In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the St. Louis Marketplace or the Olde Towne Plaza in Ballwin, we can list plenty of private business projects government had no reason to get involved in but did, to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

St. Louis Mayor Tishaura Jones came into office two years ago pledging to make changes to the city’s economic development process. To a small degree, her administration has reduced the subsidies it is giving out to companies, and for that she deserves credit. But they also figured out a way to somehow make a bad process even worse by imposing an “economic justice” imperative on it. So now, instead of listening to development officials fabricate how their corporate welfare led to jobs, growth, and so on, we get the additional pleasure of hearing how tax subsidies lead to more “equity.” Death can’t come fast enough.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, suburban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. Chesterfield officials talk about the Valley TIF there in much the same way, as if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

The self-aggrandizement of the economic development industry would be understandable if the system worked, but it doesn’t. The East-West Gateway Council of Governments (EWG) did a major study of TIF and other subsidies a decade ago and concluded that they created one job for every $370,000 in tax subsidies. That is a terrible return on the subsidy, as EWG stated. Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies. Yet our region continues to pass out tax subsidies like other people’s candy, evidenced by the atrocious decision of the St. Louis County TIF commission to approve $300 million in subsidies for the “blighted” part of Chesterfield just last month.

If we really wanted to help our community grow, residents of the St. Louis-area could get no better gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post St. Louis Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In West St. Louis County, we get to see the City of Ballwin doing the same thing regarding a tax-increment financing (TIF) package that is about to end. Of course, it’s not exactly the same thing. Ballwin doesn’t have gulags or torture and has never invaded Hungary, and I give proper credit to Ballwin for all of that.

The Olde Towne Plaza TIF is ending; not because it uses too many unnecessary “e”s in its name (although it does), but because it has hit the Missouri TIF time limit of 23 years. According to a story in West Newsmagazine, the project and TIF have been a large success (emphasis added throughout):

“It really served to fill two goals: One was to stimulate economic development. The other was to improve the infrastructure. Overall, it was a success,” long-time City Attorney Robert Jones recalled.

Further down, we read:

Finance Officer Denise Keller told West Newsmagazine by email, “The Redevelopment Plan itself was very successful in that an attractive and quality development of retail and service commercial uses has been constructed and maintained, enhancing the tax base and the resulting tax revenues for the city and all other taxing districts within the Redevelopment Area.”

Got it. This tax subsidy has been a big success. God only knows how a rapidly growing suburban region could experience growth without the Kreskin-like ability of city officials to predict the future. But wait, if you keep reading further down the article:

Incremental taxes captured for repayment of the bonds, however, (fell) short of expectations and by the time the bonds mature, there will not be sufficient funds to repay the full amount of the principal due.

So, the project and subsidy were a great success, even though the TIF district didn’t actually pay off the bonds. That’s ok, at least general city funds are not involved here, just the TIF district funds:

Keller added that the bonds have never been an obligation of the city and do not reflect on the financial health of the city.

Thank goodness for that. But wait, if you read further, you see that even though the bonds weren’t an “obligation” of the city:

The city was required by the bond indentures to make an annual contribution toward the repayment of the bonds. The cumulative amount of this contribution to date has been $2.7 million.

I don’t know how you define words like “obligation,” “success,” and “sufficient,” but if you read the full article carefully, this wonderful, amazing, tax-subsidized project experienced high turnover, generated far less revenue than expected, had the city step in to pay shortfalls out of other tax revenues (even if it was not “obligated” to), and the development now has to use an ongoing special sales tax ostensibly targeted for transportation to fully pay off the TIF bonds. All of this while any drive down Manchester Road shows a litany of empty storefronts, brought about in part by numerous municipal tax subsidies used to lure businesses from one place to the other based on chasing the subsidy, not where the best location for their business really would be.

TIF doesn’t work. Politicians, urban planners, and city managers can’t predict the future. To quote P.J. O’Rourke, giving the power of tax subsidies to local politicians is like giving whiskey and car keys to teenage boys.

All of the road improvements Ballwin brags about with the TIF project could have been funded by normal taxes collected over the period of the TIF project, from whatever developed here or elsewhere in the area. Why? Because capitalism works. Frequently, municipal officials throughout Missouri forget that and think that somehow they have the special knowledge to plan their economies in a better way. It’s ridiculous, and in the end it usually fails and you find yourself denying reality to the press.

Stalin would have been proud.

The post Ballwin TIF Ends; Clear Failure Lauded as “Great Success” by Municipal Apparatchiks appeared first on Show-Me Institute.

