Four years ago, the Show-Me Institute came out strongly against plans to spend upwards of a half-billion dollars to turn Lambert-St. Louis International Airport into an “Aerotropolis.” The plan revolved around the idea that Chinese cargo shipped through Saint Louis could be profitable—but only if the government subsidized it to the hilt. As our readers know, the project died not once but twice that year, and has died each year it has been introduced since.

It’s a good thing it kept dying too, as a story from the St. Louis Post-Dispatch showed last week.

In September 2011, a China Cargo flight carrying 80 tons of manufactured products landed at Lambert and was greeted by dignitaries from across the region. But airport officials said that market disappeared amid a downturn in international cargo. [Emphasis mine]

Imagine if Missouri had committed to the Aerotropolis project and then, poof, the market “disappeared”—which of course assumes it was ever really there. Taxpayers would have been left holding the bag.

The admission about Aerotropolis was part of a larger article about a lease just signed for a new “Mexico Hub” at Lambert, a story my colleague Joe Miller has already detailed. Lambert’s director, Rhonda Hamm-Niebruegge, says that the airport “is not paying a penny” for the new project, and if true, it’s a very good thing. At a time when its passenger traffic is down, the last thing Lambert should be doing is speculating on real estate, especially given its track record.

However, it’s not clear whether the Mexico Hub developer will try to draw on existing government subsidy programs to advance the project. An airport project at Lambert fully financed by the private sector seems very good; the concern is whether this project is too good to be true. One would hope that state and local officials would be chastened after the Aerotropolis debacle if they’re considering handing out tax incentives, whatever their scale.

I certainly hope the Mexico Hub project can move ahead on its own merits and without taxpayer money. Cargo markets have “disappeared” before, and taxpayers shouldn’t be on the hook if history repeats itself. We’ll keep you posted.

The post Lambert Officials Admit: Market for Cargo “Disappeared” Post-Aerotropolis appeared first on Show-Me Institute.

The sliver that has come back to life this time is “freight forwarding tax credits.” These tax credits are available to airlines or air freight companies that transport cargo on a direct international flight. Missouri House Bill 1500 (HB 1500) proposes a 40-cent/kg. cargo tax credit for any of those flights leaving a Missouri airport. The proposal calls for eventually allocating $60 million, with a yearly cap of $8 million. The purported purpose of the bill is to encourage foreign trade, presumably by making it cheaper for Missouri products to reach international markets.

However, as of this year, no direct international cargo flights leave Lambert. In addition, the only international passenger flights from Lambert go to resort destinations in Latin America. Whatever demand there is for Missouri exports in Latin America generally, it is unlikely that this demand is in seasonal resort towns such as Cancun and Montego Bay. As HB 1500 only allows tax credits for cargo on direct international flights, there may be few or no companies to take advantage of the proposed tax credit.

So who benefits? One possibility is that this bill is designed to subsidize Brownsville International Air Cargo Inc., which was in negotiations with Lambert for cargo space that could involve freight forwarding to Mexico. Another possibility is that the tax credit will act as another carrot to attract direct international flights to Lambert. Passenger airlines make 5-10 percent of their revenue from “belly cargo” on passenger flights. Making that cargo more profitable could make Lambert more competitive.

While these might seem like enticing goals to some, they are far from promoting Missouri’s foreign trade. The fact is, most cargo hubs in the United States are at either the major air passenger hubs (Los Angeles International Airport, JFK International in New York, etc.) or centers for major shipping companies (Memphis International Airport). Export tax credit or not, Lambert will not become a major air traffic hub when its landing fees are three to four times those of competing airports. Subsidizing a direct flight to Europe or Latin America may bring benefits to a few, but there is little reason the whole state should pay for this.

Like the original Aerotroplis plan, HB 1500 gives tax credits to select industries with only long-shot hopes for significant increases in Missouri exports. Saint Louis could be better off by making the airport, the city, and the state more competitive and economically vibrant, not pinning hopes on tax credit magic.

The post Aerotropolis Revisited appeared first on Show-Me Institute.

The document, in its entirety, follows.

We must create the demand, political and economic timetables are not the same, need private business to take the lead, like a Ross Perot and his business now employing 27,000 in Dallas. We need someone, not a government agency, to make things happen.

