Reading is Expensive

Posted on by Justin Hauke

On November 6th, Kirkwood residents will vote whether or not to approve an additional 12 cents in taxes per $100 of assessed property value in order to (primarily) finance improvements to its municipal library.

Dave wrote a great entry on the St. Louis Country Library system a few weeks ago, but I have to disagree with him on the benefits of Kirkwood maintaining its own library, rather than consolidating with the county. Kirkwood residents already pay 16.7 cents in taxes per $100 of assessed value in order to maintain their city library (compared to 15 cents for St. Louis County residents). The proposed tax increase would push this to nearly 30 cents.

Does such an expensive library system make economic sense? The building may be impressive and have an extensive collection, but is it really worth an extra $45.60 per year (for an owner of a $200,000 house) to maintain such a facility, when it could be consolidated with a country branch right down the street? By consolidating, you’d have the benefit of economies of scale, which would allow the two libraries to combine their collections and charge less in taxes.

Dave disagrees with me (and he should know, he serves as president of the University City Library Board of Directors) since he argues that Kirkwood residents like their own library and feel that it’s worth the cost. But residents have previously rejected municipal bond proposals to renovate their library. And I guess I just don’t see the point of paying twice as much in taxes to maintain a library on my block, as opposed to paying half as much for one the next block over, especially if it would have twice the books (and yes, that’s a little bit of hyperbole, but the point is there).

Should Kirkwood Sell Its Municipal Utilities?

Posted on by David Stokes

Kirkwood is the only municipality in Saint Louis County that continues to provide utility services to its residents. Would citizens benefit if Kirkwood abandoned this service model, instead allowing private, regulated utilities to provide all utility services to residents?

In January 2002, Florissant sold its water distribution system to Missouri-American Water Company for $14.5 million. That works out to $268.78 per person. Going by that ratio, Kirkwood could sell its water distribution system for $7,344,072 (in 2002 dollars), which matches the estimates Kirkwood received in 2004 when it investigated the possibility of selling its water system.

Florissant used the profit from its sale to finance additional street repairs, public works improvements, and police department projects. It then put most of the money, $10 million, into a reserve fund that earned interest for the city. Kirkwood had to consider a similar decision in 2004 because of the major capital needs of its aging water treatment plant. Officials opted to close the treatment plant and purchase water wholesale from Missouri-American Water, but maintain city operation of the distribution system. Kirkwood Electric operates in the same manner, purchasing electricity wholesale from AmerenUE and reselling it to residents.

A 1970 study by University of Missouri economists Paul Junk and Richard Wallace demonstrated that private, investor-owned electric utilities had significantly lower operating costs per kilowatt hour than municipal utilities. While that study compared power-generating municipal utilities to private utilities, it is still relevant to the current situation. The study concluded it would be better for municipal utilities to purchase and redistribute power from outside sources, as Kirkwood now does for both electricity and water, rather than produce or treat it themselves, as Kirkwood used to do. Is it now time to move further?

There are good arguments for maintaining the existing municipal electrical and water distribution systems. Both systems continue to generate excess revenues that can be reinvested into other Kirkwood services and help keep the city’s tax rates lower. The current tax-exempt status of the municipal distribution system decreases pressure on costs and allows more revenue to be returned to other city services. In fiscal year 2005, the electric department returned $1,380,000. Although it is hard to measure, a sense of civic pride can result from having your own city provide this service, much like community pride in a high school football team.

Kirkwood’s own website states that residents pay the same rates for electricity as AmerenUE customers. From a review of the publicly listed rates for water, it seems that Kirkwood residents pay a slightly higher rate for water ($1.8353 per 100 cubic feet compared to $1.5253 for Missouri-American) than other county residents, but with Missouri-American’s recent rate hike request, the Kirkwood rate may soon be lower. The benefits to Kirkwood residents do not lie in cheaper electricity or water, but in reinvesting resale profits in the city rather than seeing them go to shareholders.

There are also strong arguments for selling off municipal utilities. The one-time profit from a sale of the water distribution system could finance immediate needs, an emergency fund, a long-term, interest-earning reserve fund, and a property tax cut for Kirkwood’s residents — all at the same time. While there might be no short-term salary savings from employee layoffs, because the utilities still generate a profit, savings from long-term employee pension costs could be significant. On top of the immediate profits Kirkwood would receive from any sale, AmerenUE and Missouri-American Water are two of the 10 largest property taxpayers in Saint Louis County. Replacing tax-exempt facilities with systems they own would increase Kirkwood’s tax base and provide a long-term revenue benefit on top of immediate profits from the sale and budget savings.