The cities covered in the report are:

• Ballwin
• Blue Springs
• Cape Girardeau
• Chesterfield
• Columbia
• Florissant
• Independence
• Jefferson City
• Joplin
• Kansas City
• Lee’s Summit
• O’Fallon
• Springfield
• St. Charles
• St. Joseph
• City of St. Louis
• St. Peters
• University City
• Wentzville
• Wildwood

Click here to read more, or download the report by clicking on the link below.

The post Tax Burden in Missouri’s 20 Largest Cities appeared first on Show-Me Institute.

As you may know, a few months ago the Show-Me Institute launched its own municipal checkbook project in an effort to increase government transparency and accountability. Our database tracks the spending of local cities. Missouri taxpayers ought to be able to see how their cities spend their money, and we hope more of our municipalities follow Atlanta’s lead by making a municipal checkbook a top priority.

The post Sunshine in Atlanta appeared first on Show-Me Institute.

Let me re-set the stage. Missouri’s Sunshine Law (RSMo 610) requires municipalities and other public bodies to provide records of public interest, with some exceptions. It also states that if there is a charge billed to the requester, the municipality fulfilling the request should use employees of the public body that will result in the lowest amount of charges for search, research, and copying time.

Obtaining records of city expenses over the last five years is central to our project, and because there are so many cities in Missouri, it has been interesting to see the wide variety of reactions we have received from our uniform request (available below). As my colleague Scott Tuttle has noted before, responses to our inquiries have been uneven, with many cities promptly providing us the information we requested for reasonable fees, while others were less responsive and charged more.

For instance, the city of Festus took several days, waived their fees (as they are allowed to do) and gave a detailed Excel spreadsheet of their spending, which can be filtered and easily searched. Smithville took one day to fulfill the request and charged $20.00 for its records in PDF form. Meanwhile, Manchester—which to be fair is a city larger (population ~18,000) than either Festus (~12,000) or Smithville (~9,500)—told us it would cost approximately $1,200 and take up to four weeks for its staff to complete the response to my request.

Why the huge discrepancy in cost? The law does not specify the format in which information should be kept, or what a reasonable fee to charge is. To some degree this ambiguity makes sense, because the law has to be flexible enough to address situations and requests not considered when the statute was written. But should that gray area allow locales to drag their feet or (arguably) overcharge for documents that should be easy to access, while nonetheless complying with the law?

Although the responses from these three cities fulfilled statutory obligations, Festus and Smithville’s responses seemed to be most faithful not only to the law, but also to its spirit. As for Manchester’s response, you can judge for yourself.

It is puzzling with the technology available today why our cities and counties don’t simply publish their “checkbook” information online. There are plenty of free or low-cost platforms to keep these records up-to-date and accessible (look at what Manchester’s neighbor Ballwin is doing), and given the taxpayer interest and treasure involved, why should obstacles get in the way of accessing that information?

Click on the link below to see the request we sent out

The post How Easy Is It to Get a Sunshine Request Fulfilled? It Depends. appeared first on Show-Me Institute.

We’re told early in life that nothing is truly free. If you’ve had to learn this lesson first-hand, you know that some “free” things are actually quite costly.

The Saint Louis Zoo, one of our region’s most beloved institutions, is one of those expensive free things. And soon it could get a whole lot more expensive.

Senate Bill 49 (SB 49), if signed into law, could mean voters in Saint Louis County and City will be asked to hike their sales taxes by one-eighth of one percent (0.125%) to help fund infrastructure, conservation projects, and other zoological activities at the Saint Louis Zoo. By all accounts, the needs at the zoo are genuine—many of its pipes, sewers, etc., are original. But the zoo already receives $21 million—about one-third of its budget—from county and city taxpayers through a property tax. Is ratcheting up the region’s already-high sales taxes the best way to raise additional funds?

Here are some reasons to think not.

Sales taxes in both the county and city just went up. The city’s sales tax rate will soon be 9.179%, higher than New York City’s or San Francisco’s—and another half-percent hike is on the horizon. Things don’t look much better in the county. With the passage of Prop P, Clayton will soon have a rate of 9.113%, as will places like Olivette, Webster Groves, and Ballwin. In Ferguson, sales taxes will sit even higher, at 9.613%. Add in the extra 2% levied by numerous, overlapping special taxing districts, and in some places you’ll be paying more than 11%! A new zoo tax will only make your shopping more expensive, and it will hurt the region’s poor the most.

