Cassandra Griffin pleaded with the board to let her buy a small lot right next to her house. She has been maintaining the lot for years because the owner neglected the property and Griffin wanted the neighborhood to look nice. She continued maintaining the lot when the LRA acquired it earlier this year. Her offer was lower than the city’s estimated value of $1,454 — but she explained that she has already spent close to $4,000 on upkeep.

The LRA should be happy to give this small plot of land to a woman who is proud of her neighborhood and wants to keep it in good shape. Instead, one of the board members remarked that the LRA has only owned this property for about a year, and it is big enough to build on so someone else might want to buy it. Is that a good reason to turn down a buyer?

Here is a picture of Griffin’s home and the empty lot she wants to purchase (from Google Maps):

The LRA’s mission is to put abandoned, tax-delinquent properties back into productive use. No one else has attempted to purchase this property. How long is the LRA going to hold onto it? If Griffin stopped maintaining the property, the city would spend taxpayer dollars on upkeep when they could let her own the property now, maintain it herself, and pay taxes on that land. The city could wait years before someone comes along who wants to build on this property (more likely, they may never come). Time is money.

The post Time Is Money appeared first on Show-Me Institute.

Last Tuesday, the St. Louis Post Dispatch reported that the Rockwood School District (of which I am a graduate) received an A+ rating for “transparency” among the 10 largest school districts in Missouri. According to the Sunshine Review, a non-profit group that concentrates on state and local government accountability, Rockwood’s website met all of their criteria and provides information regarding taxes, budgets, meetings, elected officials, administrative officials, contracts, audits, public records, academics, and background checks.

Some may see Rockwood’s website as a model for school districts to follow, but taking a closer look at the site, it is not perfect. For example, if you want to review the superintendent’s or other personnel contracts, benefits, pensions, or records of communication (like e-mails between the superintendent, the president of the teachers’ union, school board members, and the board secretary), you will not find it on Rockwood’s website. Instead, you have to make a specific request for public records, and depending on the information, it could cost you more than $18,005.

Is this worthy of an A+?

No, and taxpayers deserve more. Former Show-Me Institute Policy Analyst Audrey Spalding is exactly right, “It Is Time To Increase Public School Transparency.” We have the technology to share information online. Now it is time for school districts to step up and provide us with detailed information on how they spend our money.

The post Grading Public School Transparency: Does Rockwood Deserve An A+? appeared first on Show-Me Institute.

One such program is the University of Missouri-Columbia’s (Mizzou) K-12 online learning program. Yesterday, the Columbia Daily Tribune reported that the program is adding additional courses for the 2012-13 school year. The university now offers 11 online courses for Missouri high school students at a cost of $350 each. This program will certainly be beneficial to many students throughout the state, but it is just one way to use technology to improve options for students.

For more information on digital learning in Missouri and how technology can help transform education, check out former Show-Me Institute Policy Analyst Audrey Spalding’s case study.

The post Online Learning: When More Is More appeared first on Show-Me Institute.

More than 40 years ago, Saint Louis City set up a land bank in response to the exodus of its residents, and the vacant property they left behind. When the land bank was created, the hope was that it could return vacant property back to private, productive use.

Instead, the land bank has adopted policies which have compounded the vacancy crises. Most troubling is the land bank’s policy of giving area aldermen an inordinate amount of influence over whether someone can purchase property. Offers from residents are rejected simply because their local alderman does not express his approval of the sale.

Offers to buy vacant land bank property are often from neighborhood residents. The properties are generally in a state of disrepair, and the bidder is planning to repair the property in an attempt to make his or her neighborhood a better place to live. If the resident does not have the blessing of his local alderman, the offer is typically rejected.

Consider the case of 2925 Union, a rundown, 1-story brick building in Saint Louis that received offers from four different buyers. The Saint Louis land bank said no to all four offers. When the area alderman showed up at a land bank meeting and told the land bank to sell the property to another buyer, it did.

Tragically, this policy of deferring to area officials will be written into law if Philadelphia’s land bank ordinance is adopted. In its current form, Philadelphia’s ordinance forbids the land bank from entering into a transaction if the district council person expresses disapproval. This policy will almost certainly thwart development byresidents who do not have their councilman’s approval, even if the resident plans to put the property to productive use.

Our fear is not unfounded. This happens frequently in Saint Louis. The former deputy mayor for development told us that “the sort of working arrangement we have with the aldermen is that if they don’t want to do something, we don’t want to do it.”

In order to quickly get land back into private, productive use, a land bank should accept reasonable purchase offers, even if politicians oppose them.

Philadelphia should also heed Saint Louis’s failed attempts to hold property for future development. Show-Me Institute research revealed that between 2003 and 2010, the Saint Louis land bank rejected nearly half of all purchase offers. The most common reason for rejection was that the property was being held for future development. Unfortunately, the hoped-for future developments rarely materialize.

In Philadelphia, the land bank proposal establishes goals that may undermine efforts to return the land to productive use. The goals include otherwise laudable priorities, such as encouraging “affordable or mixed-income housing that is accessible or visitable” and “community facilities that provide needed services and enrichment opportunities; side- and rear-yards; urban agriculture; and community open space.” These goals may have the unintended consequence of providing a reason for the land bank to reject purchase offers that do not fit the land bank’s vision. Again, our fears are grounded in experience – this public policy failure has occurred repeatedly in Saint Louis.

To be clear, Saint Louis’s adverse policies are not written into law, and can be suspended at any time. Indeed, it appears that in response to the Show-Me Institute’s research the land bank bank’s rejection rate was cut nearly in half. But in Philadelphia, these poor policies will be written into law.

Bruce Stahl is a research assistant and Audrey Spalding is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Don’t Bank on It: When it Comes to Vacant Property, Learn from Saint Louis’ Failures appeared first on Show-Me Institute.

Click here to watch the video of the event.

The post Donnybrook: Audrey Spalding Reappears on KETC appeared first on Show-Me Institute.

All the children in Lake Wobegon are above average. In the past 10 years, the Parkway School District in Saint Louis County, which employs more than 1,200 teachers, has terminated five teachers. Perhaps all the teachers at Parkway are above average. More likely, poor-performing teachers continue to teach Parkway students.

Teachers can make all the difference in a child’s education. This is precisely why we should reward our best teachers while encouraging teachers with a track record of failure to find another job. The only way to do this is to reform Missouri’s existing teacher tenure law.

The Missouri Legislature is considering a bill that would end teacher tenure and help districts and school boards implement performance-based evaluation systems.

