Minimum Wage Hike Is Poorly Targeted at the Poor

Posted on by Justin Hauke

 

This November, Missouri voters will vote on Proposition B, which would raise the state’s minimum wage to $6.50 per hour. Proponents of the ballot initiative claim that the wage hike is necessary to ensure that poor Missourians can make ends meet. What they don’t mention is that most minimum wage workers are not poor, and that most poor workers don’t make the minimum wage. Missouri consumers would pay for the wage hike through higher prices, and many of the benefits would go to middle-class teenagers. It would be far better to focus on targeted policies like expanding the Earned Income Tax Credit, which puts more money in the pockets of low-income workers at a far lower cost to Missouri consumers.

It is a common misperception that the minimum wage primarily affects poor workers struggling to raise families. According to the Census Bureau, only a quarter of Missouri workers making less than $6.50 per hour live in households below the federal poverty line. Even fewer—about 11 percent—are in single-income households with children. In contrast, about 40 percent of the workers who would be affected by proposition B are still living with their parents, and 29 percent live in households with incomes above four times the poverty line—about $80,000 for a family of four. The average hourly wage of primary earners in households below the poverty line is more than $9.50 – 47% higher than the proposed increase.

 

Increasing the minimum wage discourages employers from hiring low-skilled labor. For example, a fast food restaurant may find it profitable to employ several workers flipping burgers for $5.15 an hour, but at $6.50 per hour the restaurant may choose to invest in upgrading its equipment so it can make the same number of hamburgers with fewer workers. A car wash might not hire someone to dry off cars after they’ve been washed, or a retail store might not hire an extra employee to answer the phone.

Firms that adjust their business plans to reduce their labor costs are likely to let go of their least-skilled workers first. They may let go of adult workers with poor literacy and math skills—such as recent immigrants or single mothers struggling to get off welfare—in favor of middle-class teenagers with higher levels of education. Hence, the workers who will bear the brunt of the job losses are likely to be the workers who can least afford to lose their jobs.

And the job losses would be significant. In a recent study for the Show-Me Institute, economists report that Proposition B will destroy 18,500 jobs and impose $339 million in additional costs on Missouri businesses. These effects will be particularly severe for Missouri because 60 percent of the state’s population lives in the Saint Louis or Kansas City metropolitan areas, both of which straddle borders with neighboring states. A higher minimum wage will discourage entrepreneurs from starting or expanding business on the Missouri side of the border with cheaper labor just a few miles down the road.

Luckily, there are far more effective and efficient ways to help the poor. The ideal anti-poverty program should focus resources directly on those who need the help—working families supporting children. With a higher minimum wage, businesses are forced to give raises to several middle-class teenagers for every single mother who gets a raise. Instead, Missouri should join the 14 states (including four of Missouri’s neighbors) that supplement the federal Earned Income Tax Credit. The EITC is targeted at raising the incomes of poor workers supporting children. Teenagers living with parents and workers with wealthier spouses are not eligible.

Raising the minimum wage has a lot of intuitive appeal. But it’s important to make policy that’s smart as well as compassionate. Proposition B is the shotgun of anti-poverty programs; it would do little to lift poor workers out of poverty, but it would do a lot of damage to Missouri’s economy. Missouri deserves better. Targeted anti-poverty programs like the EITC will be far more effective than the scattershot approach of raising the minimum wage.

Timothy B. Lee is a policy analyst at the Show-Me Institute. Justin Hauke is an economic analyst living in Saint Louis.

 

Charter Schools Help Minority Students Catch Up

Posted on by Sarah Brodsky

Minority students are falling behind in the public school system. The graduation rate for Missouri’s white students is 87.4 percent; for black students it’s fully 10 points lower—77 percent. Black students don’t do so well as their white peers on the Communication Arts section of the MAP test.  They lag behind on the Mathematics section of MAP too.

