The article compares 2019 and 2020 taxable sales throughout the St. Louis area. Most of the St. Louis area saw a decline in taxable sales when comparing the second quarters of 2019 and 2020. St. Louis County taxable sales were down by just over 10 percent, while St. Louis City taxable sales were down by over 25 percent. The image below from the NextSTL article shows the change in taxable sales by zip code. Notably, taxable sales were down 89 percent in the Downtown zip code, 76 percent in the Airport zip code, and 75 percent in the Downtown West and Midtown zip code.

Taxable Sales/Use % Change Apr-Jun 2020 v 2019

This makes sense—a lot of these zip codes rely on visitors, bar and restaurant patrons, and office workers spending their money away from home. All these things became rarer during the economic shutdown.

So what is one takeaway from the pandemic? Our governments need to take a hard look at how they are generating revenues. If revenues are unpredictable, promised public services can be compromised.

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In Kansas City, the effort to spend $1.2 billion on a new single terminal has been limping along for years. Beset from the beginning by self-inflicted wounds from Aviation Department leadership and an aversion to open discussion (Mayor James recently tried to require elected officials to sign non-disclosure agreements about competing bids), the effort now appears to be racing toward a November election. Voter support is in no way assured.

In Saint Louis, a consortium of business interests and former city officials are moving forward with a privatization effort that has yet to be the subject of much public discussion. While free-market solutions are a worthwhile consideration for many public services, market decisions are only as good as the information available.

Why the secrecy over matters that are obviously of great public interest? If Kansas City and Saint Louis are developing good plans for managing, developing, or privatizing their airports, their leaders should be confident that they can defend the plans in the marketplace of ideas. If the plans are flawed, isn’t it better to expose the problems while there is still time to make adjustments?

One thing is certain. The longer deliberations are kept secret, the more the inference will grow that the officials leading the efforts have something to hide. It makes for an inauspicious start for what will, eventually and inevitably, become campaigns for public approval.

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The city and the commission that oversees the airport have endorsed a plan to impose $3 pick-up and drop-off fees on TNCs serving the airport. That means every time a passenger is either picked up or dropped off at the airport by drivers for companies like Uber or Lyft, they’ll pay an additional $3 on top of their regular fare. There are two apparent motivations for the fees: (1) the airport wants to collect as much revenue as possible; and (2) taxis pay a $4 pick-up fee at the airport, and so regulators want to “level the playing field” between taxis and the more popular TNCs. There are also two fundamental problems with the proposal.

For one, taxis pay a special pick-up fee partially because they’re guaranteed fares at the airport. They queue at a designated area where, after waiting their turn, they get a fare. But this designated area wasn’t free to build, and TNC drivers cannot que there for guaranteed fares. TNC drivers respond to passenger requests in real time, and so must find fares “on their own.” Moreover, TNCs impose no special costs on airports like taxis do in terms of a designated waiting area or congestion. So if the TNC business model doesn’t necessitate these extra costs, why should TNCs or their passengers pay for them? Should TNCs be punished for being efficient? The answer may irk you as much as it does me: because of the “convenience of being allowed to offer curbside pickup.”

Secondly, it is not the government’s job to pick winners and losers. By protecting some market participants at the expense of others, policymakers hurt ordinary consumers—the overwhelming majority of society—in two ways. In the present case, consumers must first pay artificially higher prices for a service they demand. Second, economic progress is slowed by propping up failing businesses. Some city officials say that allowing TNCs to operate at the airport could hurt taxis’ business. They’re exactly right. Ford’s Model T hurt the carriage industry, and the advent of electric refrigerators hurt the ice industry—but society as a whole grew richer. The market destroys some jobs as others are created. Imposing fees on TNCs will not “level the playing field”; it will simply protect government-favored businesses from the pressures of the market (i.e., the preferences of consumers).

If policymakers truly want to level the playing field, they should eliminate fees, regulations, and other perks that help some at the expense of others—for both TNCs and taxis. Deregulation has already proved itself effective in the vehicle-for-hire industry. I hope officials keep this in mind going forward.
 

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The fact that air traffic grew faster in the rest of the nation than it did in Missouri could be taken as meaning that Missouri is lagging the rest of the nation in growth. But in reality, most of Missouri’s airports—including Kansas City International (MCI), Springfield-Branson (SGF), Joplin Regional (JLN), and Columbia Regional (COU)—grew faster than the national average, in the case of Springfield, Joplin, and Columbia much faster (at 8.4 percent, 11 percent, and 16 percent, respectively). Springfield’s recent growth may be enough for it to regain its small hub airport status, which SGF lost following the recession. The performance of Missouri’s largest airport, Lambert-St. Louis International (STL), dampens the state’s overall numbers. Despite a concerted push to get more flights, STL’s passengers actually decreased by about 0.6 percent last year.