Considering that policymakers have a seemingly never-ending list of “transformative” or “essential” projects that require tax hikes, is a zoo tax the best use of limited public resources? There is no formula to determine the optimal sales tax rate, nor is there a documented sales tax ceiling, but taxpayers will only stomach so much. If the sky isn’t the limit for tax rates, could a zoo tax help exhaust the region’s sales tax capacity?

And then there’s a basic math issue. The proposed tax could raise roughly $20 million per year if passed in both the county and city, and zoo officials have claimed there is a backlog of needed infrastructure projects that will require approximately $100 million. Accordingly, by conservative estimates, a mere six years of the tax could take care of all the zoo’s infrastructure needs, and an extra year or two could raise tens of millions for conservation efforts. But there is no language in the bill that states the tax would be temporary. So while zoo officials talk of specific needs that justify the tax, they fail to mention that, in addition to taking care of these needs, the tax would increase their annual budget by a third—and, apparently, permanently so.

Finally, a sales tax hike wouldn’t fix the underlying funding problems. Since the zoo does not charge admission, it has what economists call a free-rider problem. Not all of the visitors who enjoy the zoo pay for its operation. The result is a zoo with piling bills and no way to pay for them. But rather than address this problem, a zoo tax would simply exacerbate it. City and county taxpayers who currently subsidize the zoo for everyone would be forced to doubly subsidize the zoo for everyone. And while it’s convenient to say Saint Charles, Franklin, and Jefferson counties should impose a zoo tax too, residents from these counties comprise only 13% of the zoo’s visitors, and taxing them would likewise fail to address the free-rider problem.

There are alternatives to hiking sales taxes, and one in particular deserves greater consideration: charging a reasonable admissions fee. If other top zoos charge more than $50 for admission, visitors can pay a fraction of that to keep ours one of the best in the county. A small admissions fee—for those not currently paying property taxes for the zoo—could raise millions annually, and help avoid hiking an unnecessary, regressive tax.

It’d be great if some things in life were truly free, but they’re not. And nothing is wrong with that. The user-fee system works—it’s both fair and financially sustainable. Let’s hope policymakers and zoo officials keep that in mind in the coming months.

The post To Keep the Zoo Great, Keep It Out of Taxpayers’ Pockets appeared first on Show-Me Institute.

Smart Growth America promotes many common urban planning myths about demographic factors and magic millennials, with the main point being that people are abandoning cars and suburbs for cities and transit. But the facts are:

• Suburbs (and exurbs) are still growing faster than urban cores nationwide.
• Millennials are still driving and only using transit slightly more than past generations.
• Millennials are flocking to cities with high-performing economies regardless of their overall walkability or transit scores.

Like these myths, the idea that walkability drives wealth is likely a mirage, created by the metric for walkability itself. That’s because Smart Growth America gives higher walkability scores to areas where “…everyday destinations, such as home, work, school, stores, and restaurants, are within walking distance.”

That sounds reasonable, until one considers the type of areas that will not be considered walkable. One such type of area is suburbs like Ladue or Ballwin in Saint Louis County, with spread out single-family homes. But another is going to be poor inner city neighborhoods, such as areas in North Saint Louis. Despite the higher population densities, mixed housing stock, and narrow roads with ample sidewalks, the depressed economies and lack of safety in poorer areas mean fewer businesses, fewer restaurants, and fewer shops. Therefore, they have lower walkability scores. Use that definition of “walkable” nationally and one would erroneously conclude walkability means wealth because the definition of walkable precludes economically depressed areas.

North Saint Louis already has the infrastructure to allow residents to walk, bike, or take transit to nearby areas. It just does not have the wealth to attract enough shops, jobs, and restaurants into walking distance. The only way to fix that is to increase economic opportunity, or replace current residents with wealthier residents poached from the suburbs or other city neighborhoods. I’ll leave it to the reader to decide which route the city has taken with Washington Ave., the Northside Development Project, and Cortex in midtown.

The post Walkability In Saint Louis: My Feet Are My Only Carriage appeared first on Show-Me Institute.

The report found that local incentives haven’t encouraged job creation, consumer spending, or economic growth in the Saint Louis region, and concluded that the reporting requirements are “seriously deficient.”

The report also found that tax-increment financing (TIF) hurts neighboring municipalities. As I have discussed before, economic development is not a zero-sum game, and municipalities in Missouri can grow faster if they didn’t view their neighbors as competitors.