But the gap is much larger in St. Louis than in Kansas City.  In Kansas City, the graduation rate for black students hovers around the state average.  In St. Louis City, it’s an appalling 58 percent. One important reason is Kansas City’s charter school advantage. Kansas City has a vibrant system of 18 charter schools. St. Louis, in contrast, has only 7. Many of those charter schools serve minority students, giving them additional opportunities and discourage them from dropping out. Policymakers in St. Louis and Jefferson City should find ways to expand charter schools in St. Louis so that minority children there have the same opportunities as minority children in Kansas City.

Missouri’s urban public schools don’t do a good job of preparing minority students for life and work.  And unfortunately, many minority families in St. Louis and Kansas City can’t afford homes in suburban school districts, nor can they afford to send their kids to private prep schools or tutoring as many wealthier families do.  Minority teens who aren’t doing well in the public schools may feel that the only alternative is to drop out.

But some Kansas City schools are beating the odds.  For example, Don Bosco Education Center and Hogan Preparatory Academy have black graduation rates above Missouri’s average.  At Don Bosco Education Center, the black graduation rate is a respectable 86 percent.  Hogan Preparatory Academy has an outstanding black graduation rate of 98.3 percent.

These aren’t traditional public high schools.  Don Bosco Education Center serves at-risk teens.  Hogan Preparatory Academy focuses on college prep.  Both serve a large proportion of minority students. Both are Kansas City charter schools sponsored by Central Missouri State University.

Charter schools excel because they aren’t stifled by all the counterproductive requirements the state places on other public schools.  With the guidance of a sponsoring organization, charter schools are free to try new curricula and innovative teaching methods.  Charter schools may emphasize a specific subject area, like technology or foreign language.  All these factors contribute to charter schools’ success.

Most importantly, students choose to attend charter schools. Charter schools can create a more diverse environment than traditional public schools because they enroll children from different parts of the city.  Parents who choose their child’s school feel that they have a positive effect on their child’s education.  And charter schools must compete for students, a process that forces them to be accountable to parents and improves the entire education system.  A National Bureau of Economic Research study found that competition from charter schools causes the test scores of students in traditional public schools to go up.

Don Bosco Education Center and Hogan Preparatory Academy show that competition gives children more options and keeps them in school.  The resulting high graduation rates mean that the schools better prepare students for life and build a stronger community.  Missouri should expand its charter school system so that more students can benefit.  Currently there are 25 charter schools in Missouri, 18 of them in Kansas City.  We need more charter schools in St. Louis, and we should allow children across the state to attend charter schools too.  Black and white students graduate at about the same rate in Kansas City, but in St. Louis black students are much more likely to drop out.  If St. Louis had as many charter schools as Kansas City, St. Louis students would have the same opportunities as Kansas City students and the gap between the graduation rates might close.

Greater competition would ensure that students go to the schools that are right for them rather than to the schools that just happen to be nearby.  Currently, more than a third of the black students in St. Louis City don’t graduate.  We should give these students more choices so that dropping out isn’t the only alternative to the public school down the block.

Timothy B. Lee is a policy analyst, and Sarah Brodsky is a research assistant, at the Show-Me Institute.

Joe and John Seravalli: Victims of Eminent Domain Abuse

Posted on by Timothy B. Lee

Imagine you sign a two-year lease with your landlord. After the first year, you decide you’re tired of paying rent and would like to buy the property instead. You make him an offer, which he rejects as too low. In response, you go to the board of aldermen and ask them to declare the apartment blighted, condemn it, and turn it over to you for redevelopment.


The Gentry’s landing apartment complex. The fence in the foreground surrounds a supporting cable for a crane that’s being used for new construction across the street.

It might sound absurd, but something very similar is happening right now in Saint Louis. The story demonstrates just how ripe for abuse Missouri’s eminent domain laws have become. And there’s little reason to think the eminent domain bill the state legislature passed in May will prevent such abuses in the future, because the “blight” loophole being used by the city was not closed by the legislation.

When you think “urban blight,” you probably don’t think of the downtown Radisson. The Radisson is one of three skyscrapers built on land leased from Florida real estate developers John and Joe Seravalli. The other two are apartment buildings: the Mansion House and Gentry’s Landing. The owners of the buildings pay rent for the use of the land under leases that last for decades.


