look at a fence that they think is "forbidding"? It could be mere resistance to a change in the status quo. None of these reasons, though, are viable enough to deem a fence a "public nuisance" when it does nothing but protect property. As landlord, ideally Morris should be able to do whatever he pleases with his property, as long it does not affect the safety or rights of other individuals. But city officials also rattled off several other ordinances (found in the article) that state Mr. Morris is in clear violation of city codes.

I understand that some regulations are needed to prevent total chaos (I tend to side with David Stokes and Justin Hauke on the "Village Law" debate), but something as simple as adding a fence to a piece of property should not be in the control of city officials — really, they should have bigger issues to worry about. Alas, the government never ceases to amaze me. Classifying a fence on private property as a "public nuisance" is something I cannot fathom.

According to Merriam-Webster, the definition of a public nuisance is, "something that
unreasonably interferes with the health, safety, comfort, morals, or
convenience of the community and that is treated as a criminal violation". Clearly, building a fence on your own property does need meet any of the criteria here needed to classify it as a public nuisance. The only term that the city might successfully argue is "comfort." This is an ambiguous and subjective term, though — almost any action can interfere with the comfort of some individual.

Instead, the city’s rationale for its second judgment should have been "making your neighbors mad, because they don’t like your taste."

Parking Meter Blues

Kansas City residents are resisting a proposed increase in the numbers and operational hours of downtown parking meters.

As much as I want to admonish them with a tenable free-market argument in favor of meters, I can’t help but allow our shared hatred of urban inconvenience to unite us. I regularly insult the dedicated individuals who have taught me neoliberal economics by expending excessive resources to avoid meters out of shortsighted laziness and an immediate unwillingness to part with the contents of my coin tray.

But Kansas City may offer conditions that complement my irrational distaste for meters. Although I have absolutely no knowledge of Kansas City’s downtown geography, I gather that — like my native St. Louis — revitalization efforts are aimed at drawing in the suburban population. When target customers are offered similar services closer to home and without the costs of going downtown (explicit and implicit), lawmakers should be careful when imposing additional burdens on urban businesses. Concerned business owners reasonably speculate that the selective
implementation of new meters might create an incentive for city-goers to choose
economically inefficient alternatives along streets that offer free
parking. Especially in condensed urban areas, disparities in the application of avoidable burdens will produce inefficiency and hassle. However, blanketing an entire area with parking meters is probably not the solution to attracting suburban customers.

David interestingly noted in a previous discussion of the same issue that the University City Loop benefits from its free public parking. The Loop’s successful model may not be suited to the financial hub in central Kansas City, but it might be applicable to surrounding areas, like the Crossroads Arts District, that are being considered for new parking meter placement.

Fall Intern Candidates, Apply Now!

The Show-Me Institute recently announced its fall internship program. For those interested in applying, the internship will run from early September through early- to mid-December, and will be based at the Show-Me Institute’s Clayton office near Saint Louis. Applications are due on July 3.

If you’re wondering what a Show-Me Institute internship is like, you may want to read this blog entry by our Spring 2007 intern, Steve Bernstetter.

Here’s a quote from one of our Summer 2007 interns, Maurice Harris:

The Show-Me Institute provided me with the opportunity to do research on policy that I was interested in and that has an effect on many people in Missouri. I enjoyed the statewide focus of the institute, where the research could have a direct effect on policy and can be seen quickly. Overall, being at a place where they give interns vast opportunities really taught me a lot and encouraged me to pursue my interests.

How about this quote from our Spring 2008 intern, Nicholas Loyal:

The last four months have been an invaluable experience for me in terms of developing an idea of policy work, and seeing this organization achieve so much at such an early stage has really given me hope that positive change can be affected in the world through a small group of dedicated individuals. I’ll never forget the lessons I learned, I’ll never forget seeing my name in print, and I’ll never forget all that you all have done for me.

If you’re a college student (or you know one) who would like to have a similar experience conducting real research and making a difference in the world of Missouri public policy, apply today!

Is the ‘Missouri Plan’ Good for Missouri?

Recent judicial appointments in Missouri have intensified calls for reform of Missouri’s judicial selection process. While these debates can seem like mere partisan bickering, judicial independence is critical to a well-functioning legal system, which is an important factor in economic growth. Research has found that judicial independence and legal system quality matter for economic growth, and that the outcomes of a state’s legal system depend in part on how its judges are selected. Although the General Assembly decided not to pursue legislation that might alter the “Missouri Plan” during this past legislative session, the quality of the state’s legal system and its potential effect on economic growth is an issue worthy of ongoing attention.

Policymakers need evidence about the relationship between judicial selection and legal system quality. Our recent Show-Me Institute study analyzed how judicial selection methods affect the quality of state legal systems. We looked at seven general methods used across states: (1) nonpartisan elections; (2) partisan elections; (3) legislative elections; (4) gubernatorial appointment with a nominating commission; (5) gubernatorial appointment with a nominating commission and legislative confirmation; (6) gubernatorial appointment with legislative confirmation only; (7) gubernatorial appointment with approval by an executive council.

To measure legal system quality, we used a study of state legal systems by the Institute for Legal Reform. Based on a survey of corporate lawyers, this study admittedly has a bias in that it attempts to gauge how the state legal systems are viewed by large public corporations. But this bias is also one of its advantages. Most legal reforms are enacted to promote economic growth and development, and it is precisely the perception of the state’s legal climate toward business that is being measured by this index. The study scores each state on a scale from zero to 100, with higher scores representing higher levels of legal quality. For each of the seven methods of judicial selection we calculated the average index score of each group from 2002–07.

We find that two methods of judicial selection tied for the highest average index scores during this period: gubernatorial appointment from a nominating commission both with and without legislative confirmation (both averaged a score of 65.3). Gubernatorial appointment with legislative confirmation came in third (65.0), followed by election by legislature (63.8), nonpartisan elections (61.2), and gubernatorial appointment with council approval (60.7). States using partisan elections handily received the worst average index score for judicial system quality during the period (53.4).

Based on conventional techniques for measuring statistical significance, we find that Missouri’s current method of judicial selection is statistically superior to judicial elections (either partisan or nonpartisan) and also to gubernatorial appointment with council approval alone. Based on our analysis, we conclude that Missouri could well err by moving to one of these three other methods.

We find that no other method of judicial selection results in average scores or rankings that are statistically better than Missouri’s current system. Thus, we cannot say that a switch to another type of system would result in an improved legal system. Election by legislature, gubernatorial appointment from a nominating commission with legislative confirmation, and gubernatorial appointment with legislative confirmation alone produce, on average, legal scores and rankings statistically equal to Missouri’s current system.

Thus, our findings suggest that Missouri would at least be no worse off if it wanted to experiment with selecting judges by either: (a) election by the legislature; (b) adding legislative confirmation to the existing appointment process; or, (c) gubernatorial appointment with legislative confirmation, but without a nominating commission. We note, however, that for all three of these alternative methods, there are states using them that both score both better and worse than Missouri. Based on our analysis, Missouri’s current system appears to be far superior in promoting economic growth than some of the alternatives — most notably judicial elections.

Joshua Hall is an assistant professor of economics at Beloit College, and Russell Sobel is professor of economics and James Clark Coffman Distinguished Chair at West Virginia University. Read their full study of judicial selection systems.

 

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