If the bill passes, teachers could be fired for doing a bad job. For most of us, consistently doing bad work means losing our job. Not so for teachers. Current laws state that a tenured teacher can be fired only for egregious conduct, such as willful or persistent violations of the school laws, excessive or unreasonable absences, and felony convictions. Even then, a severely truant (or criminal) teacher receives generous procedural protections. Teacher tenure reform would allow schools to dismiss teachers for unsatisfactory performance.

The reform bill would eliminate “permanent” teachers and indefinite contracts. Most of us operate with at-will employment. Again, not so for teachers. Currently, a teacher who survives a five-year probationary period becomes “permanent personnel” with an indefinite contract. Even if a district reduces staff due to budgetary constraints, school boards must thin the ranks on a last-in-first-out basis. The most senior teachers stay on the job regardless of their teaching ability.

The proposed legislation gives school administrators more discretion to retain the best teachers. Schools could contract directly with teachers for up to four years, but the board would retain the power to terminate a multi-year contract if the teacher scores poorly on evaluations. The last-in-first-out policy would be eliminated and school boards would be required to base staffing decisions on teacher performance.

Teacher tenure reform would ensure that teachers get paid for what they do, not how long they have done it. School districts currently are prohibited from basing salaries on performance-related criteria. Instead, districts pay their teachers based on length of service and level of education. The proposed bill removes this prohibition and requires school boards to consider teacher evaluations when making decisions related to pay, retention, promotion, and dismissal.

Enacting a performance-based scheme would be a big change for Missouri school districts. But the bill addresses implementation as well as substance. It requires districts to create a performance evaluation system, and mandates that certain criteria be considered in teacher evaluations, while allowing school boards and administrators to tailor the system to fit their own needs.

Not surprisingly, teachers’ unions have criticized tenure reform. Missouri National Education Association President Chris Guinther told the St. Louis Post-Dispatch that “we’ve got to be given the protection that we need to give those kids the quality education that they need.” Teachers do not need protection. They need accountability. A bad teacher can teach bad classes for years. Year after year, students cycle through this teacher’s classroom, only to receive an inadequate education. Wouldn’t these students have a better education if teachers were held accountable?

Teachers do not have a right to their jobs. The Missouri Constitution gives students the right to a public education, and they should have good teachers.

Audrey Spalding is a policy analyst and Ben Barnes is an intern at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Teacher Tenure: Why Should Educators Be Different? appeared first on Show-Me Institute.

Unfortunately, Porter fails to consider the 40-year-old land bank in her home state. Saint Louis has had a land bank, also known as the Land Reutilization Authority (LRA), since 1972. The LRA owns about 10,000 parcels, making it the largest land holder in the City of Saint Louis. The Saint Louis land bank’s track record should be considered before creating a similar entity in Kansas City.

Show-Me Institute research has found that for eight years, from 2003 through 2010, the Saint Louis land bank authority rejected almost half of all formal offers to purchase its property. The most frequent reason for rejection was that the property was being “held for future development.” Sadly, the hoped-for future development rarely materializes, and in just eight years, the Saint Louis land bank has turned down offers to purchase more than 2,200 different parcels.

Porter also fails to mention that there already is a government entity that deals with vacant land in Kansas City. The Jackson County Land Trust currently takes ownership of tax-delinquent properties that fail to sell at tax auction, and works to sell them.

There does not appear to be any evidence that the Jackson County Land Trust is doing a poor job of getting vacant property back into private, productive use. In fact, it seems to be doing quite well. During the past decade, in the course of acquiring property by default and trying to sell it, the land trust has added about 140 parcels to its inventory. The Saint Louis land bank has added 800.

However, the land bank bill, Missouri House Bill 1659, would be a land and money grab: All land trust properties in Kansas City would be transferred to the land bank, and it could take on an unlimited amount of debt.

Though Porter warns against private speculators, this bill would allow the Kansas City land bank to act as a speculator. The city would establish priorities for vacant land and use those to determine when to sell property. While this may sound innocuous, that is how Saint Louis was able to turn down so many offers to buy vacant property.

Consider this line from a letter of rejection from the Saint Louis land bank: “…her intended use is as rental property, and the alderman has indicated verbally that he will only support the sale to an owner occupant…” Years later, the property remains vacant, and the LRA still owns the land.

This bill would also let a Kansas City land bank bid directly against people who want to purchase vacant property. That certainly would go against the ostensible goal of alleviating vacancy in the city. The land bank would, when bidding against private buyers, be working directly to keep property vacant, and in government ownership.

HB 1659 creates an unnecessary expansion of government power. No strong evidence has been provided to show that the Jackson County Land Trust has failed, nor that a land bank could do a better job of getting vacant, city-owned property back into private, productive use. In fact, if Saint Louis is any example, the contrary will occur.

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

The post Land Banking Is No Miracle appeared first on Show-Me Institute.

We have the same objections as we had last year. If shipping cargo out of Lambert makes economic sense, why do taxpayers need to subsidize it? Why not just lower taxes for all businesses? As the Aerotropolis proposal has shed more of its baggage en route to this latest forwarder credit, it is fascinating that the argument for the project has turned from “we need all of it!” to “just a little will do.” We may have simply just reached the “bargaining stage,” or alternatively are seeing the last-ditch attempts of Aerotropolis supporters to get something, anything out of this mess.

If the freight forwarder credit resurrection affirms anything, it is that tax credits need reform. Indeed, there is ample room to clip the tax credit waste and cut taxes, and we have talked about this issue again and again. It makes no sense to be adding programs to a tax credit system that is already bursting at the seams and rife with tax credits of dubious value. Tax credit redemptions are expected to reach nearly $700 million in 2013 — ranking right up there with this year’s gargantuan budget deficit. And yet, state officials continue trying to pick winners and losers.

Missourians can judge for themselves whether Missouri’s economic development status quo has served them well. It seems the legislature is more than happy to serve up more of the same.

The post Zombie Bill: Aerotropolis Tax Credit Rises Again appeared first on Show-Me Institute.

There’s no doubt the governor grasps the notion that tax incentives can promote investment — but when will he realize that cutting taxes may have the same beneficial effects? Tax cuts may attract more investment to Missouri, promote job growth, and incentivize business expansions — three things for which Nixon already credits tax incentives. Tax cuts may even make business expansions easier; there won’t be all the red tape that goes along with obtaining government tax incentives.

It’s not as if tax incentives always work. Remember Mamtek? Hundreds of jobs were promised, but now all the state has to show for it are an SEC investigation and an unhappy legislature. Show-Me Institute Policy Analyst Audrey Spalding has already written on this and other tax incentive blunders. Because tax cuts won’t be tied to firm-specific investment and job creation, such government failures could become a thing of the past.

The governor needs to stop favoring focused tax incentives and start favoring broad tax cuts.