A view of the Mansion House apartment as seen from the “blighted” courtyard that lies between the Mansion House and Gentry’s Landing.

Gentry’s Landing is owned by Integrity Real Estate, headed by Peter McCann. For years, McCann has expressed interest in purchasing the land under his building from the Seravallis in preparation for building renovations, but they have not been able to agree on a price. In 2001, McCann began hinting that if he didn’t get a “reasonable” price, he might ask the city government to condemn the land and turn it over to him for redevelopment. Those threats became more overt in 2005, with warnings that he would have “no choice” but to pursue condemnation of the land if a deal was not reached. When the Saravallis continued to refuse McCann’s terms, McCann made good on his threat. On April 28, 2006, the city of Saint Louis notified the Seravallis that they would have to sell or have their land seized using eminent domain.

The neighborhood in question does show some signs of neglect. The city declared the area to be blighted back in 1989. Today, retail space along the street includes a payday loan shop and a couple of vacancies. The Gentry’s Landing apartment building is beginning to show signs of age. But it’s not obvious why the blame for those problems should fall on the Seravallis, who only own the land underneath the complex, rather than McCann, who owns and operates the facility itself.


The lobby of the “blighted” downtown Radisson hotel, on the same block as Gentry’s Landing.

The Seravallis contend that the reason is politics: that McCann and the city are conspiring to take their land for below its fair market value. They have filed suit against the plan, asking why, after 17 years of inaction, the city has suddenly become interested in redeveloping the neighborhood.

The story illustrates how precarious property rights have become in Missouri. Property rights should not depend on whether you have connections in city hall. The eminent domain legislation passed in May is unlikely to solve the problem. The legislation does require that blight determinations not be “arbitrary or capricious or induced by fraud, collusion, or bad faith.” But it’s difficult to prove bad faith in court, and judges have historically been reluctant to second-guess the decisions of legislative bodies. Such vague rules are unlikely to be much of a deterrent.

 


Some retail stores down the street from Gentry’s Landing.

More importantly, the legislation did not close the “blight” loophole, which has become one of the most common justifications for the use of eminent domain in Missouri. The legislation sets a 5-year time limit on blight designations, but it allows city legislative bodies to renew the blight designation indefinitely. And the legislation does not tighten the definition of blight, leaving city officials with wide latitude in defining the term.

The power of eminent domain has traditionally been used for public uses like roads, police stations, and hospitals. The Seravallis’ battle with the city of St. Louis illustrates how far we’ve strayed from that ideal. Although the proposed redevelopment might result in increased tax revenue for the city, the primary beneficiary is clearly a private real estate developer. And any incresed tax revenue would come at the cost of weakening property rights for everyone.

The Seravallis are successful commercial real estate developers who can afford to hire the best legal talent to defend their rights in court. They may ultimately prevail. But the battle will take years and cost tens of thousands of dollars in legal fees. Few homeowners could afford to mount that kind of legal defense. If property rights in Missouri aren’t strengthened, the big losers won’t be wealthy businessmen like the Saravallis, but ordinary homeowners who won’t have a prayer of standing up to unjust seizures of their land.

Timothy B. Lee is a policy analyst at the Show-Me Institute.

 

Dan Sheehan: Victim of Eminent Domain Abuse

Posted on by Timothy B. Lee

 

Last November, Clayton business owner Dan Sheehan learned from the newspaper that his property suffered from “age, deteriorated condition, and outmoded design.” That was a surprise to him because the property is located in one of the most prosperous neighborhoods in St. Louis and is home to four thriving small businesses, including his own. If the buildings were “deteriorated” and “outmoded,” their customers didn’t seem to notice. Yet the city of Clayton has begun making plans to seize Sheehan’s property — and four others on the 7700 block of Forsyth — using eminent domain.

The redevelopment project is ostensibly part of Centene Corporation’s plan to build a new corporate headquarters at the corner of Hanley and Forsyth. But strangely, Centene doesn’t need Sheehan’s property to build its proposed office towers. Rather, his property has been vaguely slated for use as new retail and office space.


Business owner Dan Sheehan in front of his “blighted” office in Clayton.