The editorial board at the St. Louis Post-Dispatch provides a great commentary on the report. The following is my favorite passage:

The money has moved around within the region, however, as vampire-like new developments suck the life out of existing ones. So publicly subsidized retail developments in Chesterfield and Fenton bleed business out of existing centers in, say, Ballwin. New big-box developments in Manchester drain the vitality out of older shopping centers in Crestwood, and so on. Net gain for the region: virtually zero.

If these local incentives don’t result in overall gain, why provide them at all?

Missourians would be better off if they were allowed to keep their earnings and spend them as they desire in the private sector. If the government were serious about encouraging job creation and productive economic growth, it would eliminate such market incentives entirely.

The post New Report: Tax Incentives Fail to Produce Results in Saint Louis appeared first on Show-Me Institute.

A Ballwin-area retired art teacher was sentenced to jail time on Monday for non-compliance with two city ordinances. The ordinance offender, Lewis Greenberg, is charged with littering and storing hazardous materials.

The photo above is of Greenberg’s offense. He maintains that the structures in front of, around, and behind his house are art. Although art isn’t easy, these structures do look like abstract sculpture. The tangle of wood and metal, Greenberg told the Post-Dispatch, represents the Holocaust.

Greenberg’s neighbors, however, don’t appreciate his yard art. And, they haven’t liked it for a long time. In 2007, a woman from the area blogged: “OK, so where does Greebergs right trump the neighbors right to have a peaceful life in a quiet subdivision?”

Writes a commenter on the most recent Post-Dispatch article, about Greenberg’s sentencing:

If he wants a yard full of junk – then he can move out in the country where there are no rules. In a town and a subdivision where there ARE rules – he is BREAKING THE LAW and it needs to go….

Well, not quite. Greenberg’s art is on his property. He isn’t breaking a law just because what he has built on his property is unusual and doesn’t quite fit in with the Ballwin-area aesthetic. There is no right to uniformity.

Some neighborhoods do have codes, such as the one enforced in Shaw, that can limit what individuals can do with their property. It appears that, although the City of Ballwin has an extensive housing code, Greenberg’s neighborhood doesn’t have a rule to protect itself against his abstract yard art. Instead, the city has charged him with littering and storing hazardous materials — charges that seem like a stretch.

A survey of the Ballwin City Code reveals that the term “litter” refers to substances that could injure a person’s feet or car tires, trash and debris, earth left from an excavation, and traffic obstructions. Clearly, Greenberg’s lawn art doesn’t fall into the first, third, or fourth definitions of litter. And, although commenters hasten to compare his art to junk, can items strategically placed in order to construct sculptures on a person’s private property really be classified as trash?

As for the hazardous materials charge, it could be argued that children could run onto Lewis’ property and hurt themselves. However, unlike a person keeping dangerous animals on their property, if anyone hurts themselves on Greenberg’s property, it is entirely that person’s fault. Furthermore, if a person did hurt themselves while on Greenberg’s property, that person could attempt to find recourse through the court system. It’s not the city of Ballwin’s place to stop low-risk accidents from occurring through prior restraint. If it were, the city should immediately crack down on the construction of swimming pools.

I suspect that the neighborhood’s problem with Greenberg’s lawn art is not one of danger, but one of annoyance. It is unfortunate that the City of Ballwin is claiming to protect the safety of “the children” in an effort to censor Greenberg. Instead of reacting in this negative way, the annoyed neighbors could have realized what Mr. Plumbean and his neighbors realized:

My house is me and I am it. My house is where I like to be and it looks like all my dreams.

The post The Right to Have a Peaceful Life in a Quiet Subdivision appeared first on Show-Me Institute.

1. Missouri’s portion of the rail stimulus is a (comparatively) small amount of tax dollars that DOES NOT commit Missouri to building some new high-speed rail system.
2. The dollars will likely be used in a manner that will bring demonstrable and measurable improvements to our current rail system. Or maybe they won’t, but at least we’ll know if that’s the case and have the ability to test and measure results before we commit to spending more money. So far, the first of these projects (undertaken without stimulus money) has had measurable success in reducing delays and allowing for increased traffic. (I believe strongly that eliminating delays is more important than speeding up the trip.)
3. If the state spends a reasonable amount of money making demonstrable improvements to our current system, that will increase voluntary ridership (it already has) — which will (presumably and hopefully) decrease the required subsidy amount.

It is theoretically sound, but practically unrealistic, to expect that MoDOT would not have applied for stimulus funds and that the state would not have have received any for high-speed rail. MoDOT deserves credit for applying for shovel-ready projects that will improve our current Amtrak service rather than reaching for the fantasy world of bullet trains to Ballwin.