The post The Road To Prosperity Is Paved With . . . State Tax Incentives? appeared first on Show-Me Institute.

The post What a Difference a Year Makes: Saint Louis City’s Land Bank, the LRA appeared first on Show-Me Institute.

A company that promised 600 jobs and drew Gov. Jay Nixon to Moberly to announce $17.6 million in state aid is in financial trouble and could potentially stick the city with payments on a $39 million bond deal.

Mamtek International Ltd., a company with Chinese and American ownership, planned to make sucralose, a zero-calorie sweetener at the facility. The $65 million deal, ballyhooed at the start by former Gov. Bob Holden, chairman of the Midwest U.S.-China Association, was put together in 73 days last year and was supposed to include $8 million in private investment.

Moberly issued $39 million in bonds to build the Mamtek factory, buy and install the equipment and take care of other items necessary for the company to begin production. It was supposed to have put 116 people to work — perhaps as early as late last year, according to early reports — and double that employment within 18 months.

China Law Blog is a website operated by Harris & Moure, pllc, a law firm based out of Seattle, Wash., with a China law practice. China Law Blog’s Dan Harris highlighted Mamtek’s troubles on Thursday, telling readers that “[m]any many months ago, I got a quasi-anonymous email from someone in Moberly, Missouri” regarding the Mamtek project. After a series of back-and-forth emails with the tipster, Harris determined “that the odds were that this deal would prove disastrous.”

As it turned out, the deal did prove disastrous. So what happened? According to Harris (Emphasis mine):

First, it appears that got overly excited about the possibility of getting Chinese money. It appears it fell prey to the classic “China is rich. We want money. Therefore this is a good deal” syndrome. Second, it appears nobody conducted adequate due diligence. Were the very valid suspicions of my e-mailer ever checked out? I doubt it. I have no idea if my e-mailer ever raised her/his suspicions with City Hall, but having dealt with governments, I can only imagine how they were treated. Can you say groupthink? Third, the deal was rushed. The Columbia paper noted how it all went through in “73 days, far less than the six months or more usually needed to conclude such a deal.” Rushing a deal does not mean it will fail, but it certainly increases the chances.

Governments are responsible to the people for the public money they spend and the public credit they extend. Especially in a down economy, governments will oftentimes risk a little — or more likely, a lot — of both to get the “jobs, jobs, jobs” flowing. The problem, of course, is that governments have a terrible track record of picking economic winners and losers. Unfortunately for the city of Moberly, that’s a lesson residents now know all too well.

The post China Law Blog on Mamtek: “[T]here are some lessons to be learned” appeared first on Show-Me Institute.

We’d like to thank Air Cargo News for the opportunity to comment on the substance of Missouri’s proposed “Aerotropolis” legislation, first critiqued in these pages by air cargo expert Michael Webber and since muddled by a response from the director of Lambert–St. Louis International Airport, Rhonda Hamm-Niebruegge.

If the director of the airport did indeed help introduce the bill that has gone before the Missouri legislature, as she asserted, there are serious questions she needs to answer. Contrary to her implication, the Aerotropolis legislation’s original price tag was not $360 million, but $480 million, which included tax credits for the payment of $120 million in interest costs for the building of warehouses.

For somebody who seemed particularly interested in Webber’s rhetorical precision, Hamm-Niebruegge’s obscuration of the original cost of the bill as she introduced it is revealing. She should have been more forthright about the details of her bill.

To her credit, Hamm-Niebruegge admits that warehouses would be fully eligible for $300 million in tax credits, in support of a projected maximum of eight flights per week — a meager result for such a large amount of taxpayer money.

More importantly, though, Hamm-Niebruegge has failed to explain why the legislation specifies that Missouri would restrict the $300 million in Aerotropolis warehouse subsidies solely to new warehouses located on 100 contiguous acres, in urban redevelopment areas, within the boundaries of the airport, or in areas managed by a port authority. Those strange provisions demand an explanation. Hamm-Niebruegge says that she helped introduce the legislation (original price tag: $480 million); she had the opportunity to explain these preferential carve-outs here, but declined to take it.

We doubt that there is a practical explanation. The 100-acre stipulation and other requirements serve only to limit the individuals that could have access to the tax credits, and it is disheartening that the executive director of an airport would be concerned with making sure that only a few politically powerful individuals and businesses would be eligible for hundreds of millions in state tax money.

Hamm-Niebruegge says that the proposed bill’s provisions “require that investment or export activity take place before the application for tax credits.” This is incomplete. A close reading of the legislation reveals that owners of these newly built warehouses who use two modes of commerce — perhaps road and rail transportation — could qualify for the Aerotropolis tax credits. Owners of the comparable refrigerated warehouses would qualify in this way, as well. There is no requirement in the legislation that those warehouses store any amount of international cargo. Is the purpose of the Aerotropolis tax credit legislation to encourage international trade, or is its purpose to subsidize warehouse construction?

Hamm-Niebruegge optimistically writes that the $300 million in warehouse tax credits could result in millions of square feet of new warehouse space, yet she does not mention the approximately 18 million square feet in developed warehouse space already vacant in the Saint Louis area. Why does the state need to subsidize the construction of more warehouse space if, as market research from CB Richard Ellis has shown, a great deal of space is already available? Again, we are disheartened by the possibility that public officials are in such a rush to subsidize the owners of vacant land that they fail to consider the considerable existing supply of warehouse space.

Proponents of the Aerotropolis subsidies, including Hamm-Niebruegge, point to an eight-page study commissioned by the St. Louis Regional Chamber and Growth Association (RCGA) purporting to show that the $300 million in warehouse construction tax credits would result in economic activity worth billions. We were disappointed, but hardly surprised, that the RCGA study failed to consider the cost of taking $300 million from all Missourians in order to award it to a favored few. Aerotropolis proponents fail to understand that tax credits are not free money. 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.

Let us be clear: The Aerotropolis dream of attracting international trade to a region is by no means a poor one. In fact, increasing trade among countries is one of the best ways to improve economic welfare. However, we are concerned that the dream is being used as an excuse for public subsidy.

If the Aerotropolis dream is viable, as Hamm-Niebruegge states, where are the private investors clamoring to make a substantial positive return? The absence of such investor interest without heavy subsidy reveals that the “big idea” pushed by Hamm-Niebruegge, other public officials, and industry lobbyists is in trouble — with or without this extraordinarily problematic legislation that the director helped introduce.

Patrick Ishmael and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Lambert Director Misrepresents Missouri’s ‘Aerotropolis’ Bill appeared first on Show-Me Institute.