Sheehan believes that Centene included his properties in the proposal at the behest of the Clayton Board of Aldermen. In early 2005, the city issued a request for proposals as a way to “encourage the highest and best use of commercial properties in the central business district.” The city has marked the properties on the 7700 block of Forsyth as blighted because the area is “economically underutilized.”

Sheehan is the president of Dolan Realtors, which has been in its current location since 1977 and has owned the property since 1982. He says he does not oppose the Centene project overall, he would just prefer to be a part of the project instead of a casualty of it. Sheehan does not believe that Centene has negotiated fairly and in good faith. Centene sent its initial letter seeking to purchase the property in October.

He did not respond to the offer because his property is not for sale. Clayton held its first public hearing on the Centene redevelopment project the following month. Many business owners and citizens, including Sheehan, spoke against the use of eminent domain to take their property. But on December 13, the Board of Aldermen passed a pair of ordinances approving Centene’s redevelopment plan and its use of eminent domain.

Clayton
The headquarters of Centene Corp, which has sought eminent domain authority from the city of Clayton.

Citizens and business owners responded by creating the Clayton Committee to Stop Abuse of Eminent Domain. It took them just a few days to collect more than 250 signatures — five times the number needed — on referendum petitions to request the Board of Aldermen to rescind the ordinances.

A referendum would haven given Clayton voters the opportunity to decide whether the use of eminent domain was appropriate. But the city prevented that using a procedural tactic: they passed the ordinances as “emergency” measures, which protected it from the referendum process.

On February 27, Sheehan received a contract saying that he had 45 days to respond to either waive or accept mediation. Sheehan has reluctantly accepted mediation, which is scheduled to begin shortly.


Some of the businesses being condemned to make space for new retail space.

Sheehan argues that it is possible to proceed with the planned Centene project and leave the businesses that do not wish to sell. Clayton’s redevelopment agreement with Centene provides that if requested by Centene, the board of aldermen would give reasonable consideration to eliminating the requirement to acquire all property within the redevelopment area. Essentially, Centene could exempt the two owner-occupied properties from being redeveloped and use the remaining three properties to build new retail space and above ground parking. A similar exemption of active businesses from seizure occurred recently in the Frenchtown redevelopment project in St. Charles.

Sheehan says that as a commercial realtor he has assembled large properties for clients on several occasions, and he has never found it necessary to use eminent domain. He assembled 55 acres for a client in the 1960s, and then assembled 200 acres for the same client in the 1980s. Neither project required the use of eminent domain. “Nobody can defend the use of eminent domain unless it is for a hospital, highway, or other purpose for which it was originally intended,” he says. “Everybody tip toes around that and they talk about the jobs that will be created and the taxes that will be increased, but that’s no reason to kick somebody out on the street.”

Timothy B. Lee is a policy analyst at the Show-Me Institute. Shaida Dezfuli is pursuing a master’s degree in public policy at the University of Missouri, St. Louis.

 

Property Rights Still in Danger a Year After Kelo

Posted on by Timothy B. Lee

 

One year ago today, in the case of Kelo v. New London, the Supreme Court ruled that local governments have wide latitude to transfer property from one private party to another for purposes of “economic development.” The public was outraged. In response, politicians across the nation pledged to enact state legislation to strengthen property rights. Last month, the legislature passed House Bill 1944 into law, which Governor Blunt touted as “protecting the rights of responsible property owners.”

Unfortunately, compared to other states, Missouri’s legislation leaves a lot to be desired. Florida offers a particularly striking contrast. Thanks to action by Florida lawmakers, property owners in the Sunshine State now enjoy robust protections against the abuse of eminent domain for private gain. Missouri property owners, on the other hand, got only crumbs.

Probably the most serious loophole for eminent domain abuse is “blight,” which has become a virtual blank check for city governments to seize private property. One notorious example is in Clayton, one of the most prosperous cities in the St. Louis metro area. At the behest of the Centene Corporation, which wants to build a new headquarters, the city of Clayton is attempting to use eminent domain to force out several small business owners down the street from the company’s current headquarters. They claim that the buildings that house these businesses are blighted, but the buildings don’t look noticeably different from the buildings around them. Those property owners simply had the misfortune of owning property that a larger company wanted.