While Kirkwood utilities do make “payments in lieu of taxes” back to the city, those payments really just move government money around without generating new revenue or long-term savings. And not every year going forward will result in an operating profit to be transferred to the general fund. According to Kirkwood’s 2007 budget report, “The high average age of our (electric) system dictates more replacement and maintenance and drives our operations and maintenance costs up.” This situation will not become less expensive for Kirkwood over time.

In my opinion, Kirkwood should follow the example of the other municipalities in our area that have ceased providing utility services, and sell its facilities to investor-owned, regulated utilities. This would allow Kirkwood to focus on services that are not privately provided, such as police and fire protection. Aside from the one-time profit, however, the immediate, quantifiable savings to residents from the sale would be minimal. If the residents and leaders of Kirkwood wish to continue the current system, there are legitimate reasons to do so.

David Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.

 

“I Lift My Lamp Beside the Golden Door”

Posted on by Sarah Brodsky

Immigration’s back in the news. The Post-Dispatch reports on a personal angle: State Rep. Tim Flook is Mexican-American.

Since many of the foreign-born workers in Missouri are Hispanic, it’s understandable why the Post-Dispatch wanted a profile of someone from an Hispanic background. But on another level, it doesn’t make sense why they singled out Flook. According to the article, his mother’s family left Mexico in the beginning of the 20th century. The article doesn’t mention the ethnicity of Flook’s father, nor does it say when his family immigrated.

If having "ancestors who came here about 100 years ago" means you have a special perspective on immigration policy, probably most of our lawmakers meet that criterion. It’s also interesting to note that Flook’s family learned English long ago, and Flook didn’t learn Spanish until well after he had graduated college.

Flook’s story doesn’t point out any sensitive issues or potential conflicts of interest in accepting immigrants. Instead, it highlights the fact that immigrants do learn English and assimilate, and that most of us have ancestors who were immigrants if you look back far enough.

Although I don’t agree with the premise that Flook’s family background is unique, it’s fun to read about him and his very reasonable stances on state immigration policy:

Flook opposed a bill that would have penalized employers for hiring illegal immigrants. The plan "was turning every employer into a junior varsity investigator on all his employees," he said.

Hear, hear. The federal government should be enforcing federal laws, not micromanaging every small business owner in Missouri.

For Each Their Own in Cape Girardeau County

Posted on by David Stokes

It seems that an attempt by local governments in Southeast Missouri to work together and share revenues from overlapping developments is coming to an end. The Southeast Missourian has the story via Combest. Local governments in St. Louis County share sales-tax revenues via a pool, and if it can work here it can certainly work elsewhere. Here is an op-ed I wrote on that subject.

I was interested to learn that last session the state Legislature passed changes to the law making it easier for local governments to share revenues from developments along city borders. That is a very good move. And before anyone cries "socialism," please remember we are talking about money that already goes to the government — this isn’t a proposal to send more private money to the government. It’s not socialism to have different government entities share the same pot of money. The mayor of Jackson, which — rather than Cape Girardeau — is the county seat, summed up the failure to reach an agreement nicely:

Jackson Mayor Barbara Lohr said unwillingness to share revenue now could have an impact if Jackson is asked to support a major development with tax revenue.

Sounds fair to me. Why would Jackson support projects with tax dollars (which they should not do for other reasons, too, but let’s stick to the point at hand) if all the revenues from the project are going to go to other governments? At least when St. Louis County sends money to St. Louis City, the county hopes to get something for it, like more county hotel room bookings, etc.

It is a shame that the two cities and the county could not work out an agreement on how to split the pie of the proposed Wal-Mart development. If 91 cities in St. Louis County can do it, it amazes me that Jackson and Cape Girardeau can’t work something out. It sounds like their local leaders need to take a junket to Clayton and Richmond Heights to see how local communities can share services and save tax dollars.

Women’s Health in Missouri

Posted on by Sarah Brodsky

An article in the Post-Dispatch today reports that the National Women’s Law Center and Oregon Health Sciences University have given Missouri an "unsatisfactory" grade in their survey of women’s health in the 50 states:

Missouri dropped to 38th out of 50 states in the overall ranking, down from 35th in 2004. The state fared well in getting prenatal care to women in the first trimester of pregnancy, ranking seventh in the nation for that measure. But more than a third of Missouri women have arthritis, placing the state at 48th of 50 states. And Missouri is one of a few states that has lost ground on the number of poor women covered by Medicaid, Waxman said.