Legislators are considering moving forward with the so-called “Aerotropolis” legislation, a bill that would create $360 million in tax credits. Of that total, $300 million would go toward subsidizing warehouses, and $60 million would go toward subsidizing cargo flights from Saint Louis to international destinations. The bill’s proponents promise that these tax incentives will increase air cargo traffic to the region and boost the state and local economy.

Policy analysts at the Show-Me Institute have researched this proposal extensively. Based on a thorough review of the legislation, we believe that the proposal is a raw deal for Missouri taxpayers, and that certain provisions are indistinguishable from the cronyism often seen at the federal level.

Furthermore, the use of tax credits to encourage economic development has a poor track record, both in Missouri and nationwide. Our case study detailing the most serious problems with the bill, and with tax credits in general, is available online. We encourage all who are interested in good government to read that paper.

Without endorsing the use of any tax credits in this case, changes to the legislation might mitigate the harmful effects on the state economy and taxpayers. Below are revisions that we believe should be considered if the legislation moves forward despite a lack of substantive empirical support.

Allow all new warehouse owners to compete for the tax credits
All arbitrary limits on Aerotropolis eligibility should be removed.

The Aerotropolis tax credits would subsidize warehouse construction, as well as cargo flights from Saint Louis to international destinations. Up to $300 million in tax credits — more than 80 percent of the bill’s tax breaks — would be made available for the construction of new warehouses around the airport. Those tax credits could be used to pay up to 30 percent of a warehouse owner’s demolition, construction, and equipment costs.

The bill requires that warehouses qualifying for those incentives must be built on 100 contiguous acres of land or in specially designated areas. There does not seem to be any practical reason for the “100 acre” requirement contained within the Aerotropolis tax credit bill. The requirement seems to serve only to restrict who could draw upon such tax credits, narrowing the field to a small pool of large-scale developers.

This restriction should be removed. If the state is determined to subsidize warehouse construction — without any substantive empirical evidence that such subsidy would lead to increased economic growth and international trade — such subsidies should at least be made available as broadly as possible.

Accountability measures
Include clawback provisions and reporting requirements in the legislation.

In its current form, the Aerotropolis legislation does not include any sort of clawback provisions or reporting requirements. Accountability provisions should be added. If claims of job creation and investment are used to sell the creation of $360 million in state tax credits, then those credits should be evaluated objectively on the merits of job creation and investment.

In 2010, Gov. Jay Nixon tasked the Missouri Tax Credit Review Commission with reviewing the state’s tax credit programs. The commission recommended that:

…strict statutory clawbacks to be enforced by the State in cases of non-compliance with program requirements be included in all tax credit programs currently lacking such provisions.

And that:

…all applicants for state incentives be required to enter into a contract with the agency administering the tax credit specifying standards of performance, program requirements, and penalties in the issue event of non-compliance.

The commission’s recommendations are sensible, and should be extended to all prospective tax credit programs, including the Aerotropolis legislation.

As written, the legislation requires that new warehouses be built, and little else. If the state subsidizes warehouse construction, but there is no increase in demand for warehouse space, the state will be either subsidizing the construction of vacant warehouses, or helping owners of new warehouses drive owners of older warehouses out of business. Either case is not a desirable outcome for the state or for the area economy.

If legislators move forward with the Aerotropolis bill, a provision that would require an objective evaluation of the tax credit program — that is neither conducted by nor commissioned by an organization receiving any benefit from the Aerotropolis legislation — should be added.

Such an evaluation could be made three years after the inception of the tax credit program. It could include a comparison of the level of international cargo processed at area warehouses, employment numbers at area warehouses, and area warehouse vacancy rates before and after the creation of the tax credit program. If that objective review finds that the Aerotropolis program has not delivered on its promises, then the state should cease authorizing tax credits under the legislation.

In line with the Tax Credit Review Commission’s recommendations, the Aerotropolis legislation should also include clawback provisions. If warehouse owners receive Aerotropolis tax credits, and are found not to be in compliance with its requirements, or are not processing any level of international cargo, then the state should have a mechanism to recover the tax credits awarded to such noncompliant owners.

Furthermore, the Show-Me Institute has highlighted the fact that, despite proponents’ statements to the contrary, the Aerotropolis legislation would allow tax credits to be issued to owners of warehouses that do not process any international cargo. Since the primary argument for the Aerotropolis tax credits is that the incentives would promote international trade, the definitions within the Aerotropolis bill should be revised so that only warehouses processing international cargo may receive the credits.

Grants of Extensive Political Power (135.1503)
Remove the provision that would grant power to the mayor and county executives to determine who could receive the warehouse tax credits.

The Aerotropolis bill gives the authority to the mayor of Saint Louis or the executive officers of nearby counties the power to designate “gateway zones.” While this power sounds innocuous, it has important ramifications.

Those chief executives would become gatekeepers in the distribution of millions of taxpayer dollars. The Aerotropolis legislation would create $300 million in tax credits that would subsidize warehouse construction. That tax credit money may be awarded only to warehouses built in gateway zones.

Even if motives are pure, the ability to pick what areas could be eligible for hundreds of millions in tax credits would be an incredible power. The legislation does not say anything about monitoring such designations. Nothing in the legislation would prevent one of these chief executives from using such power as an indirect way to acquire campaign contributions or other untoward benefits.

A simple way to stop any such potential abuse of power would be to take the city and county chief executives out of the equation. If the state — despite a lack of substantive empirical evidence that these tax credits will do any economic good — really wants to subsidize warehouse construction, then all vacant land owners should be able to compete equally for the tax credits. There is no need to give special power to city and county executives. The language creating this power should be removed.

If this delegation of power is kept in the Aerotropolis legislation, then the Mayor and county executives should be required to make their gateway designations at a public meeting, with any and all applications and correspondence to the mayor or county executives requesting such a designation treated as public information.

Restrict the ability to layer tax credits with other tax incentives
It is fiscally irresponsible for the state to heavily subsidize projects under certain programs.

It is no secret that the state heavily subsidizes some projects through a myriad of its tax incentive programs. The level of subsidy for those projects can reach absurd heights. According to an analysis of state tax credit data, Missouri’s fifth Senate District – which includes downtown Saint Louis – was the recipient of nearly $1 billion in state tax credits between 2000 and 2010. This total does not include local tax subsidies, such as property tax abatement and tax increment financing (TIF), which likely are substantial. The Aerotropolis tax credits, as proposed, could easily be layered on top of existing tax incentives already offered by the state or local government.

In fact, in an internal review of the Aerotropolis legislation, Saint Louis County identified five areas near the airport that would likely be eligible for Aerotropolis tax credits. According to the county’s analysis, those areas had already been authorized to receive or were eligible to receive almost $300 million in state and local tax incentives, including Brownfield and Enhanced Enterprise Zone tax credits, as well as tax increment financing, property tax abatement, sales tax exemption, and state tax increment financing.