The new Missouri law does little or nothing to prevent such abuses. The use of eminent domain for the elimination of blight or substandard conditions is still permitted, and no changes are made to the current “anything goes” definition of blight. In contrast, Florida’s reform bans the use of eminent domain to eliminate allegedly blighted conditions. If Centene was located in Florida, it would have to find voluntary ways to acquire the land it wants.

Another example of “blight” abuse occurred in Sunset Hills. The city condemned the entire neighborhood of Sunset Manor because a handful of properties had minor problems. The project fell through due to the developer’s inability to finance the project, and the area has been left in a much worse condition than before.

The new Missouri law would have done little to prevent the Sunset Hills fiasco. If a “preponderance” of the properties in an area are blighted, the legislation allows every parcel in that area to be taken–even those in perfect condition. In contrast, Florida municipalities are only permitted to use eminent domain for truly public purposes such as public roads, parks and utility systems. For truly blighted, slum-ridden and nuisance properties, Florida law allows municipalities to use building codes and nuisance law to force homeowners to eliminate nuisance conditions–powers that are far less subject to abuse than eminent domain. In short, Florida’s legislation would have prevented the Sunset Hills fiasco, but Missouri’s legislation leaves private property vulnerable.

The Missouri law does provide a few token concessions to property owners. Farms are protected from blight takings, and the law provides additional compensation in some cases. But until the “blight” loophole is closed, Missouri property rights will continue to be in danger. Give any property enough time and it will naturally become “blighted” by the terminology currently used in Missouri. Older buildings can become blighted simply because they were built according to different standards with different technology. As long as the law permits an open-ended definition of blight, none of our homes or businesses is safe.

Florida’s legislation is a model for serious eminent domain reform in Missouri and across the nation. Florida’s lawmakers listened to the overwhelming public outrage about the Kelo decision and outlawed eminent domain abuse for private gain. In contrast, Missouri’s lawmakers ducked the hard questions, preferring to tinker around the edges instead. Property owners in Missouri deserve better.

Timothy B. Lee is a policy analyst at the Show-Me Institute. Shaida Dezfuli is pursuing a master’s degree in public policy at the University of Missouri, St. Louis.

Homer Tourkakis: Victim of Eminent Domain Abuse

Posted on by Timothy B. Lee

 

In January of 2004, the city of Arnold unveiled a plan to re-develop a large chunk of Arnold commonly referred to as the Arnold Triangle. The plan envisioned 250,000 square feet of retail space, a Dierbergs Market and a Lowe’s store. Unfortunately, there were 52 homes and businesses already occupying the area. They don’t pay as much in taxes as the city expects to get from the big box retailers, and the city has decided to remove them in favor of wealthier businesses.

One of the property owners the city wants to displace is dentist Homer Tourkakis. He and his wife Julie have put down roots in Arnold. They’ve been in the city since 1985, when they started the practice in the Arnold Triangle. They’ve spent the last 21 years forging friendships and attracting clients from all over Jefferson County. They also raised two daughters, both of whom are now in Missouri colleges.

“When I heard about the city’s plans, I had a lot of concern and consternation,” Tourkakis said. “I was ignorant about eminent domain and all the ramifications, and the power that was available to the city. I still looked at the world through rose colored glasses. I thought the city council would be there to defend me. It didn’t take long for me and other business owners to realize that like it or not, this thing was going to happen.”


Business owner Homer Tourkakis in front of his “blighted” dental office.

On September 16th, 2005 the city voted in favor of giving Overland-based developer THF Realty $24 million in tax breaks and the authority to condemn the homes and businesses of property owners who refused to sell.

Tourkakis and his neighbors protested the plan. “I didn’t want to be part of this development program,” said Tourkakis, “I didn’t want to have to dip into my savings and start all over again.”