As Mr. Tubbesing notes, “it’s all about demand.” Where’s the entrepreneur that would drive the Aerotropolis project forward and make it a success?

The post China Hub Document: “We need someone, not a government agency, to make things happen” appeared first on Show-Me Institute.

In officially joining the “Aerotropolis” bandwagon and calling for a special session of the Missouri Legislature in September, Nixon used the phrase “Let’s get it done” several times in a twenty-minute speech. That was his way of endorsing the much-talked-about bill to support the development of an air cargo hub at Lambert-Saint Louis International Airport.

The bill would pass out $360 million in tax credits – with $300 million going to support the development of additional warehousing space and the rest going as an inducement to freight forwarders to send additional cargo through Lambert.

But if the goal is to transform Lambert into the world’s next great cargo hub, will this legislation be enough to “get it done”? Will it succeed in creating thousands of new jobs and providing a major boost to the region and state?

There is no reason to suppose it will.

As policy analysts at the Show-Me Institute have pointed out in a number of papers and commentaries, there are acres and acres of unused warehousing space in and around Lambert. If setting up a Midwestern cargo hub at Lambert is such a great idea, why has the sensible money stayed on the sidelines? Why does the hub need tax credits or other government guarantees to attract investments for upgrades, retrofits, or new construction for refrigeration?

After months of discussion, supporters of the Aerotropolis legislation have yet to produce a serious cost-benefit analysis of what Missouri taxpayers should expect in return for a substantial investment in the project.

The St. Louis Regional Chamber and Growth Association (RCGA) produced an eight-page statement making the claim that $300 million in public incentives for new warehousing would lead to $34 billion in private economic activity over the next two decades. That is an economic multiplier of more than 100. Perhaps suggesting the lack of a sound basis, the RCGA has yet to identify the assumptions used in reaching this astounding conclusion.

At the same time, no group supporting the proposed legislation has produced a shred of evidence that the Chinese government or even a single international carrier is committed to turning Saint Louis into a major air cargo hub.

Greg Lindsay, who co-wrote the book Aerotropolis: The Way We’ll live Next, has publicly scoffed at the pending legislation. He has called the proposed investment both “too much” – in representing an egregious waste of taxpayers’ money – and “too little” – as billions of dollars of additional investment would be required to enable Lambert to compete with established powerhouses such as Dallas Fort Worth and Chicago O’Hare International Airports.

It is not surprising that supporters of the Aerotropolis legislation are anxious to stop talking and swing into action in passing a bill. Even they must know the economic case behind the legislation does not survive close scrutiny.

In his press conference in Saint Louis, Governor Nixon engaged in the kind of chest-thumping that often accompanies large job creation schemes, calling for “decisive” action by the public sector. “We need a bold spirit and competitive vision again,” Nixon proclaimed. “We are competing against the world.”

But if business generation is the real goal, you don’t start by slaying the great Goliath of global competition. Instead, you begin by providing a better product or service that someone else will want to pay for – at a price that will provide a decent profit.

That kind of thinking is alien to glory-seeking and intervention-minded politicians. It is also alien to rent-seeking business people – business people, that is, who would rather lobby for special favors from government than compete in the open market; business people who would rather drop the real risk of capital investment at the feet of taxpayers rather than lift it onto their own shoulders.

Over the past several years, we have seen many examples of much touted job creation and pump-priming economic schemes, at the federal as well as the state level – everything from “cash for clunkers” to the massive $787 billion stimulus bill.

What they all have in common is simply this: They don’t “Git-R-Done.”

The post Aerotropolis: The Wrong Way to Get-It-Done appeared first on Show-Me Institute.

To say that things have not gone according to plan at Lambert-St. Louis International Airport is a considerable understatement. During the 1980s and 90s, Lambert ranked as the nation’s ninth or tenth busiest airport. Today it is no longer among the top 30. Since the year 2000, it has experienced a 60 percent decline in enplanements. Lambert also went from debt-free to being saddled with $877 million in long-term debt when the third runway opened for public use in 2006.

