On November 4, Springfield voters will decide on a proposal to increase the city’s hotel tax by three percent. The proceeds from the new tax will help fund a new convention center for the city. A recent report paid for by the Visit Springfield tourism bureau said exactly what Visit Springfield wanted it to say: that a new convention center will generate enormous revenue for the Springfield area. The report claims a new convention center will drive $1.3 billion in new spending over the next 30 years. Exaggerated estimates like this one have been made on behalf of convention centers all around the country for decades, and the historic evidence is clear that Springfield voters should be dubious of such claims.

Between now and November, Springfield residents who visit St. Louis should drive by the largely empty dome attached to St. Louis’s downtown convention center to see how these convention center promises often play out. That dome was a part of a large convention center expansion in the 1990s. The same promises of growth, revenue, and utopia were all made when St. Louis voters approved a similar hotel tax increase back then. Now the dome is mostly empty, and the regional body that manages it is struggling to pay for its upkeep. St. Louis’s local tourism agency thinks the solution is the same thing it always is: further expansion of the convention center. Like a Cold War general in a Kubrick movie or a carpenter with a box full of nails, tourism agencies have the same solution for every problem. Economic recession? Expand the convention center. Economic growth? Enlarge the convention center. Global nuclear war? Definitely gonna need a bigger convention center to commiserate in.

The increased hotel tax isn’t the only public money being used as part of this plan. Other local sales taxes are slated to be used for funding, and state tax dollars are being considered. Tourists, Springfield residents, and possibly all of Missouri will get to pay for this new event space, whether it is actually needed or not.

Haywood Sanders is a researcher and writer with the University of Texas–San Antonio who has studied convention center expansions for decades. He has documented how cities and tourism agencies systematically inflate projections to get these projects approved. Sanders has reviewed the Springfield convention report and noted in an interview with a Springfield News-Leader reporter earlier this year that the report didn’t state how it calculated its room occupancy estimates and ignored underwhelming numbers of comparable convention centers in Overland Park, Kansas, and St. Charles, Missouri. Sanders states that the convention-center industry peaked in the early 2000s and shows no signs of returning to the success it enjoyed back then. With two major convention areas so close by in Branson and Lake of the Ozarks, a new center in Springfield will face intense competition. But I have no doubt that local Springfield convention-center boosters will ignore reality in their quest for tax revenue and city spending.

Visit Springfield wanted a report that claims a convention center will be an economic boon for the city. They got it. As Springfield residents prepare to decide on the hotel tax increase proposal, they should study the work of Heywood Sanders and others to learn about how these claims have been made about many other convention centers in many other cities, and how they usually fail. Springfield voters can also go to St. Louis to see the failures of these promises with their own eyes. Taxpayers should not be on the hook for convention centers whose overstated benefits, such as they are, will largely go to private entities. This is the Show-Me State, and the claims being made by supporters of the convention center for Springfield should be met with a healthy dose of skepticism by voters.

The post Springfield Voters Should Be Skeptical About Convention Center Claims appeared first on Show-Me Institute.

*Affton, Branson, Center, Confluence Academies, Fayette, Lebanon, Lee’s Summit, Lewis County, Liberty, Lindbergh, Lonedell, Mehlville, Neosho, Ozark, Parkway, Pattonville, Raymore-Peculiar, Ritenour, Ste. Genevieve, and Shell Knob

The Demonstration Project is a formal trial implemented with the goal of determining whether the Missouri Assessment Project (MAP) (which tests at the end of the year) should be replaced with an individualized and continuous system. I have discussed the details, benefits, and concerns with this project in two previous posts. If this new system sees success, Missouri could try to incorporate it statewide.

What will change for students this year?

Students in these 20 districts will be tested more frequently—three times in English/language arts (ELA) and three times in math (45 minutes for each subject), and the assessments will be on a computer. Students should know that it is an adaptive test, meaning the test will change in real time based on the responses—if a student misses questions, the test offers easier questions and vice versa. For a test taker, this means one cannot afford to make any careless mistakes. On traditional tests, all questions are weighted equally, so if one accidentally marks bubble C instead of bubble B, it will count as one mistake. However, if one accidentally picks bubble C or carelessly forgets to flip the sign on a negative number, the adaptive test will count it wrong and think the student cannot do harder problems since one of the easier problems was missed. Therefore, students should double check their work, because a careless mistake on the wrong problem can tank their score.

Students in these 20 districts will also take the MAP this year. The federal government mandates that every district in a state participate in a uniform standardized test. The MAP is a federally approved and mandated test, so any exemption from taking the MAP would have to come directly from the federal government. These 20 districts have requested a federal waiver, and we will see whether it is accepted or not.

What will change for parents?

The results of these student assessments will return quickly via an online form, and there will be a detailed breakdown of each student’s strengths and weaknesses (here is an example of adaptive test results). A dashboard will also be designed to report annual performance targets and goals. Page 29 of this report shows a sample dashboard. A parent should be able to access information relating to their district via the dashboard.

Hopefully this new trial will yield success that can help us find better ways to teach and assess our students.