In response to those protests, some influential property owners were spared. The city promised to give the Veterans of Foreign Wars land within the development area and build a new VFW hall. A UMB bank was also guaranteed a place in the new plans. And Norman Moss, who sits on the city’s Board of Adjustments, managed to get his business, Arnold Stove and Fireplace, spared from forced relocation outside of the development area.

But no such concessions were offered to small business owners like Tourkakis. Tourkakis thinks that the city is playing favorites. “It just seems really arbitrary,” said Tourkakis, “why do some get red-carpet treatment, while I get my life turned upside down so the city can pick up a few bucks?” Tourkakis says that the city council members of his ward, Phil Amato and Joyce Deckman, refused his requests for help.


Board of Adjusts member Norman Moss’s business, Arnold Stove and Fireplace, will not be forced to relocate outside the development area.

Tourkakis’ property, along with about 12 others, was declared blighted by the firm of Peckham, Guyton, Albers and Viets (PGAV), the same consulting company that made the blight determination in the infamous Sunset Hills redevelopment project. In one instance, PGAV cited broken pavement as evidence of blight–never mind that maintaining roads is a city responsibility.

“They say they offer fair market value, but my business has been established in this area for years. I’ll have costs that ‘fair market value’ simply won’t cover. What about my loss of highway traffic? What about the risks I incur?” Tourkakis asked. “The appraisals were a joke. They looked at property that was miles away from mine. Everybody knows they lowball you.”

The developer, THF, did go through the motions of negotiations. THF principal Allen Bornstein visited Tourkakis on three occasions. But Tourkakis charges that the relocation offers made to him were vague and inadequate. “They just wouldn’t talk seriously about a plan,” said Tourkakis. “At one point, Bornstein said to my attorney, ‘Look, I’m not in the dental building business.’ They all seemed pretty convinced that they could push me where they pleased. They were pretty arrogant.”


A “blighted” home a block away from Tourkakis’ dental practice.

The Tourkakis dental practice isn’t as large as Dierbergs or Lowe’s. He employs a staff of three full-time, fully health-insured persons, two of whom are Arnold residents. His practice is one of a handful which treats Medicaid patients, including the elderly and the developmentally disabled. Treating Medicaid patients who can’t pay their bills means operating at a loss. The government only reimburses Tourkakis ten cents for every dollar he spends treating those patients. “I see doing it as part of being a member of the community,” says Tourkakis, “helping out the community makes for a stronger community.” Tourkakis’s practice has treated Medicaid patients for 21 years.

In the coming weeks, the developer must make a final buyout offer to the remaining property owners, who number about 15. If they can’t get the contracts, they’ll ask the city to file a condemnation lasuit against the property owners.

“It kind of makes you wonder why you work so hard to build something,” said Tourkakis. “If they’re just going to take it away from you, why bother?”

Timothy B. Lee is an editor at the Show-Me Institute. Jonathon Burns is a student at Truman State University.

 

Better Teacher Pay Would Improve Math and Science Instruction

Posted on by Timothy B. Lee

 

In many schools across the country, students hand in lab reports and math homework to teachers who have no background in science or math. The Missouri Department of Elementary and Secondary Education says that Missouri schools suffer from teacher shortages in those subjects. Governor Blunt has pledged to address the problem. He held a Math and Science Summit last month, and he recently named twenty scholars to a Math and Science Alliance.

Such state-wide initiatives are a good start, but we’re unlikely to solve the problem until changes are made at the local level. Unfortunately, when it comes to hiring math and science teachers, school districts’ hands are tied. Under Missouri law, school districts must use rigid salary schedules that apply to all teachers. They can’t offer better pay to teachers of shortchanged subjects, or to teachers with valuable credentials and experience. Those restrictions prevent school districts from hiring the best teachers. Crucial subjects like math and science are the hardest hit.

What causes a teacher shortage? In a recent study, University of Missouri economist Michael Podgursky looked at public school teachers’ wages compared to the wages earned in other professions. He found that teachers as a group aren’t underpaid, but some individual teachers are. Most teachers, if they weren’t teaching, would probably find jobs in nearby fields like social work and library science. Teachers earn more than those professionals on average.