Some existing Missouri tax credit programs place restrictions on the layering of tax credits. For example, the Missouri Quality Jobs tax credits explicitly prohibit recipients from also receiving Enterprise Zone or Enhanced Enterprise Zone tax credits, Business Facility Program tax credits, Rebuilding Communities tax credits, or Brownfield Jobs and Investment tax credits.

It would be prudent to add similar restrictions to the Aerotropolis tax credit legislation. Similar tax incentive programs that should not be combined with the proposed Aerotropolis program include: Distressed Areas Land Assemblage tax credits, tax increment financing, state tax increment financing, Enhanced Enterprise Zone tax credits, and Brownfield tax credits. Those tax incentive programs are designed to encourage similar activity – construction – that the Aerotropolis legislation is designed to encourage. The state should not award redundant incentives.

Final thoughts

The proposed Aerotropolis legislation is problematic, especially in light of questionable jobs claims and the expansion of power for local government executives contained within the bill. There appears to be an incredible amount of political pressure attempting to push the tax credit measures forward, despite a lack of substantive empirical study. Moreover, China, the country cited by proponents as the source for increased international cargo traffic, has not stated publicly that warehouse construction tax credits are necessary before it will consider sending more cargo flights to the Lambert Airport.

All of the above facts should give legislators pause. But, if the state legislature is prepared to go forward and pass the Aerotropolis tax credits despite those concerns, then provisions designed to protect Missouri taxpayers should be added to the bill.

The post Mitigating the Harmful Effects of the ‘Aerotropolis’ Legislation appeared first on Show-Me Institute.

If the director of the airport did indeed help introduce the bill that has gone before the Missouri legislature, as she asserted, there are serious questions she needs to answer. Contrary to her implication, the Aerotropolis legislation’s original price tag was not $360 million, but $480 million, which included tax credits for the payment of $120 million in interest costs for the building of warehouses.

For somebody who seemed particularly interested in Webber’s rhetorical precision, Hamm-Niebruegge’s obscuration of the original cost of the bill as she introduced it is revealing. She should have been more forthright about the details of her bill.

To her credit, Hamm-Niebruegge admits that warehouses would be fully eligible for $300 million in tax credits, in support of a projected maximum of eight flights per week — a meager result for such a large amount of taxpayer money.

More importantly, though, Hamm-Niebruegge has failed to explain why the legislation specifies that Missouri would restrict the $300 million in Aerotropolis warehouse subsidies solely to new warehouses located on 100 contiguous acres, in urban redevelopment areas, within the boundaries of the airport, or in areas managed by a port authority. Those strange provisions demand an explanation. Hamm-Niebruegge says that she helped introduce the legislation (original price tag: $480 million); she had the opportunity to explain these preferential carve-outs here, but declined to take it.

We doubt that there is a practical explanation. The 100-acre stipulation and other requirements serve only to limit the individuals that could have access to the tax credits, and it is disheartening that the executive director of an airport would be concerned with making sure that only a few politically powerful individuals and businesses would be eligible for hundreds of millions in state tax money.

Hamm-Niebruegge says that the proposed bill’s provisions “require that investment or export activity take place before the application for tax credits.” This is incomplete. A close reading of the legislation reveals that owners of these newly built warehouses who use two modes of commerce — perhaps road and rail transportation — could qualify for the Aerotropolis tax credits. Owners of the comparable refrigerated warehouses would qualify in this way, as well. There is no requirement in the legislation that those warehouses store any amount of international cargo. Is the purpose of the Aerotropolis tax credit legislation to encourage international trade, or is its purpose to subsidize warehouse construction?

Hamm-Niebruegge optimistically writes that the $300 million in warehouse tax credits could result in millions of square feet of new warehouse space, yet she does not mention the approximately 18 million square feet in developed warehouse space already vacant in the Saint Louis area. Why does the state need to subsidize the construction of more warehouse space if, as market research from CB Richard Ellis has shown, a great deal of space is already available? Again, we are disheartened by the possibility that public officials are in such a rush to subsidize the owners of vacant land that they fail to consider the considerable existing supply of warehouse space.

Proponents of the Aerotropolis subsidies, including Hamm-Niebruegge, point to an eight-page study commissioned by the St. Louis Regional Chamber and Growth Association (RCGA) purporting to show that the $300 million in warehouse construction tax credits would result in economic activity worth billions. We were disappointed, but hardly surprised, that the RCGA study failed to consider the cost of taking $300 million from all Missourians in order to award it to a favored few. Aerotropolis proponents fail to understand that tax credits are not free money. 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.

Let us be clear: The Aerotropolis dream of attracting international trade to a region is by no means a poor one. In fact, increasing trade among countries is one of the best ways to improve economic welfare. However, we are concerned that the dream is being used as an excuse for public subsidy.

If the Aerotropolis dream is viable, as Hamm-Niebruegge states, where are the private investors clamoring to make a substantial positive return? The absence of such investor interest without heavy subsidy reveals that the “big idea” pushed by Hamm-Niebruegge, other public officials, and industry lobbyists is in trouble — with or without this extraordinarily problematic legislation that the director helped introduce.

Patrick Ishmael and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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The post Lambert Director Misrepresents Missouri’s ‘Aerotropolis’ Bill 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.

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.

At the 11th hour, legislators tacked on this misguided proposal to another bill that would limit tax credit expenditures. The end result is a 330-page bill that would accomplish little other than take benefits from some — in this case, the low-income elderly — and instead award benefits to private developers in Saint Louis.

In a recent state Senate committee hearing on the China Hub subsidies, Sen. Ron Richard opined, “I’ve got business people and friends of mine that live in Saint Louis that are begging for something new and creative. So we take a chance.” Unfortunately, when he advocated trying something new and creative, Richard did not suggest that the state create an environment that encourages all Missourians to be creative and entrepreneurial. His plan entails quite the opposite: gambling hundreds of millions of dollars, and leaving Missouri taxpayers on the hook.

The China Hub subsidies have three critical problems. First, the bill rests on the flawed notion that legislators are all-knowing, and that they have the ability to successfully pick and choose the industries, types of employment, and goods and services that should exist in Missouri. Second, the state government is already short on funds, and it cannot afford to give away hundreds of millions. Revenue lost to tax breaks for favored industries would need to be replaced by increased debt, reduced government spending, or — more likely — imposing a higher tax rate for all of Missouri’s less fortunate taxpayers.

Third, there has been no in-depth study of the costs and benefits of the proposal, nor do we know the level of commitment from foreign firms. The Saint Louis Regional Chamber & Growth Association recently released an eight-page brief about the China Hub subsidies, but it is by no means in-depth. It merely extends the unsupported assumptions that were built into the legislation.