The post 20 Missouri Districts Get the Green Light to Try New Assessment System appeared first on Show-Me Institute.

In the past few weeks, the newly elected Branson leadership team has dramatically altered city management in Branson. The city administrator, assistant city administrator, city attorney, finance director, and the head of planning & zoning (and several other city employees) have either resigned or been fired.

There is, not surprisingly, opposition to this in Branson. A former city official stated:

“Branson does not need this, gentlemen. You three were not elected to conduct business like this. . . . We’re not supposed to be tearing the city apart.”

According to Skains [a former alderman who just lost an election], remaining city staff are “terrified” of being fired at any moment.

I am not unsympathetic to people losing their jobs, but the reality is that if voters want real change in their cities and towns, replacing the part-time elected officials over time usually won’t get it done. Most Missouri cities are run by full-time bureaucrats who have significant power advantages over the part-time elected officials.

Leaders dealing with powerful and recalcitrant bureaucrats is a fight as old as history, but the dynamic at play in Missouri towns is heightened by the fact that the full-time employees simply have much more information at their disposal. It is hard for a part-time councilmember to stand up to a city attorney with years of experience and a law degree, no matter how right the councilmember may be.

I remember over a decade ago when the people of Ellisville were opposed to a tax-increment financing (TIF) plan and elected a new mayor who was opposed to the TIF. The new mayor did all he could, but the pro-TIF city administrator, city attorney, and other city staff answered to the pre-existing council majority that hired them, not the new mayor. They did all they could to frustrate the new mayor, up to and including impeaching him and removing him from office. (The new mayor was returned to office by a county judge who found the entire impeachment process invalid.) Eventually, after another election cycle, the anti-TIF forces won and ultimately stopped the TIF, but the fight was brutal.

But back to Branson. If the people of Branson want to see change and have voted for change, then change is what they should get. Perhaps they will get more change than they realized. In that case, Mencken’s line that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard,” may be proven true in Southwest Missouri. But when the citizens of a city or county want change, the interests of the voters should be the priority, not the employment status of city workers.

Change is hard, but when people see what their communities are doing—be it mask mandates, tax subsidies, or hospital privatizations—and demand accountability and new leadership, they deserve to have it.

The post To Make an Omelette in Branson, You Have to Break a Few Eggs appeared first on Show-Me Institute.

Although it’s a little trite, “the early bird gets the worm” is harmless enough as far as old sayings go. Still, living by those words is one thing, and governing by them—as Lake Ozark seems to be doing—is quite another.

Food truck operators want to set up business along The Strip in the city of Lake Ozark, but the Planning and Zoning Commission is prohibiting them from doing so. While identifying consumer desire for food truck options in this area, the Commission says that its intent is to protect brick-and-mortar businesses that are already there. As the daughter of a restaurant owner, I fully support brick-and-mortar businesses, but why is the Planning and Zoning Commission choosing to protect these businesses at the expense of others, namely food trucks? Why are we only allowing the early bird a chance at getting the worm?

The commission fears that food trucks would compete with existing businesses. That is not something that should be feared; it should be expected and encouraged. In the same way that existing businesses compete with one another, food trucks should compete with other restaurants—and may the best food and dining experience win! It’s through this competition that we end up with a collection of businesses that consumers really want. That’s how competition in the market should work; consumers, not commissioners, pick winners and losers. It shouldn’t be the early bird that gets the worm, but the best bird.

After the Great Recession, many were looking for cheaper, on-the-go food options, and a lot of culinary experts were unemployed, laying the groundwork for a surge of food trucks. (And it’s not a stretch to think that our current economic situation could increase the demand for food trucks even more.) From 2013 to 2018, the number of food truck establishments in the U.S. doubled, employing over 16,000 workers in 2018 and reporting sales of $1.2 billion in 2017 according to the U.S. Census Bureau. More options increase the chance that consumers find exactly what they are looking for at a price they are willing to pay. Additionally, more businesses mean more entrepreneurship and opportunities for workers.

Other cities have found ways for food trucks to operate that would be better options than an outright prohibition. For example, Clayton allows for food trucks to operate for city or private events provided that they follow specific guidelines. Branson prohibits food trucks from operating within 100 feet of a restaurant and also allows for food truck courts. While these examples still place regulatory burdens on the food trucks, they show that there are ways for brick-and-mortar restaurants and food trucks to coexist.

Existing businesses should not receive special treatment just because they already exist. We allow brick-and-mortar restaurants to compete with one another—is it really that dangerous to allow them to compete with food trucks? Lake Ozark says it’s working on an ordinance to lay the groundwork for food trucks operating in the area. I say, let all the birds go and see which one gets the worm.

WATCH: More From Show-Me on Food Trucks

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Longtime United States Senator and Chairman of the Senate Finance Committee Russell Long of Louisiana used to say, “Don’t tax you, don’t tax me, tax that man behind the tree.” Long knew that everyone’s favorite tax was the tax that forced someone else to pay for something. We all want services from the government. The problem there (actually, there are many problems there, but let’s focus on the tax issue) is that we have to pay for those services with taxes. Like many other politicians, Long realized that what we really want is to have other people, the “outsiders,” pay for our public services.