Because of the adverse combination of reduced traffic and heavy debt (now equal to seven times annual revenues), Lambert has been forced to raise its landing fees to more than double or even quadruple those of competing airports, and that, in turn, has caused a number of carriers to vote with their wings in shunning the airport.

The third runway is seldom used. It isn’t needed at today’s traffic levels (less than one third of what the airport’s planners were anticipating), and remaining airlines avoid using it unless forced to do so by bad weather (the two pre-existing runways are too close together to permit simultaneous instrument landings) because it is farther away from passenger terminals. Even the “International” in airport’s formal name has become a misnomer, as St. Louis has the unenviable distinction of being the biggest metropolitan area in the nation with no direct scheduled air service outside of North America.

All of which has led to an improbable question as political and civic leaders in the St. Louis region ponder the future: Can the self-styled “Gateway to the (American) West” reinvent itself a futuristic, airport-centered Gateway to the Far East?

Joined by the Saint Louis Regional Chamber and Growth Association (RCGA), political leaders in St. Louis City and County have appealed to the state of Missouri for assistance in boosting the ailing airport. That is to be expected. What is remarkable, however, is the broad bipartisan support that has emerged at the state level for a hastily conceived plan – described by RCGA and others as “The Big Idea” – aimed at inducing the Chinese government and world air carriers to establish a major air cargo hub at the under-utilized Lambert-St. Louis airport.

The proposed legislation would dole out $360 million of state tax credits for the purpose of creating a “China Hub” or “Aerotropolis” at Lambert. And that in itself is a tell-tale sign of an“investment opportunity” that is an accident waiting to happen. As we have argued in number of commentaries, targeted tax credits are very similar to “earmarks” – narrow public subsidies handed out to powerful special interests. We have shown that several of the likely applicants for Aerotropolis tax credits are warehouse and real estate developers already eligible to receive millions of dollars of state and local tax incentives.

In truth, for all that it has been touted as the “Big Idea,” the Aerotropolis plan seems to consist of little more than a hope and a prayer, accompanied by a good deal of political grandstanding with unrealistic projections of massive job growth and economic stimulus. The RCGA produced an eight-page statement making the claim that $300 million in public incentives for the Aerotropolis – to facilitate the construction of new warehousing space – would pay for itself more than 100 times over in just two decades – leading to $34 billion in private economic activity. Saying little about the methodology that was used, the organization cited a single computer forecasting model to support this extraordinary claim.

Neither the RCGA nor any other organization has produced a detailed feasibility study. No one supporting the Aerotropolis has produced evidence that Chinese authorities and major carriers are contractually or otherwise committed to turning Lambert into a major air cargo hub – provided that the airport is able to meet certain conditions in the provision of additional warehousing space and other facilities. In fact, we have shown that St. Louis already has acres and acres of surplus warehousing space in the immediate vicinity of the airport – enough, according to Michael Webber, an international air cargo consultant, to provide for the projected traffic of eight weekly freighters cited by Aerotropolis supporters.

So where is the evidence that massive tax credits are the magic ingredient needed to turn St. Louis into one of principal caravansaries along the aerial Silk Road of the future – connecting China and other Asian nations to the American Midwest, with onward connections for air cargo to other parts of the world as well?

There is none that we found in months of diligent searching. Instead, proponents rally support by making it sound as though other airports – in Detroit, Chicago, Cincinnati, Indianapolis or other cities – will seize the gold ring for themselves if the city and state fail to take preemptive action. It’s the old argument – Build it and they will come.

At the Show-Me Institute, we have cited numerous instances, both in the St. Louis region and around the state, where targeted tax credits have failed to produce promised economic results. The list includes failed shopping centers, a stalled “Ballpark Village” in downtown St. Louis, and other supposed economic wonders that have turned sour.

Meanwhile, the cost of this misguided corporate welfare has mounted. Over the past 12 years, tax credit redemptions in the state of Missouri have quintupled – growing from $103 million to $522 million per year. Every time our lawmakers pass out more “gifts” to some businesses, they are forced to dig deeper into the pockets of other taxpayers – both businesses and individuals.

That is not fair. And it is not smart public policy either.

More than a decade ago, Lambert-St. Louis International Airport rolled the dice on an ill-advised gamble on future growth that wasn’t there. Let’s hope it’s not about to repeat the same mistake.