The poor performance of STL compared to other airports in Missouri and nationally may be in part due to a relatively weak recovery in the Saint Louis area. It is well understood that underlying economic conditions mostly determines total airline traffic in large cities. However, Saint Louis did see some positive economic growth in 2014, along with a large increase in employment.

Another factor that may affect STL’s ability to gain both flights and passengers is cost. STL’s cost per enplaned passenger, at almost $15, is about three times the costs at MCI or SGF. Higher costs can mean fewer or more expensive flight options, dampening demand. STL’s elevated prices mainly stem from massive debt taken on to build a new runway in the early 2000s, planned when the airport was still a TWA hub.

STL’s leadership, unlike those at another Missouri airport, see the airport’s high costs as a major hurdle toward increasing traffic and are taking aggressive steps to bring in more revenue and rein in costs. This includes leasing out unused land to local businesses and attempting to attract more national and international cargo shipments.

Whether or not these strategies will succeed is as yet unknown. But perhaps the lesson from STL’s experience for all Missouri’s cities is that if their airport provides what it needs at a low price, it will be in the best position to contribute to, and benefit from, better economic growth.

The post Missourians Take to the Skies With Increasing Numbers appeared first on Show-Me Institute.

[Fees] that are generated at the airport stay in the airport, to take care of the needs of the airport. . . . The money from the airport can’t be used for streets and sewers and none of that. . . . Airport money stays with the airport. If you don’t spend it on the airport, it doesn’t get spent.

He repeated it in his State of the City address in 2014 and again when his Airport Terminal Advisory Group issued their report. In that report, the advisory group repeated the claim, asserting on page 15,

Another common misperception was that funds or profits from the Aviation Department (legally organized and maintained as a Kansas City Enterprise Fund) could be used by the City of Kansas City to fund other municipal purposes unrelated to Airport operation.

The problem is that none of this is true. The city borrowed money from the airport in 2010. Then, during this mayor’s tenure, the city renegotiated the debt to extend the life of the loan to 2016.

Need more? Look no further than page 179 of the mayor’s own Submitted Budget for FY 2015-16, which includes $500,001 for “Aviation Loan Repayment.”

The mayor may have his own opinion on the airport, but he cannot have his own facts, much less two sets of facts.

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Airports in Missouri already are self-sufficient and/or receive significant federal and state funds. Missouri’s largest commercial airports, Lambert-St. Louis International, Kansas City International, and Springfield-Branson, are capable of financing any reasonable capital improvement projects without aid. In addition, these airports receive federal money through the Airport Improvement Program and the Passenger Facility Charge. Missouri’s largest airports do not need sales tax money.

Missouri’s smaller commercial airports, though not self-sufficient, already receive significant local, state, and federal aid. For instance, Columbia Regional Airport received $8 million in federal grants in the past three years and is slated to receive an extra $350,000 in the next five years from state airport grants. This is on top of a regional revenue guarantee scheme to entice airlines to fly out of Columbia without risk of financial losses. Joplin’s airport received $13 million in federal grants in the past three years and expects $10 million in state aid over the next five years. It also is a beneficiary of the Essential Air Service (EAS) program, which is essentially federally subsidized airline service.

Eleven of the proposed sales tax recipients are general aviation airports. While they may serve a useful purpose to local businesses and recreational fliers, these airports already are heavily subsidized. For example, Camdenton Memorial Airport is a small airport that plans to spend almost $826,443 in the next year with less than $100,000 of user-generated revenue. The remaining funds will come from the city coffers and federal or state grants. Without any sales tax money, this small airport with only 30 based aircraft is scheduled to receive $5.85 million in aid.

Simply put, like much of Missouri’s transportation system, airports already have effective funding mechanisms. For the smaller airports, it is probably too effective, unless you love enormous subsidies for small assets.

The fact that cities and counties plan to spend general sales tax money on Missouri airports is another reason the proposed Amendment 7 is terrible public policy.