Local governments in Missouri have excelled at this practice for many years. It was here in Missouri that local governments took it to its most extreme form in Mack’s Creek, St. George, and many other places by funding their city governments with reprehensible fine and ticketing practices. Ferguson got much of the attention for these actions after the riots, but, in fact, they were a fairly normal Missouri city when it came to using fines and tickets to fund their city’s operations. After the violence in Ferguson, the state passed beneficial legislation that finally limited this practice, and our entire state is better off for that change.

But local governments still focus on raising revenues by taxing outsiders. Voters in Kansas City and St. Louis just approved keeping the earnings tax, which includes taxing people who don’t live in those cities and can’t vote on the issue. Who wouldn’t want to tax someone else who is only in the city for limited periods, uses fewer public services, and has no say in the matter? Branson did the exact same thing earlier this month when voters passed proposals to pay for important infrastructure improvements entirely with new hotel and restaurant sales taxes.

Welcome, stranger, thanks for visiting.

A more common practice is the use of special taxing districts such as transportation development districts (TDDs) and community improvement districts (CIDs) to fund local services. Such districts have exploded in recent years, going from a combined 86 in 2004 to 732 in 2020. Special taxing districts can use property taxes, sales taxes, or direct user fees like tolls for their projects. While a couple of the most well-regarded of these tax districts do use property taxes or tolls to fund their operations, I’ll let you guess which tax most of them use. That’s right, the sales tax.

In a 2017 audit, Missouri state auditor Nicole Galloway cited numerous TDDs and CIDs for financial and management abuses. In Springfield, she detailed how the College Station TDD failed to notify shoppers of the tax and failed to include area residents on the TDD board. In Waldo (in Kansas City) multiple CIDs are layered on top of each other, creating high taxes for shoppers that benefit business owners, not the general public. In Southeast Missouri, the Black Mountain CID in Van Buren was caught using the CID’s tax money to make private loans, pay private debts, and fund private expenditures. In Mid-Missouri, the Stoneridge TDD in Jefferson City granted a no-bid contract submitted after the supposed deadline to a board member’s company, while the Rock Bridge TDD in Columbia collected sales taxes from businesses outside the district. Missouri needs tighter limitations on the use of TDDs and CIDs, or they will continue to be abused around the state.

There are benefits to funding government with consumption taxes. This is not an anti-sales tax piece, generally speaking. What I want to argue against is the exploitation of the idea that those shoppers, workers, or visitors who briefly appear in your city need to pay their “fair share” of the local tax burden. “Free rider” is a term for people who use public services without paying the costs. Good public policy should work to limit free riding where possible. But is a person who shops in your city really a free rider who must, in the interest of fairness, pay another half-cent sales tax on the goods that they buy? I don’t think they are, even in tourist havens like Branson or Lake of the Ozarks.

Those shoppers are already paying gas taxes, and a portion of the gas tax gets sent straight to cities for their local roads. Beyond the gas taxes, shoppers and other visitors will generally travel major state and county roads to get to their local shopping destinations. Those malls, shopping centers, grocery stores, etc., are rarely located on streets maintained by city governments.

Those businesses that employees work for or shoppers patronize are already paying commercial property taxes (which are assessed at higher rates than homes) to the city. They pay business license fees to the city, so I might ask what the purpose of a business license is if not to allow employees and customers to come to your place of business? Arguments for raising new taxes, including through measures like TDDs and CIDs, frequently leave out any discussion of all of the other taxes and fees that are currently being paid.

Another issue with funding as much of your local government as you can with a sales tax directed at outsiders is that doing so makes things the government wants look like things the government needs. Do you think that Missouri’s nascent and inexplicable enthusiasm for new trolleys and streetcars would be happening if property owners and trolley users (the few there are) were paying the entire cost? Of course not. The Loop Trolley is entirely funded by outsiders via local sales taxes and federal tax dollars. The Kansas City Streetcar is significantly funded by federal tax dollars and a local TDD, although—to give credit where due—some of the operating funds come from local property taxes. The ability to export most or all of the cost of a new government project onto people who don’t vote on it makes it much more likely that government will engage in activities with questionable benefits. Using property taxes instead as the primary basis for local government funding results in better decision-making by voters—who must decide if the benefits of the government activity are worth what the voters themselves will have to pay for them.

The local leaders who push these efforts to tax outsiders or alleged free riders often feel they are being clever by doing so, as if they have discovered some new trick. The recent ads in favor of the earnings tax in Kansas City proudly claim that half of the money comes from people who don’t live in Kansas City. Supporters of almost every new TDD, CID, or other sales tax proposal consistently tout how this will make those outside shoppers finally pay their fair share. What is lost here is the fact that while your city is being clever in getting that revenue from those outsiders, all of the other cities are doing the same thing to your residents. This whole endless endeavor just creates a circular firing squad of higher taxes used to fund government expenses of questionable necessity. At its worst, it led to long lines at night courts throughout Missouri as town after town was funding itself with tickets and fines targeted toward making payroll rather than public safety.