However, math and science teachers might choose to work in architecture or engineering—fields that pay better than teaching. Podgursky found that teaching is an attractive position compared with the other options available to English majors, but that a physics major often has much more lucrative alternatives. Therefore, when school districts offer the same salary to English and physics teachers, physics teachers are in short supply.

A National Center for Education Statistics (NCES) study of biology teachers highlights the problem. Of U.S. secondary-level public school students in biology classes, 39 percent were taught by a teacher who did not have a major or minor in biology. Some of these teachers had studied elementary education, physical education, or English. When science majors go into engineering, preparing the next generation of scientists is left to people who would be better qualified to teach Shakespeare or soccer.

Poor teacher education holds the U.S. back as it struggles to catch up with other countries in math and science instruction. Students in Asian countries such as Japan, Korea, and Singapore consistently score higher than American students on the Trends in International Mathematics and Science Study (TIMSS). The difference between U.S. teachers and teachers in other countries stands out in a TIMSS report on eighth-grade mathematics teachers’ backgrounds. In the U.S., only 41 percent of eighth-grade students were taught by teachers who had majored in mathematics, 30 percentage points below the international average.

In order to solve the math and science teacher shortage, school districts will have to break away from strict salary schedules and offer math and science teachers better pay. This past session State Rep. Allen Icet sponsored a bill that would allow districts to use hiring incentives to attract teachers with desired qualifications or experience. The state of Missouri should give districts the option to reward hard-to-find teachers. If math and science teachers are offered reasonable salaries, they’ll no longer be hard to find.

Timothy B. Lee is a policy analyst, and Sarah Brodsky is a research assistant, at the Show-Me Institute.


 

 

 

Legislation Fails to Protect Property Rights

Posted on by Timothy B. Lee

 

Is it right for the government to take your property for the benefit of another private party? Voters across the nation were outraged last summer when the Supreme Court said “yes” to that question in its infamous Kelo decision. Missouri’s elected officials reacted by pledging to change Missouri law to ensure that Show-Me state residents’ property would be secure.

But judging from the legislation passed last week and expected to be signed by the governor, they didn’t mean it. True, the legislation does impose some new requirements on cities seeking to take peoples’ homes, but it does almost nothing to prevent the use of eminent domain to benefit one private party at the expense of another. If the governor signs the legislation this week, property rights in Missouri will still be in danger.

Our legislators seem to think that private property is an issue of money and paperwork. Municipalities exercising eminent domain must pay an extra 25 percent if they take your primary residence, and an extra 50 percent if the home has been in your family for 50 years or more. And the law requires more public input, more negotiations, and more court oversight before a taking can occur.

Such tweaks miss the point. Fundamentally, property rights are about equal rights before the law. Private property places the smallest homeowner on an equal footing with the largest corporation. If the company wants the homeowner’s land, he must pay a price the homeowner is willing to accept or look for land elsewhere.

In contrast, when the law permits eminent domain for private profit, ordinary property owners become subject to the whim of the powerful and well-connected. We recently saw a clear example of the dangers of eminent domain abuse in Clayton, where the Board of Aldermen is in the process of condemning five small downtown retail establishments to make room for the expansion of Centene Corp’s corporate headquarters. The city justifies the taking on the basis that the retail establishments are “blighted,” despite the fact that downtown Clayton is one of the most prosperous neighborhoods in the St. Louis metro area.

“Blight” has become a catch-all term that allows municipal leaders to condemn anyone’s land. It was the pretext under which the city of Sunset Hills condemned properties in its doomed re-development plan, which collapsed last fall when it was discovered the developer couldn’t finance the project. And it was the justification given by St. Louis alderman Tom Bauer when he sought to condemn several homes and businesses to make room for a QuikTrip gas station—a plan that led his constituents to recall him.

Yet the legislation being sent to the governor this week wouldn’t have done a thing to stop any of those three abuses. “Blight” takings are still permitted, and no change has been made to the current “anything goes” rules for defining blight. Under the current rules, cities commission blight studies by friendly consulting companies that invariably give cities the answers they’re looking for. Such studies often cite trivial problems such as broken drain spouts, declining tax revenues, or windows that are too small for the latest fire code. Amazingly, some studies even cite poor upkeep of public streets and sidewalks as evidence of blight, even though those are the responsibility of the city government that sought the blight designation in the first place.