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In the United States, due to significant financing advantages given to publicly owned airports and onerous federal regulations, all but one of the 502 commercial service airports in the United States are publicly owned, most by local municipalities. That one private airport is Branson Airport in southern Missouri. As the case study points out:

The success of Branson Airport may be uncertain, but one of the features of private enterprise is that individuals and companies risk their own capital, not of that of their fellow citizens, in hopes of a larger return.

The other six commercial service airports in Missouri are all publicly owned, the largest of which are Lambert-St. Louis International Airport (STL) and Kansas City International Airport (MCI). However, they also can benefit from partial or full privatization. The most basic level of privatization, contracting airport services, already is in place at both Lambert and Kansas City. These contracts allow the airports to attain services through competitive bidding from the private sector. MCI is one of the few airports to privatize its security screening through TSA’s Screening Partnership Program (SPP).

However, airports in Missouri can go much further in privatizing operations. This includes privatizing the management of airports or even leasing the airports to private entities through the Airport Privatization Pilot Program (APPP). Kansas City considered this option for MCI once before. This program is actually the only way a municipality can use proceeds from its airports on other public goods. However, the program requires a complex negotiation between the local municipality, the FAA, airport workers, and the airlines. As the case study states:

Should Kansas City pursue the APPP route of privatization, the city could expect significant proceeds from the sale. However, it would require complex and lengthy negotiations with the potential buyers, airlines, and the FAA in order to participate in a program with no record of long-term success.

The full or partial privatization of airports can have many benefits for air service in the state, whether it is simply reduced costs or financial gain from an airport sale. The case study “Government Privatization in Missouri: Successes, Risks, and Opportunities” outlines some of the possibilities that might allow Missouri to create an example of airport privatization for the rest of the nation.

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The City of St. Clair, located in Franklin County, has an airport problem. Namely, the city is losing money on its small, general aviation airport. As the St. Clair Missourian reported last week, the airport has only four remaining tenants and use of the airport is at an all-time low.

So why not simply put up the “for sale” sign? For the last five years, the city government has been trying to do just that. But due to stringent federal regulations, the sale of even a miniscule airport can be an odyssey for local governments.

In theory, when a municipality builds and maintains an airport, whether that be Lambert-St. Louis International Airport or St. Clair Regional Airport, that government is free to do what it pleases with its property, including selling it. However, if a city has accepted federal money to upgrade its airport, as St. Clair has many times, federal regulations, known as the FAA’s grant assurances, tightly restrict that freedom.

Two of the more cumbersome assurances for a city like St. Clair are Nos. 5 and 25. Assurance No. 5 obligates St. Clair to maintain it as a public airport and not dispose or sell any part of the airport without FAA approval. The FAA will only give approval if St. Clair can show that closing the airport improves aviation in the area. In addition, the dispensation to sell the airport does not free St. Clair from reimbursing the federal government all recent federal grants. This will cost the city more than $750,000.

Assurance No. 25 prevents any revenue from the airport from being used for non-aviation purposes. According to the assurance, money from the sale of an airport is airport revenue. So to sell, St. Clair will have to submit a report on fair market value of its airport to the FAA, and put all sale proceeds from the sale into an escrow account for other regional airports to use on aviation-related purposes. The FAA has already rejected a number of St. Clair’s valuations as too low, further delaying any possible sale.

St. Clair’s experience trying to sell its own money-losing airport should act as a reminder to Missouri municipalities on the complications of having a public airport and accepting federal dollars. It is better to support the development of private airports or lease existing airports to private owners than to spend money and time begging the federal government to let them get rid of a bad investment.

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The headline? The near future of all air service is looking grim. Airlines continue to consolidate service at their largest hubs, consolidate with each other, and will continue further reductions at small community airports.

Columbia has felt this decline over the past several months, and the final Frontier Airlines flight from Columbia took off for Orlando, Fla., on Monday. Columbia is not alone. Data in the MIT study shows that Missouri airports, along with almost every other airport in the country, have lost service over the past five years.

This data shows us that the fate of air travel is not dependent on how shiny your airport is. Airlines have shifted away from capacity expansion because it was not a profitable strategy. They will continue to seek ways to maximize profits; unfortunately, small- and medium-sized airports are disproportionally affected in the process.

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Yet public money has already gone toward Aerotropolis. Last year, Saint Louis County officials diverted $3 million in gambling tax revenues to support Aerotropolis. At the time, Lambert’s director, Rhonda Hamm-Niebruegge, told the St. Louis County Economic Council that with the gambling money (emphasis mine),

We are ready to go. . . . These funds put the muscle into our argument that St. Louis is the right place to move cargo around the world. We have capacity and we are happily uncongested, unlike most other United States cargo hubs, such as Chicago and New York.