If Russell Long had been from Missouri, he probably would have changed the final line of his doggerel. “Tax that tourist in the CID” and “Tax that driver in the SUV” come quickly to mind as localized final verses. But his main point stands the test of time and geography. Long understood the desire to tax someone else to fund your public services; a desire that is alive and well in Missouri. Who knows, perhaps Senator Long once got a speeding ticket in Mack’s Creek?

The post Here’s A Crazy Idea: Tax Yourself. appeared first on Show-Me Institute.

The West Virginia Legislature just passed a sweeping school choice bill. The bill allows 90 percent of West Virginia children to receive $4,600 in an education scholarship account (ESA). These ESAs can be used for private school tuition, tutoring, education therapies, or homeschool curriculum. If the governor signs this bill, it could be a game changer.

West Virginia’s governor also announced a plan to eliminate the state income tax. The plan will be paid for in a combination of ways, including raising sales taxes, raising consumption taxes on alcohol, and reducing or eliminating tax breaks for the oil and gas industry.

All of the sudden, West Virginia, which has had a declining population since the 1950s, could look pretty attractive to young families who aren’t thrilled with the West Virginia public schools and would prefer to DIY their own plan. It’s going to look pretty attractive to high-income earners who can now work from anywhere. And it’s going to look pretty attractive to active folks who value a small-town atmosphere with a low cost of living. These are groups that can engage with their communities and help solve entrenched social problems. These are groups that Missouri would be wise to pursue.

Missouri also has great amenities. We have delightful small towns, beautiful state parks, Lake of the Ozarks, and Branson. Unfortunately, too many legislators from these very same areas are solidly against school choice in any form. They need the support of teachers to get elected and that, so far, has meant standing firm for the status quo and only the status quo. The fact that the young people who do go off to college often don’t return must not be considered. The fact that young families aren’t gravitating to these communities is seemingly being ignored. The fact that knowledge workers will go to states like West Virginia, Colorado, or Florida must not be a threat.

We keep this attitude at our peril. Post-pandemic, many people are thinking long and hard about where and how they want to live. Missouri should be setting itself up to be as attractive as possible.

The post Almost Heaven appeared first on Show-Me Institute.

Missouri has made the decision to mandate the earliest dates that schools can open each year, even as other states are moving away from similar policies. The reason? So that families have an extra week or two to vacation in the state’s tourist areas. I’ll be very curious to see how many families change their plans because of this law.

Where is the outrage from parents with full-time jobs who have to make summer arrangements for their children for a longer stretch of time? Where is the outrage from school boards that clamor for local control? Where is the outrage from principals who know full well about the impact of the summer slide?

The Missouri legislature had the opportunity to improve education in the state by encouraging innovative ideas and options for parents. Instead they chose to manipulate the public school system in the hope that it will benefit the Lake of the Ozarks and Branson. The next time a lawmaker claims that public education is their priority, pay attention to their actions, not their words.

The post Public Education Is More Important Than Tourism appeared first on Show-Me Institute.

Would it be nice to have the show produced here? Sure. Is it economical to subsidize such productions? No. As with many tax incentives, research demonstrating the waste associated with film tax credits is fairly clear, so if Georgia wants to underwrite dozens of hours of (dramatic) Missouri tourism videos for us, more power to them. It may already be having a positive impact in that regard.

Unfortunately, bad ideas in Missouri tend to die hard, and that has certainly been true of the state’s film tax credit program.

Missouri hasn’t offered perks for film studios in several years — and producers have taken note, shooting scenes set in Missouri in other, more generous states.

But, if it were up to Lt. Gov. Mike Kehoe, the state would reboot its modest incentive program, with the goal of drawing crews to Missouri to film shows such as Netflix’s “Ozark” and HBO’s “Sharp Objects.”

“I have seen the benefits of us being a film tax credits state,” Kehoe, a Republican, told reporters on Thursday.

“Lake Ozark, Branson area, would really like to work to try to attract some moviemaking,” Kehoe said. “I think we need a small amount.”

That this topic returns again and again to the political scene in Missouri is a testament to the voracious tax credit appetite of the entertainment industry, and I can understand why filmmakers like the set up (it’s basically free money) and why politicians like it (it’s publicity, albeit far from free).

But why should taxpayers let our politicians play Louis B. Mayer to Hollywood types with their tax dollars? Rather than giving away tax money to out-of-towner production companies, elected leaders should be focused on reducing the taxes of the people already here in the state, who are far more likely to reinvest in it.

The post Let Georgia Keep Paying to Promote Missouri appeared first on Show-Me Institute.

The post Testimony: Tax Increment Financing and the Branson Adventures Project appeared first on Show-Me Institute.