Even worse, the new legislation continues to allow land to be taken if a “preponderance” of a proposed redevelopment area is blighted. That means that the city can take your home even if it’s in perfect condition, as long as some of your neighbors haven’t been maintaining their properties. In Sunset Hills, several meticulously maintained homes were condemned because their owners happened to live in a neighborhood the city government considered “blighted.”

Missouri’s elected officials have failed to keep the promises they made last summer to pass meaningful restrictions on eminent domain abuse. Instead, they passed legislation that is little more than window dressing, in the hopes that that would satisfy voters’ demands for stronger property rights. Show-Me state voters shouldn’t be fooled by that kind of legislative sleight of hand.

Timothy B. Lee is a policy analyst at the Show-Me Institute.

 

Cable Consumers Deserve Choices

Posted on by Timothy B. Lee

 

“The company that had a monopoly had lousy services until competition came, and then they improved their services.”

That’s how one Texas consumer describes the increased cable TV competition his community has experienced in recent months, after the Texas legislature passed sweeping legislation to open up the cable TV market to new competitors. Another Texas consumer says, “I think I am paying too much for what I am getting and that is why I am switching.”

That’s how competition is supposed to work: several different companies compete for your business, and you choose the one that offers the best service at the lowest price. But that’s not how the cable TV industry works in Missouri. For most consumers, the only alternatives to your local cable company are satellite TV or rabbit ears.

Under current Missouri law, a new company wanting to compete with incumbent cable companies must negotiate hundreds of franchise agreements with individual municipalities. The process can take years and cost millions of dollars in attorneys’ fees. Not surprisingly, few companies have attempted it.

Sen. John Griesheimer has introduced legislation to reform the system and reduce red tape, but his bill has stalled in the Senate. He blames heavy lobbying by the cable industry, which—not surprisingly—would rather not have new competitors.

That is particularly disappointing because it comes just as several new studies find that reform would bring substantial benefits for consumers. Jerry Brito and Jerry Ellig of the Mercatus Center at George Mason University calculate that cable franchise reform could increase competition and save consumers nationwide $5.5 billion per year. Kent Lassman of the Progress and Freedom Foundation published a study last month that focused specifically on the Missouri cable market. He estimated that franchise reform could save Missouri consumers more than $100 million per year.

These predictions are borne out by experience. A survey released last month by the American Consumer Institute shows the dramatic results of the Texas franchise reform: in three of the first communities where Verizon Communications began offering video service in competition with the incumbent cable companies, more than 20 percent of consumers switched to the new service. Customers who switched since Verizon entered the markets have saved an average of $20/month on their cable bills.

But the benefits of competition go beyond saving money. Many of the “switchers” indicated they did so because they preferred the package of channels offered by the new company. Others cited dissatisfaction with the quality or customer service of their previous company. Competition drives down prices, but it also spurs companies to offer higher-quality, more responsive service. Consumers in Texas are reaping those benefits.

Unfortunately, in Missouri, the interests of consumers seem to have taken a back seat. That’s especially problematic because Missouri is in competition with other states for new investment. After Texas passed its franchise reform bill, telecom companies pledged to spend $800 million on new and upgraded infrastructure. Indiana, which enacted similar legislation last month, is seeing a similar windfall, as AT&T has promised to upgrade their infrastructure in 33 rural Indiana communities to offer new services. Virginia has passed similar legislation, and there are numerous other states considering it.

If the Missouri legislature adjourns without passing meaningful franchise reform, it is likely that the telecom companies seeking to invest in next-generation video services in 2006 will invest in other states with less hostile regulatory climates. By the time the legislature convenes again in January 2007, we will likely have fallen behind several more states.

Time is of the essence. Consumers in Texas, Indiana, and Virginia are already enjoying the benefits of increased competition. Why should Missouri consumers have to wait until next year?

Timothy B. Lee is a policy analyst at the Show-Me Institute.

 

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