I don’t think we need to be very concerned about this report. First, the life expectancy for women is higher than for men, and men are at greater risk for some big killers like heart disease. And while the statistics on conditions like obesity may appear disconcerting, they have a lot to do with people’s personal lifestyle choices, which are outside of the control of state health policy.

I also think it’s a mistake to give a state a bad grade because not everybody eligible for Medicaid uses it. As Dave Stokes has explained, low participation rates in government programs can be a sign of self-reliance rather than of unused resources.

 

Access to Credit

Posted on by Sarah Brodsky

There’s a great op-ed in the Springfield News-Leader about the proposed interest rate cap on payday loans. If you want to read the entire history of interest rate regulation going back to Plato, the FDIC has a paper for you. But the News-Leader op-ed does a good job in a few hundred words of explaining why rate caps are harmful. Here’s an excerpt:

Banning the industry would deny Missouri consumers the right to make their own choices, limit their credit options and force many to risky and more costly options such as unregulated offshore Internet lenders and bouncing checks.

Read the whole thing!

Listen to Tim Lee’s Eminent Domain Interviews

Posted on by Eric D. Dixon

Tim Lee’s interview about his new eminent domain study, on KMOX’s Charlie Brennan Show, is now available online. If you haven’t already, be sure to read the follow-up entries in this blog by David Stokes and myself, correcting a couple of erroneous claims about the study that were made on the show.

Also online today is an article and a 60-second radio spot about the eminent domain study, by Steve Walsh of Missourinet. Walsh summarizes the study’s findings and features a brief clip of Tim Lee speaking about the subject. It’s well worth a listen.

Facts Aren’t a Matter of Opinion

Posted on by Eric D. Dixon

David’s post about this morning’s Charlie Brennan interview does a great job correcting the record about supposed "factual errors" in Tim Lee’s new eminent domain study. I’d like to make an additional point about the McRee Town neighborhood.

It’s certainly true that qualitative judgments can differ, often widely, especially when it comes to examining an area’s quality of life. Mayor Slay’s chief of staff took issue with Tim’s claim that McRee Town was improving before eminent domain, and cited news reports and police officers pointing out the area’s negative qualities to bolster his contention. It’s important to point out that Tim explicitly acknowledged that the area was unpleasant. But a look at conditions at one point in time doesn’t tell us anything about a long-term trend. Saying that conditions were bad doesn’t, in itself, support the argument that conditions were getting worse.

It’s possible that there are police officers who would say the area was getting worse, but those would amount to opinions. Jim Roos, however, a McRee Town property owner, is able to provide actual data about quality of life in the area. In the buildings he managed, from the mid-1990s through 2000, vacancies dropped and rents rose. This is an economic signal of greater demand, even in the face of higher housing prices. When an increasing number of people want to move into a neighborhood even as the area’s rents rise, it tells us in real, measurable, concrete terms that the area is improving.

That kind of data isn’t a matter of opinion.

Eminent Domain Abuse Interview on KMOX

Posted on by David Stokes

We hope you enjoyed the discussion of the Show-Me Institute’s just-released eminent domain study, which ended a short time ago on KMOX’s Charlie Brennan Show. We will link to the podcast as soon as it is available.

As part of the discussion, St. Louis Mayor Francis Slay’s chief of staff, Jeff Rainford, claimed the study had two factual errors. (We are not going to even get into his contention that this is an opinion piece, rather than a study. Go read it and decide for yourself.) Rainford erroneously stated that Tim Lee, a co-author of the study, wrote that eminent domain was used in Gaslight Square in order to increase sales taxes. Having rechecked the study, I found absolutely no mention of sales taxes anywhere in the Gaslight Square section (pages 21-22). While Dr. Erondu in Gaslight Square is mentioned as part of a discussion of tax revenues on page 19, the study never states that the Gaslight Square eminent domain program was used for the purpose of sales taxes. Dr. Erondu was included because he, like Dr. Tourkakis in Arnold, is a dentist, and Dr. Tourkakis was most certainly targeted in Arnold because his office did not produce sales tax dollars. We look forward to Rainford’s forthcoming correction.

Rainford also claimed the study made a "factual error" concerning its assessment of the McRee Town neighborhood. While people’s opinions may differ on this issue, two callers to the show backed up Tim’s contention that McRee Town was improving before the use of eminent domain. This can hardly be termed a "factual error."

Tim Lee has written a great study on eminent domain abuse throughout Missouri, and we encourage you all to take a look at it.

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