According to news reports, this is exactly the deal developers are seeking from the city of Branson. The developer wants to build a water park that they project will bring 600,000 visitors each year, making it the 7th most popular water park in the country. They claim the project will create 900 full-time jobs immediately and ramp up to 1,200 as the park is completed. The park also will include restaurants, hotels, and other amenities.

Despite all that potential, there isn’t enough financial interest—from the people who invest in these sorts of things for a living—for the project to move forward. So the developer has come knocking on the door of the taxpayers—in the form of the Branson Tax Increment Finance (TIF) Commission—asking for your money. And the members of the TIF commission voted 7 to 4 in favor of awarding TIF. The board of aldermen will pass judgment at a later meeting.

Overwhelmingly, research on TIF in Missouri and around the country shows that the process does not live up to its promises. (This perhaps explains why private investors aren’t so excited about these deals to start with.) If you were to peruse the 2017 TIF Annual Report compiled by the Missouri Department of Revenue you’ll find that only about one-half to one-third of the promised jobs ever materialize—and those numbers are reported by the developers themselves without audit.

The argument in favor of TIF largely rests on a logical fallacy: an assumption that development that happened after TIF happened because of TIF. But the research tells another story. One study of TIF in Kansas City and St. Louis—the state’s most prolific users and abusers—found that economic growth in areas without TIF met or exceeded growth in areas with TIF. In St. Louis, a report prepared by the very people who staff the TIF commission concluded that it was a waste of taxpayer money.

Perhaps the developers should scale back their ambitious plans. Maybe it makes sense as a smaller project—say, the country’s 12th most visited water park. If it is as successful as the developer claims, the park can always be expanded with the profits. But all of this should be done entirely with private money, from people who know a good investment and expect to see a return.

In Branson and across Missouri, cities are struggling to deliver basic services. Diverting sales and property tax dollars away from education, infrastructure, and public safety to invest in a park that itself may increase demand in all three of those areas is unwise and unnecessary. Branson’s success is due to individuals realizing great success from private investments, there is no reason now to change that winning formula.

The post Branson Water Park to Soak Taxpayers appeared first on Show-Me Institute.

The city of Branson has a choice in how it will conduct negotiations with the firefighters union: It can keep the citizens of Branson in the dark and meet with the union in closed-door sessions, or it can open the doors to its collective bargaining sessions and allow citizens and the media access to these meetings.

Open meetings like this are important because taxpayers and people who depend on city services need to be informed about what their government is doing. The transparency of open meetings leads to accountability. However, when the public is kept from meetings between government officials and government unions, government often acts in a way to benefit itself to the detriment of the taxpayer.

If Branson decides to hold collective bargaining sessions in open meetings, it will be in good company. Both the Monarch Fire Protection District and Columbia Public Schools already hold open collective bargaining sessions with their employees.

To put it simply: Branson citizens have a right to know how their city and fire department operate and where their tax money is being spent. When the city of Branson and the firefighters union begin negotiating a labor agreement, the city should keep the doors open. This will help ensure that citizens of Branson are well served by their newly unionized fire department.

The post Branson Firefighters Unionize appeared first on Show-Me Institute.

Branson Airport (BKG) made news in 2009 when it became the nation’s only privately constructed and operated commercial airport. Unfortunately, in large part due to poor timing, passenger levels were far below expectations and the project has been in financial trouble for the last couple years. The airport’s problems trebled when Southwest decided to halt service to the market last year.

Stripped of its only major airline, Branson Airport management has been trying to lure new service. To do that, the airport plans to use $1.5 million of private money and $500,000 of public money (courtesy of Taney County) to create a revenue guarantee for prospective airlines. If an airline agrees to serve Branson Airport and fails to turn a profit, this guarantee will make up the difference.

We’ve seen the use of revenue guarantees before in Missouri, notably at Columbia Regional Airport. The Columbia region provided a revenue guarantee to American Airlines, which prompted Delta Airlines (who was already serving the airport) to end service. In essence, publicly funded airline revenue guarantees take the risk of providing airline service from the private sector and give it to taxpayers. This is a questionable use of public resources, and it subsidizes air travel.

Even though Branson Airport is a private operation, a revenue guarantee would not be the first public support it has received. The city of Branson has paid a set amount to the airport for every out-of-town passenger that it has brought in, and Taney County helped the airport secure initial financing. With the airport on the verge of financial collapse, and the county now preparing to subsidize commercial air service, the question becomes whether the public should be invested in bailing out this private venture. Especially with nearby Branson-Springfield National Airport (SGF) growing briskly in the last couple years, it may be in the interest of the taxpayer to let the airport sink or swim on its own.

The post Airline Revenue Guarantee Could Make Touchdown in Branson appeared first on Show-Me Institute.

According to The Bond Buyer newspaper:

Branson Airport LLC previously defaulted on terms of a forbearance agreement and faced possible bondholder enforcement action absent a new agreement. The trustee recently posted an amended and restated forbearance agreement dated April 22. It extends a June 30 expiration this year to June 30, 2014.