Andrew B. Wilson is a fellow and Patrick Ishmael is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri Public Policy.

The post A Starry-Eyed Proposal To Rescue an Airport and Revitalize a Region appeared first on Show-Me Institute.

The post What’s Wrong with Aerotropolis: What’s the $300 Million for? appeared first on Show-Me Institute.

Quote:

Major Findings

Lambert-St. Louis International Airport major infrastructure components:

• Runways
• Ground handling
• Warehouse

All sufficient to manage and handle wide body air cargo flights from China. A recent on-site visit by a major international logistics firm has provided validation.

Referenced here and here.

The post Aerotropolis: Aerostrata “Six (6) Month Progress Report,” July 2010 appeared first on Show-Me Institute.

Despite Aerotropolis proponents’ tendency to dismiss every expert who dares to cast doubts on the proposal, yet another one has come forward. The latest person is none other than Tom McKenna, marketing director for the Kansas City International Airport. McKenna told the Star the following:

Not everybody can buy their way into being an air cargo hub or aerotropolis.

And:

To think you would get them to break out the Asian stuff, or just the China stuff, and incentivize them to aggregate that in St. Louis doesn’t make any sense. It’s not going to happen. … Missouri taxpayers should be very concerned about this.

At this point, the Aerotropolis tax credits make almost no sense. Proponents have not demonstrated that there is a lack of warehouse space, despite their plans to award up to $300 million to subsidize warehouse construction (or could the money actually end up going to existing structures?).

The very public commission pushing for the subsidies has not provided a feasibility study for the Aerotropolis concept. And what about the provision that appears to award a great deal of power to the mayor of Saint Louis or to the nearby county executives?

And now, McKenna is yet another high-ranking official questioning the wisdom of the project itself. He joins Roel Andriesson, senior vice president of international sales for Tyson (yes, that Tyson), Greg Lindsay, author of the very book on the Aerotropolis concept, and two air cargo consultants.

Supporters of the Show-Me Institute have said that we are “bold” to raise these questions. But really, what is bold about asking for a justification for taking $360 million from Missouri taxpayers in order to award it to a small group of well-connected individuals? Actually, isn’t it bold to ask for $360 million without any substantive analysis as to why the subsidy is needed?

I have to wonder, given the number of unanswered questions regarding the Aerotropolis legislation and the project itself, when will elected officials start voicing their private concerns about Aerotropolis publicly?

I agree with the Star. The cost of these tax credits, $360 million, is “eyebrow raising.” But raised eyebrows alone won’t fix it.

The post Both Kansas City Star and Kansas City Airport Question Aerotropolis appeared first on Show-Me Institute.

“As you start stripping away carriers that automatically won’t be part of the Saint Louis equation,” Webber said, “I think any expert that isn’t on the payroll of the proponents of this project would probably come up with a likelihood of [Aerotropolis] being successful at something under 1 percent.”

In response to a question about local cattle farmers flying their herds overseas, Webber told Brennan that a livestock export facility built in Kansas City was used fewer than 10 times after it was constructed two decades ago. Atlanta had constructed a similar facility for transporting horses, used during its 1996 Summer Olympics, but even in that international hub, he said, use for the facility plummeted after the games to levels similar to those of Kansas City’s livestock facility.

And Webber was particularly skeptical of the warehouse component of the legislation, which constitutes the bulk of the tax credits.

“When you see the projections as wildly exaggerated as this is, you don’t only smell a rat. You smell a rat that’s wrapped in week-old fishpaper,” Webber said.

“So, when you start talking about folks going from 100,000 square feet of proven need for warehouse space to asking for 27 million [square feet], you’ve got to think this thing is really rotten.”

Be sure to listen to the full segment.

The post “You Smell a Rat That’s Wrapped in Week-Old Fishpaper” appeared first on Show-Me Institute.

In no place was this clearer than in Saint Louis during the 2011 legislative session. Under the guise of increasing international trade, Saint Louis developers and politicians pushed hard for creating $360 million in state tax credits. Unfortunately, those tax incentives had little to do with realizing the Aerotropolis dream.