The projects that MoDOT will undertake with this money, and the project they already completed without stimulus funds, are based on engineering — not on delusions of taking the Orient Express at 250 mph. A study completed in 2007 by Mizzou engineers listed the most cost effective ways for MoDOT to improve existing rail service. The study recommended projects, such as the recently completed California (Mo.) rail-siding extension (scroll about two-thirds down the page) that would immediately improve rail service. Those are the projects for which MoDOT received funding, not pie-in-the-sky projects requiring newer, larger, and interminable subsidies.

The nationwide high-speed rail plan as a whole, announced last week, is a sad joke, as aptly described by Chrissy in her recent post. However, Missouri’s part in it is a relative bright spot, and MoDOT deserves commendation for keeping its plans focused — almost as much commendation as that candidate in Illinois who made the Simpsons monorail reference before I did:

“All this money to get from Chicago to St. Louis 45 minutes faster? This isn’t informed public policy, it’s a ‘Simpsons’ episode,” gubernatorial candidate Dan Proft said in a statement.

The post Missouri Can Be Proud of Its High-Speed Rail Allocation appeared first on Show-Me Institute.

The noise disturbance, the rezoning, and the (at least temporary) loss of property value are certainly among the reasons that residents might choose to protest, even though these reasons might be counterbalanced by the long-term growth in economic activity that would occur as a result of such a store opening. Today’s protesters could be tomorrow’s shoppers. As Nobel laureate economist Ronald Coase observed, projects of this type would have a much smoother process if developers could focus on economic factors like compensation for property owners with legitimate complaints, rather than having to jump through political hoops.

The post The Schnucks Challenge appeared first on Show-Me Institute.

The article I am referring to is in today’s Post-Dispatch, and discusses the issues regarding enforcement of St. Louis County’s child helmet laws within the various county municipalities. Readers might be confused by statements such as this in the article:

Maryland Heights Police Chief Tom O’Connor, when asked about helmet laws, said, “That’s a St. Louis County ordinance and we don’t enforce county ordinances.”

What? They don’t enforce county ordinances? That might sound strange to people, but it is quite normal.

Most county ordinances only apply in the unincorporated parts of the county. The 91 cities enact the local ordinances within their boundaries. There are crossovers, though. The county sets traffic laws on county roads, even those within municipalities. This occasionally leads to disputes, as the county has to count on local police to enforce the county traffic laws on the county roads within cities, and the question is what will the city police enforce if the city and county disagree on something like a speed limit? (Something very close to this happened when the Forest Park Parkway reopened after MetroLink construction, with St. Louis County, Clayton, and University City disagreeing on the new speed limits for the Parkway.)

The primary area in which county laws trump local control is in the health code. No municipality in the county is large enough to have its own health department. I believe a city has to have at least 70,000 people before it can have its own health department (that number is from memory; I don’t feel like looking it up). So, the county health code automatically applies within cities, which is why they enacted the helmet requirement under the health code rather than the criminal code. Cities can certainly enact tougher legislation in the area of health laws, like Ballwin’s smoking ban, but generally the county rules govern when it comes to public health issues. It is not hard to see why a city police chief might not be aware of this exception.

Whether or not they were aware of the rule, it is great to read some of the police officers’ comments exhibiting common sense and anti-nanny-state sentiments:

“Is it practical to enforce if you come across three or four kids out riding bikes without helmets? What the hell do you do, confiscate their bikes and then drive them all home to tell their parents? It ought to be the parents’ responsibility in the first place.”

Not surprisingly, the health department bureaucrat who has made it her mission in life to tell everyone else how to live their lives doesn’t agree:

The driving force behind it was Shirley Scatcherd, a county public health coordinator. She had worked for four years to extend to municipalities a regulation in effect in the unincorporated areas since 2001.

“The law was never intended to be punitive, but we do expect that it will be enforced,” she said.

Soon enough, my son will start riding bikes, etc., and when he does we will make sure that he uses a helmet. When he starts to ski, that will also be the end of my helmet-less time on the slopes, because I will have to set a good exemple for him. (The argument over “moral hazard” — or, whether the presence of a helmet will cause me to ski more dangerously than I would without one — is a topic for another post. Hint, the answer is: “guaranteed it will.”)

But I can once again feel my blood pressure rising with yet another example of a public official taking away our own individual liberties and responsibilities under the guise of “safety.” This case is particularly maddening, because she wasn’t happy enough just to enforce the rules in the unincorporated parts of the county. Nope, the nanny state must apply everywhere!

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