Major questions remain to be answered. In particular: What’s the rush? We don’t know with certainty what the legislation will cost, or what business it may bring. Why should state government pick an economic winner, when it has such a poor track record for doing so? Also, how do we know that cargo warehouses have the ability to boost the Saint Louis area economy?

Legislators like Richard have a hunch, and they want taxpayers to bear the risk. As Harvard economist Edward Glaeser notes: “Too many officials in troubled cities wrongly imagine that they can lead their city back to its former glories with some massive construction project …”

Unfortunately for taxpayers, the strategy taken by state legislators is not a new one — nor is it effective. The China Hub subsidies rely on the same old policies that the legislature has tried before. Why will this time be any different? Within the last decade, we spent $1.1 billion on a new runway at Lambert, and it sits largely unused. Missouri lawmakers say that they want to rein in tax credits, but then turn around and award even more.

If lawmakers were serious about “taking a chance,” they would do something that is actually new and different, such as reducing the state income tax or eliminating tax credits altogether. This would create a more favorable playing field for all businesses — not just a select few. Is there anything creative and new about subsidizing the construction and operation of warehouses?

The best way for Missouri to grow the economy is to provide a business climate that encourages individuals to develop new ideas. If government officials genuinely want to try a new strategy, they should stop attempting to control the state economy from the top down. Creating another layer of bureaucracy — no matter how well-intentioned — will only impede this creativity and stifle growth.

Entrepreneurs in Missouri will seize upon the opportunities around them as soon as the government gets out of their way.

Christine Harbin and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post The ‘China Hub’: Another Flight of Fancy? appeared first on Show-Me Institute.

Transcript

Audrey Spalding: [testimony]

John Lamping: The name of your organization again?

Audrey Spalding: The Show-Me Institute

Bob Dixon: I was just curious in listening to your testimony there about the cost … if you did any sort of analysis with respect to the opportunity cost of — let's say we don't do it, and it goes somewhere else.

Audrey Spalding: I have not done that study. We haven't had time to do that study given that the ”Aerotropolis” tax credits, the amounts in particular, were recently agree upon. I think, I would assume: 1) that the tax credits are necessary to the creation of an international hub; and, 2) that such an international hub would be successful. Regardless, I think anyone can agree upon the fact that there is at least a possibility that this is not successful.

Eric Schmitt: I have a follow-up. Mr. Dixon?

Bob Dixon: I would be interested to, if you're going to present a study like that, I'd be interested to see some sort of analysis on that. Because a lot of times we do things, recently we sent to the governor's desk a phase-out of the corporate franchise tax, but I don't think that your organization was here to testify against that because of the cost. I realize it's a different issue, but it seems to be an opportunity that, if it's lost, we could certainly lose out, and I'd like to see us calculate that cost. Thanks, Mr. Chairman.

Eric Schmitt: Thank you. And I want to, first of all I want to thank you for coming up here and testifying. I totally disagree with your analysis. You made reference to the $480 million. Are you aware of how long it would take for the $480 million, if everything hit, how long that would take?

Audrey Spalding: Yes, I realize that would not hit immediately.

Eric Schmitt: Do you know how long of a period of time it is?

Audrey Spalding: I believe that it's more than a decade.

Eric Schmitt: Fifteen years. So, if everything hits, if we hit the freight-forward piece, if we're building facilities, if we have industry that we don't have in our state right now, and the only way that they get any of the credit is: they invest in a $20–25 million building, they're operating, they've created jobs, we have the kind of economic activity that we were seeking with the legislation that we don't have, I do not understand how an organization that seems to at least state that they're for economic growth cannot get behind an idea of incentivizing people to come and do things that we just don't have. So, my question is, if this is a real possibility, is it worth doing? If China, which is first-in, is gonna move, and wanna have the ground, which they don't have in Chicago, is that worth having in our state?

Audrey Spalding: Well, I think perhaps we approach this from a different, each from different standpoints, obviously. Now, we're talking here about this proposed international hub, and of course there have been talks of a China hub in other countries, so this would be a wonderful idea. Given that those talks are occurring, isn't it also at least possible that Saint Louis–area developers and other such entrepreneurs would be entrepreneurial enough to seize upon such an opportunity without state help?

Eric Schmitt: But if you don't have, my question to you is, if it doesn't happen, and I know you're seeking some sort of letter of, memorandum of understanding or something. If it doesn't happen, none of this revenue that we would be foregoing — because that's what it is, we're foregoing revenue — which I find it interesting, actually, as a Republican, I hear a lot … really, what we're doing here is we are reducing the tax liability to create and to have an industry in our state that we don't have. I don't find that offensive in any way. People campaign a lot about this, about job growth, about opportunities, about having and creating an economic environment in our state that's conducive to the creation of quality jobs — well, here it is. And being critical of a new idea that's bold isn't anything new or isn't anything unique. I'm sure the steamboat captains of the late 1800s thought that the railroads were something that threatened their interest, or that people would be inconvenienced as their homes or property might be bought out to make way for the new mode of transportation. But guess what? One city got it right. Chicago got it right and Saint Louis was standing on the sidelines. I don't want to be remembered … there's a mural in the Senate, I spoke of this last time, of the first senator, Sen. Benton, who was talking about having that westward expansion of the railroad from Saint Louis to the west coast, and we missed it, OK? What I'm saying this session is: This is important enough that I think we need to stand up for growing the pie. And I know there's going to be plenty of people that poke holes and have criticism, but that's what critics do, OK? It's our job, up here, to seize on an opportunity to grow our economy, and there couldn't be anything more real or more immediate than being in the center of an international trade hub. Any great civilization, any great city has been at the confluence of routes, of commerce, of industry. That's what we have an opportunity for, here. And just because we want to live in an ivory tower and we want to give great speeches about what things might look like if we lived in some utopian world — we don't live in that world. We don't live in that world. So we can choose to compete, or we can be economic isolationists and we can build a great wall around our state. I think it's our job in this committee and in this Senate in this session to break down those walls, to open up trade routes, to create opportunity for Missouri businesses, the ag community. We heard from the pork producers today. This is an opportunity that we haven't seen in this state. So I appreciate, I really do appreciate you coming up here. I appreciate your different point of view. I've seen some of your articles. I haven't had a chance to visit with you; we haven't had a chance to talk about the legislation. I'd be happy to do that with you more. I know that you were probably coming in to a room where there's a lot of support, so I do appreciate that, but I respectfully disagree. Thank you. Any other questions?

Victor Callahan: Railroads were federal stimulus.