Of the $360 million, $300 million would have gone toward subsidizing the construction of warehouses, while the remaining $60 million would have been devoted to encouraging international freight forwarders to send flights to Saint Louis.

Although one sixth of the total package would at least go toward bringing air traffic to Saint Louis, the remaining $300 million in warehouse subsidies was troublesome. Warehouse subsidy proponents excitedly discussed the 27 million square feet of new warehouse space that could be constructed with those millions, without mentioning that more than 18 million square feet in developed warehouse space near the airport was already vacant and available.

“If someone’s looking for space, we have space available,” said David Randolph, vice president of CBRE, an area real estate brokerage firm that managed the sale and lease of many of those vacant warehouses. Randolph said that the subsidies for new construction would be unfair to individuals who had already built warehouses in the area.

The Midwest China Hub Commission (MCHC), the same Missouri organization promoting the creation of an Aerotropolis in Saint Louis, noted in its internal review of the Missouri tax credit legislation that the state money slated for warehouse construction could end up funding activities unrelated to air transportation.

The MCHC worried that the Aerotropolis tax credit legislation defined “cargo activity” too broadly. From its analysis: “The definition … specifically includes facilities related to truck, rail and water transportation; this may be appropriate, but may incentivize facilities that have only a limited relationship to the Air Cargo facility …”

Furthermore, the MCHC noted that the areas most likely to be awarded the warehouse tax credits had already received nearly $100 million in development tax incentives, and had the ability to draw upon nearly $200 million more. Here at the Show-Me Institute, a nonpartisan research organization dedicated to studying Missouri state and local policy, we wondered why there was such a push for the $300 million in new tax credits, given the incredible amount of tax incentives already available to area developers. At some point, the state must stop subsidizing failure.

At no point had the Chinese government or Chinese cargo companies stated publicly that the hundreds of millions in subsidies were a crucial prerequisite to sending more flights to Saint Louis. In fact, the idea of increasing international trade at the Lambert–St. Louis International Airport had been in the works for years. Only at the last minute did a prominent developer’s attorney, who was also involved in the talks with China, propose the subsidies.

Increased trade is important for any economy, and the United States should not wall itself off from other countries. Air cargo is certainly one way to expand trade throughout the world. Unfortunately, though, the best ideas can be co-opted in order to push benefits for the politically powerful.

If Aerotropolis-style development is the right move for a city, private investment and development will blossom without handouts. The Aerotropolis idea should not be used as a back door to push through large-scale subsidies for the select few. Hopefully, other cities can avoid the political posturing and favor-trading that Saint Louis found itself mired in.

Audrey Spalding is a policy analyst with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Trade Promotes Growth, Except When Hijacked by Subsidy-Seeking Special Interests appeared first on Show-Me Institute.

St. Louis area business leaders and airport operators propose to divert regional air cargo now dominated by Chicago O’Hare International Airport to what locals call the “Midwest China Hub” and “the Big Idea”. Rather than test the likelihood of the hub’s success, proponents and their enablers simply assume Lambert will attract the required service and then promise benefits based on that success. The proposition’s champions and their consultants performed a meager analysis. Shockingly, the State of Missouri has already directed millions in public money on that basis and the Missouri Legislature almost approved hundreds of millions in additional support without any independent analysis.

Had an independent analysis been conducted, overwhelmingly critical concerns would have been exposed.

Mere context is damning enough. According to Airports Council International – North America, St. Louis ranked 39th among North American airports end of calendar year 2010. By comparison, Kansas City International Airport was ranked 45th and until 2009 had led St. Louis for a decade. In fact, St. Louis not only trailed Kansas City but also Des Moines. During a decade that found the U.S. air cargo industry in collapse, St. Louis’ annual air cargo volume declined 20% comparing 2010 levels with calendar year 2000. St. Louis’ air cargo slide is not atypical of the industry but nothing suggests it is in expansion mode.

Worse, an unprecedented surplus of on-airport air cargo capacity exists after a decade of nationwide contraction that witnessed the disappearance of such formerly common on-airport all-cargo names as Airborne Express and Emery Worldwide, as well as sharp contraction by BAX Global and DHL. Medium-sized U.S. airports are fortunate to still have both UPS and FedEx. The two integrated carriers account for at least 90% of air cargo at most U.S. airports, including St. Louis.