There is a huge difference between the Branson and Kansas City airports, though. Branson is America’s only private commercial airport, so there is no way taxpayers will be on the hook there. (As an aside, with Southwest Airlines recently entering the Branson market, we are optimistic that this important experiment will succeed. We are certainly rooting for it. If it does not, well, risk is a part of free-market capitalism.)

What would happen if the Kansas City airport similarly failed to meet its bond obligations? In a story about the airport for The Pitch, Steve Vockrodt wrote:

The city would not be on the hook to make up the difference if the airport didn’t produce enough revenue to cover bond payments. Bondholders would be screwed on their investments, but so would the airport’s reputation when it wanted to issue bonds in the future.

Vockrodt is correct, but it is unlikely that Kansas City’s leadership championing this project would sit by and let the airport default. For example, Kansas City recently refinanced debt incurred by the Citadel development scheme, which was never actually built. (Talk about a bridge to nowhere!) We’ve already written about how the city is on the hook for the Power & Light District. Like the airport, the city is not legally required to make the Power & Light’s Tax Increment Financing (TIF) payments. However, it has chosen to. It is therefore reasonable to expect that if a new MCI terminal fails to generate enough cash to repay its debts, Kansas City would reach into its general funds to make up the difference. In other words, the city will take money currently spent on essential city services and divert it to pay for the new airport.

Other airports have failed to live up to the fantastic expectations of development boosters. Cincinnati’s traffic dropped as ticket prices rose. Kansas City has enough financial drains, our airport need not be one of them.

The post Not All Airport Bonds Fly appeared first on Show-Me Institute.

Kansas City’s recent past is full of rosy development projects that did not pan out; KCP&L (Kansas City Power & Light) is chief among them. As a result, the city — and the taxpayers who fund city operations — are on the hook for about $13 million each year. Funds used to support the project are being diverted from other worthy causes.

Aviation Department Administrator Mark VanLoh says: “One common misconception the city must overcome: People think Kansas City will have to raise taxes to pay for a new terminal. It will not.” Maybe, maybe not.

Let’s review airport revenue. Dave Helling wrote in the Kansas City Star about how a new terminal would struggle to raise revenue:

There aren’t a lot of ways airport users could generate that kind of revenue. Ticket sales are already taxed, and air travel here is slumping. The airlines could pay more in rent, but other airports would pounce if the cost at KCI gets too high.

Indeed, VanLoh has admitted in press interviews that airports in Branson, Mo., and Wichita, Kan., are already taking market share from Kansas City because they are paying airlines to land there. Increasing rents or landing fees are not a realistic option.

If the airport is unlikely to be able to generate the revenue needed to support those bonds, can’t we turn to the federal government for help? VanLoh says “no,” telling the Star that large-scale federal participation in the project faces headwinds.

If the city were to issue $1.5 billion in revenue bonds in order to pay for the new terminal, it certainly would require a vote of the people. (Note that the $1.5 billion they are now considering is already a 25 percent increase over where we started, at $1.2 billion.) But what of Kansas City’s 2nd District City Councilman Ed Ford’s assertion in November that the project is “going to happen regardless of whether our citizens want it to happen”?

It turns out that not all bonds require voter approval. These bonds, known as Special Obligation Bonds, are not considered debt in the same way as other bonds and therefore require no public vote. Kansas City uses them all the time, and in fact is preparing to issue some this year to pay for the streetcar. Special Obligation Bonds were created to address a city’s immediate need — say, a broken water main — when it does not have the resources to fix it or the time to seek a vote. Kansas City issued two such bonds in 2012 amounting to $75 million that funded computer upgrades for the city’s revenue collectors, garages, and the refinancing of the ill-fated Citadel Plaza project.

Unlike revenue bonds, which do require a public vote, these bonds are normally secured by property. In this case, the Aviation Department may secure the $1.5 billion debt with the airport itself. While the city may not have to raise taxes, as VanLoh says, it is well within reason that the city will have to cover those bond payments from the general fund just like we cover KCP&L.

Welcome to the Kansas City Power and Flight District.

The post Kansas City’s Power And Flight District appeared first on Show-Me Institute.

Why is fanciful airport art an issue? Kansas City officials argue that we need a shiny new terminal because we are losing market share to other airports in the region, such as Branson, Mo., and Wichita, Kan.

On KCPT’s Week in Review program (comments begin at 5:07), Scott Parks of KMBZ 98.1, in a courageous act of honesty, questions the whole concept of a city “losing flights” to another city. He says:

Maybe I struggle against this panel mentally. I don’t understand how Kansas City is losing flights. Airlines are a business. If people want to fly to Kansas City for business, for pleasure, to visit family, whatever, they’re going to fly to Kansas City. I heard the argument this week that we’re losing flights to Columbia, we’re losing flights to Branson, we’re losing flights to Wichita. Well if I live in Seattle and I have family that lives in Kansas City, I’m not flying to Wichita and then driving three hours to Kansas City. I don’t understand how flights that were supposed to be coming to Kansas City are now going to Wichita or Branson.

The conversation immediately moved to the cost of security and Kansas City International Airport (MCI); no one addressed Parks’ concern.