Eric Schmitt: Any other witnesses in opposition?

Christine Harbin: [testimony]

Eric Schmitt: Before I go, I just want to make note that it sounds like you're advocating more money for social spending, and, if I recall correctly, the Show-Me Institute was against the autism bill last year.

Christine Harbin: I'm sorry?

Eric Schmitt: The autism bill. I believe the Show-Me Institute had an editorial piece against the autism legislation last year, so I'm glad to see that the Show-Me Institute is advocating more money being spent on social programs now.

Christine Harbin: That wasn't my implication and I didn't work on that particular thing.

Eric Schmitt: Any questions? Sen. Dixon.

Bob Dixon: Earlier in your testimony, you referenced my question of the previous witness, and then in your reference to the St. Louis Business Journal, I believe in their editorial, before I ask you a question I'll just mention: I probably take greater offense at being called "out-state." I'm from Springfield, and I don't have … you know, I'm not in the Saint Louis area, and I support this legislation wholeheartedly because I think it's good for the entire state. But that, I'm more concerned about that mentality that we're not in-state, we're out-state, than I am anything else, because we don't need those kind of divides in Missouri, and that's part of what has hampered progress in the past. But my question specifically is, going back to what I asked of the previous witness, if you would please clarify what you said pointed to that question, because I still don't see anything where we're talking about the lost opportunity, and where that cost has been calculated. And then, specifically what services — and you used the word "services" — would be. That also is a concern, but I won't go into a big statement about that, because I don't believe the state provides "services," or if that fits. But if you could enumerate on what services you think we need to be funding with those "opportunity dollars," if you will, and then, also, how that testimony would have addressed my previous concern.

Christine Harbin: Sure. When I say "services," I just mean other government programs. I'm speaking in very general terms. I'm talking about education …

Bob Dixon: Bureaucracy.

Christine Harbin: Yeah, building roads, fixing potholes, stuff like that.

Bob Dixon: Those basic things I can agree with are functions, but if we're talking about "services," there's a lot of people roaming these halls talking about benefits for this that and the other, which, in my opinion, are not a function of state government. To that point, that answers that question. Specifically to the lost opportunity cost, if you could address that.

Christine Harbin: Certainly. Well, I would say that it's impossible to calculate with certainty what could have been in the absence of this policy. However, what I described in my testimony is … When you have a large public works program like this, when you have a large tax credit program like this, people are forced to, taxpayers contribute more of their earnings, a greater percentage of their earnings towards the program. And so, as a result, it means that they have less money to spend in the private sector.

Bob Dixon: Potentially.

Christine Harbin: Potentially. Because otherwise, they could see a reduction in services, too. It's some combination.

Bob Dixon: Some of that, though, I would have to say, and I'll yield back to the chair, but some of that also comes from the concept that any money not collected by government is actually just tax money that we didn't collect, which I fundamentally disagree with that whole mindset. A tax credit is not, and the courts even have ruled on that in various cases, one in particular, but those are not state dollars.

Christine Harbin: Agreed. I agree that it's not state dollars. I'm just saying that, as a consequence of programs like this, Missourians, taxpayers, have less money to spend themselves.

Bob Dixon: Potentially.

Christine Harbin: Potentially. It's difficult to calculate with certainty how much is taken out, but they're going to eat at fewer restaurants, they're going to spend fewer nights in hotels …

Bob Dixon: The very strong likelihood also exists that, in the long term, because of the economic growth, we could see substantially — and perhaps exponentially — more.

Christine Harbin: Agreed.

Bob Dixon: OK. I just wanted to make sure that, and again, I would like to emphasize that I would love to see some sort of a more exhaustive study on that end. Thank you. Thank you, Mr. Chairman.

Eric Schmitt: Sen. Richard.

Ron Richard: Mr. Chairman, just briefly, as someone who's done in Joplin, the lady mentioned my city, who's done most of the economic development for the Saint Louis region, us poor people that are barefoot and corncob pipes have done more to back up Saint Louis and the community in Kansas City than frankly some of the Saint Louis–elected people. And the reason we have is because we understand what's at the other end of the highway, which is Saint Louis. And as they progress and do well, the rest of us will, too. Everything that the Show-Me Institute is for, I'm against, and everything they're against, I'm for — and we're both conservatives, I don't understand that. I mean, we fought for organization on the Bombardier in Kansas City, and it was a stretch, didn't work. This may be a stretch, but I've been to Saint Louis somewhere almost twice a month, as in Kansas City, and I've got business people and friends of mine that live in Saint Louis that are begging for something new and creative. So we take a chance. And I think the chairman has a great opportunity here to take a chance on something. If it doesn't happen, nothing is given away — no tax credit. Granted, the lady's right, tax credits may be a little overwrought, and I think there's a mechanism to address that, and the chairman has a plan for that. But I will say that, until Missouri is ready to take a chance on something new, we'll just be a lackluster state. We will have all our kids move away, our universities will disintegrate, our highways will disintegrate, our schools don't have to worry about opening ‘cause there'll be no one going to school, ‘cause there won't be tax money one of these days. So, I respect the lady's opinion, again I think we take a chance, I think we move forward, and I support the chairman and I will support Saint Louis every time I get a chance.

Eric Schmitt: Thank you. Any other questions? Sen. Lamping.

John Lamping: I'm curious about a couple things, actually. First of all, you were kind enough to quote the St. Louis Business Journal, and I'm curious to know what the Show-Me Institute's opinion would be on their proposed outcome, which is, we simply offer $60 million tax credit to freight forwarders. So what's your opinion of that idea?

Christine Harbin: I didn't study that particular proposal.

John Lamping: Well, that was the second half of the editorial you just quoted.

Christine Harbin: Yeah, sorry. Similar to how you said earlier in response to the question and answer session with Audrey: You're either for it or you're against it. I testified in front of the Tax Credit Review Commission last September. And I have been a very vocal supporter of the total elimination of targeted tax credits in Missouri. And that holds true here, too. I think that Missourians would be better off if they were able to keep their earnings and spend it themselves in the private sector. So, I do not support kind of a halfway …

John Lamping: So you like the idea of suggesting that some of the Business Journal editorial is correct in pointing out the fact, in your opinion, that the rest of the state subsidizes it, but you disagree with the conclusion they come to — you don't support.

Christine Harbin: I agree with their criticisms of the project. I don't fully support their policy recommendation.