Lots, lots more at the link. Cross-state, Tony’s Kansas City picks up the story under the headline “MUST READ!!! GROUNDBREAKING EXPOSÉ UNCOVERS BIG MONEY STL AIR CARGO FACILITY “FLEECING” AND A SECOND-CLASS KANSAS CITY CONNECTION!!!”:

Just like most development schemes . . . The economic promises and utility of this project are suspect.

But even more importantly for this town, his reporting and analysis reveals. . .

WHILE IT MIGHT BE A BOONDOGGLE, KANSAS CITY WAS COMPLETELY OVERLOOKED IN THIS IMPENDING MISSOURI AIR-CARGO FACILITY HOT MESS!!!
[…]
Local politicos overlook this kind of IMPORTANT INVESTIGATIVE JOURNALISM at their own peril, and it’s troubling that $400 million of taxpayer cash to support a competitor across the state doesn’t arouse any concern from either our local legislators or local business media.

More is coming. Stay tuned.

The post Air Cargo Expert Hammers Aerotropolis Plan in Industry Publication appeared first on Show-Me Institute.

In retrospect, the wonder is that so many legislators from across the state rushed to support the bill. As proposed, the China Hub legislation would, over a period of years, distribute some $360 million in tax credits and other subsidies to private developers in and around the Lambert–St. Louis International Airport. To what end?

Supporters of the legislation made wildly optimistic claims. They talked about how this was a can’t-miss proposition that would create “thousands of jobs” and “jump-start” economic activity.

But where was the credible evidence to support the giddy optimism? Short answer: There was none.

Legislators of both parties were prepared to overlook the absence of serious economic analysis. Still more, they were prepared to ignore the absence of any firm statement from the government of China or leading international carriers that they would send more flights to Saint Louis if granted substantial tax credits.

An eight-page “study” by the Regional Commerce and Growth Association (RCGA) was indicative of the slipshod thinking behind the so-called “Big Idea.” The RCGA paper did not attempt to show any real link between the tax credits and increased flights. It somehow assumed that those flights would magically appear.

In response to an information request, the Show-Me Institute obtained a review from the Midwest-China Hub Commission that revealed internal doubts and inconsistencies.

First, it showed that facilities around the airport were already on the receiving end of a surprisingly large and unreported amount of government incentives — $93 million had already been authorized or expended, and another $192 million was available for future use. Second, the review conceded that “Many unknowns remain such as: catalysts for increased flights, cargo market share capture, background analysis, etc.” The commission also noted that the China Hub legislation “may incentivize facilities that have only a limited relationship to the Air Cargo facility.”

In a series of commentaries, policy analysts at the Show-Me Institute showed how the proposed legislation was likely to lead to an underwhelming result — supporting existing operations at Lambert, and contributing to the growth of still more surplus or unneeded warehousing facilities in or around the airport.

In the end, Missouri lawmakers could not agree on a comprehensive set of changes that would both sunset tax credits in other development areas and still leave room for a fresh set of new tax credits for the China Hub in Saint Louis.

The Show-Me Institute instilled a badly needed sense of reality in the whole debate.

Tax credits are not free money. Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation. There is a long and dismal history illustrating the multiple failures of heavily subsidized commercial enterprises.

Instead of awarding more tax credits to favored individuals and industries, legislators should do something truly innovative: They should lower taxes across the board for all Missourians. That way, economic growth can occur organically, and in areas that legislators might not expect.

Any attempt to call a special session of the legislature for the purpose of resurrecting the China Hub idea should be rejected. If this idea really is a can’t-miss proposition, entrepreneurs in the private sector will find a way to make it happen. Our state lawmakers are not equipped to pick economic winners and losers.

Andrew B. Wilson is a fellow and Audrey Spalding is a policy analyst with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Defeat of ‘China Hub’ or ‘Aerotropolis’ Bill a Significant Victory for Missouri Taxpayers appeared first on Show-Me Institute.

It turns out that we weren’t the only ones who had reservations about the $360 million in so-called “Aerotropolis” tax credits that would have subsidized warehouse development and international flights.