Just like the old ministers in Hans Christian Anderson’s “The Emperor’s New Clothes,” Parks states the obvious — doing so almost apologetically. But he is exactly right. If proponents want to argue that the airport is unattractive as a hub — a place where people make connections to other flights but not itself a destination — a shiny new terminal will not address that problem. It will only exacerbate the problem if it results in higher costs to airlines who are already being lured elsewhere with cash.

Week in Review was rife with those same slick computer-generated images that were shown at the transportation committee meeting. Those images are meant to appeal to emotions. The Kansas City Star reported that the aviation department has contracted with an outside public relations firm for $117,000. Are presentations to the Kansas City Council and the public already focused on selling slick and colorful images rather than answering substantive questions? The city council’s committee hearing suggests the answer is “yes.”

Kansas City Mayor Sly James has called for an “adult discussion about the facts,” and that is good. But he and others on the City Council have yet to make their case that the Emperor is not naked.

The post The Emperor’s New Airport appeared first on Show-Me Institute.

But today we are talking about a different Branson. You may have heard that Saturday marked the beginning of Southwest Airlines service to Branson, Mo. There will now be daily flights to Chicago, Dallas, and Houston, and one flight a week to Orlando. This news comes on the heels of a decrease in flights to Columbia, Mo.

There is obviously a lot that contributes to the decision for an airline to begin or increase service. But it is worth noting two things. One, Branson is the only privately owned and operated commercial airport in the country. Many were skeptical that it would succeed. Industry expert Mike Boyd predicted when the airport opened that “the local population is too small, and the region’s attractions aren’t sufficient to consistently generate sufficient traffic for profitable air service.” Branson may be small, but the area has generated enough demand to keep air service over the past few years.

And, they have done it without major subsidization. This airport does not rely on taxpayers to operate (but it does receive $8 from the city for each arriving visitor). Nor does it rely on taxpayer money to attract business. Columbia ran into trouble when it offered subsidies to one airline but not the others; the others are now gone. Subsidies may help attract an airline in the short term. But Delta official Trebor Banstetter reinforced that subsidies such as revenue guarantees will not keep an airline around if the flight does not prove to be successful without that guarantee.

The post You Are Now Free To Move About The Country Without Subsidies appeared first on Show-Me Institute.

In economic terms, public goods are non-rivalrous and non-excludable. Except in extreme circumstances, the water I consume does not limit your consumption of water. In this case, the water in the Missouri River is non-rivalrous. However, with utility services — as opposed to national defense or local roads — it is easy to prevent someone from using the asset if necessary. They are excludable. It is hard to argue that water access and infrastructure needs to be provided by the government, especially when there are private providers operating in the area that have a proven ability to provide the product. And it is even more difficult to make that argument when a lease, management contract, or utility sale would be valuable to taxpayers. (To those who might scream about everyone having the basic right to water, you are all free to collect rain water to drink, and to take baths in a local stream all you want. This is about the demand for pressurized hot or cold water coming into your home on demand by turning a tap.)

To its credit, Kansas City’s water division at least charges for its water like a private good instead of a public good. The fact that Saint Louis still lacks water meters for most of its consumers is absurd. Even if Kansas City changes the debate some by charging for water more like a private good, the fact is that public utilities far too often lack the political will to charge what they need to charge for the asset.

Also in Kansas City, the private contract to operate the animal shelter has been pulled. This happened awhile back, and I touched upon it here, but this is a great disappointment. This is clearly not a failure of privatization, unless saving money and increasing adoptions is a failure. It might be considered a failure of this particular private operator, but I remain unconvinced. I think that there is a core group of activists/volunteers who will never be happy with any system until they get a no-kill shelter in Kansas City. I say this as a dog-lover who got my dog (who passed away last year at 10) back in 2000 from a local shelter.

I think the city caved to accusations, as this statement indicates:

“We’ve been receiving allegations from some of the volunteers who put in time out at the shelter regarding mistreatment of animals,” said David Park, director of Neighborhood and Community Services for the city. 

Park acknowledged the shelter has been run better now than in the past. 

“They’ve done a wonderful job, as far as increasing the number of adoptions. (Previously) the number of animals that were euthanized was far greater than the number that was adopted, and now the opposite is true,” Park said. 

According to Park, the city has to protect itself, even if the allegations have yet to [be] proved. 

“Until we have the formal results of the investigation back, we don’t want to renew a contract for a year, for another year, and then have something surprising come out of the Missouri Veterinary Medical Board — then we need to cancel right away.”

The private airport in Branson is struggling financially. It does not appear to be struggling in its day-to-day operations, but I’ll try to fly there next week to make a better judgement. They have two commercial airlines offering regular flights to Houston, Atlanta, and Denver, and more charter services. It remains to be seen how the airport’s debt issues will play out over time. I certainly hope that this experiment succeeds, but who knows? If it does fail, it will fail with (mostly) private money. Compare that to Mid-American Airport over in Illinois, and pick which style you want.

The post Missouri Privatization Roundup appeared first on Show-Me Institute.