What happened to the money? The St. Louis Post-Dispatch reported that not only did the original funds go unused, but that the airport is now gunning for a new $60 million cargo tax credit.

Last year, St. Louis County established a $3 million fund to subsidize cargo flights, but it has not been used. Airlines, say Hamm-Niebruegge, worry that they would burn through that pot too quickly; having a program worth $7.5 million a year for eight years will give the effort more staying power.

“It’s so critical for us to have a long-term view,” she said.

To summarize:

• In 2012, $3 million in casino taxes “put the muscle into [the airport’s] argument that St. Louis is the right place to move cargo around the world.”
• In 2013, not only was there such a lack of interest in the Saint Louis Aerotropolis project that no private actors drew on the money, but the airport says it needs more money. . . by a factor of 20.

If they have not already done so, policymakers have to ask themselves now: When will the Aerotropolis reality live up to the Aerotropolis rhetoric? Will it ever?

The fact is, Missouri’s economic development projects oftentimes live and die based on the promises supporters make, rather than the results they produce. Aerotropolis is simply a giant, tottering example of this unfortunate state of affairs. Now on its third time before the legislature and after literally years of puffery, it is time for Missouri to close the book on Aerotropolis and, more generally, other “big promise” tax credit projects. There are better ways to promote economic growth in Missouri. This is not it.

The post Part 2: It Is Time To Close The Book On Aerotropolis appeared first on Show-Me Institute.

At some level, taxing tourists, via special hotel taxes or other means, is appropriate. There is wide agreement that people are less price-sensitive when traveling and will absorb some additional taxes without changing behavior. So, my complaint is not with Columbia’s current 4 percent hotel tax, which is reasonable by municipal standards. I object to the fact that the first reaction of many cities when they are looking for new revenues is to raise the hotel tax. If the people of Columbia want and need a larger airport, they should pay for it. They should not try to obtain a free lunch by passing off the bill to tourists.

The estimated cost of the terminal expansion is $21 million. Is there another way to pay for that without increasing taxes? Absolutely. A decade ago, the Saint Louis suburb of Florissant privatized its water system. Missouri-American Water paid $14.5 million for it. Columbia, which is much larger than Florissant, operates its own water and electric company. Privatizing either (or both) of those operations could readily pay for a desired airport terminal expansion, if one is truly needed.

The question as to whether terminal expansion is truly needed is fair. The airport currently has just 21 outgoing flights from two carriers per week. The eventual goal (taken directly from the city’s own study) is to add “one or two” commercial air carriers and “a recurring flight” to Chicago. I am not an aviation expert, but I think taxpayers should demand stronger evidence of a true need before investing $21 million on the hope of a few more regular flights per week. Missouri has already experienced one disastrous airport expansion. Saint Louis is stuck in a vicious cycle where it is forced to keep its landing fees high to pay for the hundreds of millions of dollars in airport bonds it issued to pay for its new — and now totally unnecessary — runways.

Voters in two major Saint Louis suburbs rejected hotel tax increases (on top of the already high regional hotel tax) by wide margins in 2010. Those voters said enough is enough to tax increases and government growth. They noted the harm the tax increases would have done to hotels in those two cities. If given the opportunity, Columbia residents should consider sending the same message.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

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The Airport has been the hotbed of taxi controversies in our area.  Back in the 90’s, the airport cab regulation was so stringent that no new drivers had an opportunity to work there.  It was closed system that worked great if you had the goldmine, aka a license.  Not surprisingly, a new company sued and won.   After that, around 2000, anyone was allowed to become an airport cab, altough that just allows you to work from the airport to hotels, etc., and not the reverse, insane as that sounds.  Soon enough, there were so many new drivers at the airport that the older ones began coming to County Council meetings and demanding new regulations.  I would have preferred time and the free market be allowed to sort it out, but soon enough the State created this unified commission and the County and City went with that. 

I don’t mean to say that cabs should have no regulations.  I understand having cabs inspected and making sure cabbies have valid driver’s licenses.  I am less sure about dress codes and I can’t believe the rules still forbid airport cabs from picking up people downtown and taking them to the airport after they have just dropped somone off at the same hotel.  I wish the drivers with Allen Cab all the best.  I would feel more confident in their future if they had the free market to count on and not some regulatory commission.

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