The Midwest-China Hub Commission (MCHC), the organization that has been pushing for increased cargo flights between Saint Louis and China, itself raised many of our concerns — and even more of its own — in its analysis.

In response to an information request, the Show-Me Institute received the MCHC’s review of the Aerotropolis tax credits, and it is interesting. So, consider this blog post as having been written with a great deal of assistance by the folks at the MCHC. I think they raise excellent points about the bill, and ones that taxpayers should be concerned about.*

A Lot of Tax Money Has Already Been Spent or Will Likely Be Spent in the Area

Most concerning to me is the MCHC’s analysis showing that much taxpayer money has already been spent on sites that would likely qualify for the Aerotropolis tax credits. Much more will likely be spent in the near future.

From the MCHC’s analysis: “… 192 million in prospective incentives are currently available at the major development sites located at or near Lambert Airport.” According to the analysis, another $93 million has already been authorized or expended at those sites, bringing the total amount of taxpayer money spent, authorized, or available in the future already to more than $285 million.

The Aerotropolis tax credit package would lump another $360 million on top of those tallied in the MCHC’s analysis.

Then, the analysis notes that other existing tax credit programs could be used to subsidize the promised development and resulting warehouse jobs, including Missouri Quality Jobs tax credits.

So, why exactly is more taxpayer money needed? Haven’t these sites received enough subsidy already? Why award an additional $300 million to subsidize warehouse construction on top of the subsidies already available?

How Do We Know That Increased Cargo Flights Will Materialize?

In its review, the MCHC notes that “Many unknowns remain such as: catalysts for increased flights, cargo market share capture, background analysis, etc.”

This is exactly the point that I have raised repeatedly. So far, the Regional Chamber and Growth Association has produced an eight-page “study” that purports to show the benefits of awarding $360 million in tax credits. But the study doesn’t show that increased flights will materialize if tax credits are awarded. In fact, it doesn’t show that increased flights will materialize at all — the RCGA study just assumes that those flights will appear. Out of thin air, as it were.

I think legislators should heed this review and wait for more information that would reveal exactly what could cause more international flights to come to Saint Louis.

Could the Tax Credits Go to Activity That Has Little to Do With International Air Cargo?

The MCHC review raises a fascinating point. Could the Aerotropolis tax credits go to companies for activity that has little to do with international air cargo? The commission’s analysis notes that the Aerotropolis tax credit legislation defines “cargo activity” broadly. From the analysis: “The definition … specifically includes facilities related to truck, rail and water transportation; this may be appropriate, but may incentivize facilities that have only a limited relationship to the Air Cargo facility …”

So, would the proposed tax credits go to new economic activity? Or, given the broad definition of cargo activity, could the tax credits end up subsidizing business as usual at Lambert?

The concerns listed above are ones that I think persist in the bill, despite recent changes to the legislation. I want to point out that although the Show-Me Institute was the only organization publicly raising questions about unlimited costs contained in earlier versions of the Aerotropolis legislation, the MCHC’s analysis raised the concerns internally.

From the review:

Most critically, a close read of [the tax exemptions included in the initial version of the Aerotropolis bill] indicates (by omission) that there is NO cap placed on the total cost to the state of these two programs.

Thankfully, legislators took those uncapped exemptions out. And, luckily for taxpayers, the Aerotropolis subsidies did not pass the Missouri legislature this session. But many legislators are not giving up hope. Some public officials are even suggesting that the governor call a special legislative session in order to pass the subsidies this year.

Maybe instead of pushing to award $360 million in taxpayer money, legislators should address our — and the MCHC’s — concerns. Why throw more money at this area? Where’s the evidence of increased international cargo flights? Why write tax credits into law that could end up subsidizing business as usual?

* For the policy wonks: I know that this review by the commission concerned SB 390, and that the most recent version of the Aerotropolis tax credit proposal was contained in HB 116, which had some changes from the previous version of the bill. The problematic issues listed in this post are still present in the HB 116 version of the Aerotropolis tax credits. I did not include the commission’s concerns about eligible costs or tax exemptions, because those provisions were removed.

The post Even the Midwest China Hub Commission Knows “Aerotropolis” Tax Credits Are Flawed appeared first on Show-Me Institute.