I think the key issue here is the idea of competition. In a report for San Diego, the authors at Reason put it well (emphasis added):

“Taxpayers win whenever there is competition, even when the competition is won by public sector providers” said Adam B. Summers, policy analyst at Reason Foundation and co-author of the report. “They get more accountability, better results, and lower costs. […]”

Private screening companies are used at only 16 airports in the county. Springfield-Branson would have been no. 17. The very existence of competition brings a greater degree of efficiency to the TSA, even if it continues to do the screening in the vast majority of American airports. I know we aren’t used to thinking about the terms “government employees” and “complacency” together, but if the presence of competition in a small number of airports serves to reduce the TSA’s complacency, that benefits all of us.

One six-year-old report found that private screeners did a better job than government employees, but another report said that there are no cost savings because the TSA still overseees the private security companies, which operate according to the same requirements, rules, etc.

I believe the real reason for this denial of the private screening option has more to do with organized labor. From the KMOV Channel 4 report on this story:

The American Federation of Government Employees, the nation’s largest federal employee union, has praised [TSA Administrator John] Pistole’s decision.

TSA employees will be deciding on union representation shortly. Government unions are generally the most ardent opponents of any type of privatization.

Anytime I write anything about Branson, I always think, “What would Yakov say?” So, here is my best attempt at a Yakov Smirnoff–style joke about this situation:

In USA, people worry they the screeners will touch their junk as they board the plane. In Russia, people worry about the plane itself because the whole plane is made of junk!

Fire off better jokes in the comments, if you dare!

The post Private vs. Public Airport Screeners: Who Gets to Touch Your Junk? appeared first on Show-Me Institute.

The $2.5 billion settlement to improve the Kansas City sewer system has put the city well past the question of whether something needs to be done with its infrastructure assets. Right now, private companies are willing to pay for the right to manage the city’s property, and long-term savings result when the private sector operates public services more efficiently. Partnering with the private sector — either in the form of up-front payments for asset management, or cost savings from greater operational efficiencies — could help Kansas City meet its financial obligations, both now and in the future.

In 1984, Oklahoma City contracted out the management of its wastewater treatment facilities to a private utility company, Veolia Water. At the time of the contract, Oklahoma City spent $14 million per year on its system. Seventeen years later, in 2001, Veolia operated an improved system for only $11 million per year. These numbers have not been adjusted for inflation, making the savings even more impressive. Veolia still operates the Oklahoma City wastewater system today, after further contract renewals.

I provide this example not to encourage you to buy stock in Veolia or move to Oklahoma City, but to showcase the potential effectiveness of partnering with the private sector in public infrastructure operations, management, and delivery. A city council committee has approved a resolution for Kansas City officials to study the possibilities offered to residents and taxpayers from private sector competition for public infrastructure programs. The full council is scheduled to consider the proposal soon.

This resolution is limited in its reach. The proposal simply calls for the city to study the expected effects of contracting out the management of certain assets. There is no plan or intention to sell off and fully privatize city assets. Instead, the study could consider a range of options, such as private companies that pay the city for the right to operate city parking garages, or a private engineering firm contracting to operate water or wastewater facilities. One local example of the benefits of these ideas involves recent successful changes to the Kansas City animal shelter, although that particular effort moved further toward full privatization than this proposal does.

Successful examples of the private provision of public services can be found throughout Missouri. They include instances of outsourcing, contracting, and private ownership. Private companies successfully operate the nation’s only private, commercial airport in Branson; manage the pharmacy services of Saint Louis County’s Department of Health; provide electricity, gas, and water throughout Missouri; and manage trash collection in communities throughout the state. Around the country, private companies efficiently operate public highways, libraries, jails, and much more.

Not every example would be appropriate for Kansas City, but a study could help determine where private partnerships would benefit the city. Mayor Mark Funkhouser deserves credit for bringing these issues to the forefront, and the people of Kansas City will benefit if they get the serious study they deserve.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

The post Private Sector Can Help Kansas City Manage Its Public Infrastructure, Likely for Less appeared first on Show-Me Institute.

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X. As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, but what I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. […]

He works, he votes, generally he prays — but he always pays — yes, above all, he pays.

Don’t take this as a specific criticism of any of the officials discussed in the News-Leader article. Even more so, don’t take it as a criticism of the programs discussed in the story, especially the great people in the Missouri National Guard. The deal to lease part of the airport may well be a good deal for taxpayers.

However — and I want subtlety to be my friend here — is it really that amazing that politicians will get along at an event where they are all either spending or receiving other people’s money? State tax dollars are being used to lease local government property, and it is supposed to be noteworthy that all the politicians are happy? It does not matter that the expenditure in this example is an arguably fully legitimate use of public money. (I’ll leave aside for a moment that it could be even better if the Springfield airport were privatized, like its competitor to the south in Branson.)

Anyone who sees public officials getting along in an instance like this and thinks that it is a notable example that bears repetition lacks an understanding of public choice economics and interest group politics.

Thanks to johncombest.com and derrickjeter.com for the story links and quote.

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