John Lamping: Second thing, probably unlike most of the members of this board, I appreciate you coming forward today. As someone for who economics is kind of a hobby, I study … I'm a member of the Show-Me Institute, as well as many other think tanks, as I like to stay abreast and current of different thoughts and ideas. But one of my favorite economic terms that all my teachers used over and over again, and us in business and finance always laughed when we think about this, is this concept of all things being equal. And that's something that, your study of economics sounds like from school. And that's where the theoretical world comes in and they say, "Well, all things being equal, then, well, here's our supply line, here's our demand line, we're going to now go forward with our great discourse and our great study, assuming all things are equal." I think what the chairman spoke to today is the reality that the world, all things are not equal. There's the theoretical and there's the reality. And as much as I enjoy sitting down and going through the theoretical. I think that it helps for, and again, maybe that's your role. Maybe that's your role in the discourse: It's to be the theoretical go-to. Unfortunately, in this capitol building, it's all about the reality and the real, and all things are not equal. And when it comes to economic development in and around this region, clearly all things are not theoretically perfect. So, I appreciate you coming forward, it's a really interesting part of the testimony, and I look forward to your next publications.

Christine Harbin: Can I respond to that?

Eric Schmitt: Sure.

Christine Harbin: To that last point, I agree that economics is separate from natural sciences because it can't really be studied in a laboratory, we're kinda going through it, you know, as we are. However, I think that my focus here is very reality-based. I think that the idea of this particular policy awarding close to half a billion dollars in tax incentives to a small group that is … The hope is that it will encourage trade, but I think the reality is that it won't.

Eric Schmitt: OK, let me follow up on that. If it doesn't, do we expend any tax credits?

Christine Harbin: If it doesn't encourage trade?

Eric Schmitt: Correct.

Christine Harbin: You mean after we go through the policy? After we enact it?

Eric Schmitt: Look, I do want to — and I do appreciate you coming out — I just want to make, I want to understand, know that you understand the bill …

Christine Harbin: Oh, I read it.

Eric Schmitt: So what is your understanding of how the tax credits are awarded for facilities?

Christine Harbin: It was what Audrey outlined. We offer tax credits to support the subsidization of these warehouses.

Eric Schmitt: But how does that work? How does that work?

Christine Harbin: I don't have the text of the legislation in front of me.

Eric Schmitt: Well, you're testifying against the bill. OK? And I'll just explain how it works, which is, you build a building. It's a $25 million building, you operate it, you get a portion, it's screened over five years, each year you have to prove that you're getting the economic activity and the jobs. So, if those buildings never get built, my point is, if the buildings never get built, and we don't have the trade, there's never any tax credit. So, it's a very different reality from what you're explaining, which is, we're spending 500 million and hoping that people come. The reality is, if they come, at that point we have the infrastructure because of the trade. So it's just a, it's different, it's a different sequence of logic here.

John Lamping: Mr. Chairman, my guess is, what she really means to say is that she's against the Business Journal's recommendation to just do the freight-forward piece. ‘Cause that would then show no evidence of successful …

Ron Richard: [Sen. Richard's microphone was turned off, so this portion is inaudible]

John Lamping: Maybe we'll find out in Friday's edition.

Christine Harbin: Well, my response is: If it's such a great idea, then there's a lot of entrepreneurs in Saint Louis with great ideas, with multiple skills — let them take risks and bear the burden.

Eric Schmitt: So, it'll just happen?

Christine Harbin: Yeah, incremental change.

Eric Schmitt: Sen. Dixon.

Bob Dixon: Yeah, I just want to follow up on the comments from earlier, I wanna make it very clear. I failed to thank you for coming. I want to make it very clear that I really do appreciate you coming, as several others have said, and I appreciate the Show-Me Institute for the stands they've taken on several things, principled stands. We'll just have to agree to disagree on this one, but it takes a lot of courage to come and testify in a room full of people that are in favor of something, testify against it. And I do appreciate it.

Christine Harbin: Thank you.

Eric Schmitt: Any other questions? Thank you again. And I really, I do appreciate it. Obviously I have … I believe in it. You're passionate; I'm passionate; that's what this process is all about. So, I do appreciate you taking the time to come up to Jeff City; it's not easy to come in and express at one of these.

Christine Harbin: Thank you.

The post Testimony on the ‘Aerotropolis’ Bill appeared first on Show-Me Institute.

The process is already extremely difficult. To change state law, groups must get tens of thousands of the legal voters in two thirds of the state’s congressional districts to sign a petition. Missouri has more than 4 million registered voters, so any group trying to get an initiative on the ballot must collect more than 100,000 signatures.

And it’s expensive. Paul Jacob, president of Citizens in Charge, a nonprofit group dedicated to preserving and advancing the ability of U.S. citizens to petition state government directly, estimates that the minimum cost for signature collection in Missouri is more than $2 per signature, and can be significantly higher. This means that a group of people trying to change government for the better would likely need at least $300,000 even to attempt to bring a state law change before Missouri voters for their consideration.

In fact, most groups that have attempted to change state law with the current initiative petition process have failed. In recent years, Missouri Citizens for Property Rights, a group attempting to strengthen safeguards against the abuse of eminent domain, managed to gather more than 160,000 signatures from registered Missouri voters but still fell short of the already hefty requirements imposed.

Justus’ proposal will make it at least 50 percent harder (and that much more expensive) for Missourians to bring an issue to statewide voters. She proposes requiring that groups collect signatures from registered voters in all congressional districts. That would mean groups would have to collect, at minimum, signatures from an additional 45,000 registered Missouri voters. That’s at least another $100,000 in expenses. Why would Justus want to restrict this process further, so that only the most wealthy individuals and groups can participate?

According to the St. Louis Business Journal, Justus hopes that the proposed law will make it more difficult and costly for people and organizations to “buy laws and constitutional amendments.” She is certainly right — her proposal will make it more difficult. But her logic is flawed. Justus’ proposal will make it more difficult for any group to impact state government directly, not only those she suspects of trying to “buy” laws.

One of the greatest strengths of American government is that there are a number of checks and balances at the federal, state, and local levels that limit the ability of any one branch of government to abuse its power. The initiative petition process is one of those checks on power, and restricting it further will serve only to erode Missourians’ ability to limit legislators by initiating good — but politically difficult — policy change.

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

The post Citizen Initiative Process a Crucial Check on Political Power appeared first on Show-Me Institute.

Justus’ proposal will make it at least 50 percent harder (and that much more expensive) for Missourians to bring an issue to statewide voters. She proposes requiring that groups collect signatures from registered voters in all congressional districts. That would mean groups would have to collect, at minimum, signatures from an additional 45,000 registered Missouri voters. That’s at least another $100,000 in expenses. Why would Justus want to restrict this process further, so that only the most wealthy individuals and groups can participate?

Be sure to read the whole thing! And thanks to Brandon Holmes at Citizens in Charge for alerting us to this story.

The post Protecting the Initiative Process appeared first on Show-Me Institute.