This is just the latest example over the years of City Hall favoring wealthy, connected corporations with taxpayer subsidies and special treatment.

Port KC CEO Jon Stephens framed the incentives as a “small, supportive element” aimed at ensuring Kansas City retains high-quality jobs. The project promises to add 150 jobs with an average salary of $126,000 while retaining 600 current employees. Yet no precise value for the tax exemptions was disclosed. Its not clear if PortKC attached performance requirements to the deal, but Friestad indicates there was no such discussion of it among the commissioners when the subsidies were approved.

Readers may recall Stephens backed subsidies for an independent baseball team in Kansas back when the team couldn’t pay its utilities. If nothing else, he is consistent in his apparent desire to redirect taxpayer money to private corporate interests

Such a deal is nothing new for JE Dunn. The company received a lucrative incentive package when building its headquarters in 2009. That project fell under the East Village tax-increment financing plan, redirecting $19 million in public funds for a parking garage, demolitions, and blight removal.

This latest deal follows a familiar script in which major corporations, including Cerner, H&R Block, Burns & McDonnell, and Commerce Bank have secured public funding for their private office projects. Research has indicated for years that such incentives do not significantly impact corporate decisions on location.

Port KC has repeatedly played a central role in funneling public dollars into private hands. Its recent involvement with JE Dunn reflects a long history of negotiating deals that often leave taxpayers holding the bag, such as the millions each year taxpayers must fork over to cover bond payments on the Power & Light District owned and operated by Cordish Company. (Stephens is a former manager of that project.)

As Kansas City grapples with persistent infrastructure needs, ballooning public debt, and limited funding for essential services, its continued reliance on subsidies for corporate renovations raises questions about priorities. For now, Kansas Citians can only watch as the city’s public funds are diverted to underwrite private gains.

The post KC’s Corporate Welfare: JE Dunn’s HQ Renovation Gets Public Support appeared first on Show-Me Institute.

Royals-loving Jackson County voters might think this is about baseball; it is not. It’s about Sherman enriching himself and his investors, leveraging our love of the Royals so he can drive up the value of the team. A recent CNN report pointed out:

Teams are now real estate plays for billionaire owners, stadiums increasingly serve as anchors for mixed-use shopping and entertainment districts, and development rights around stadiums for owners have become a key component of public financing for these projects.

Sound familiar? That same CNN story points out that the trend of moving stadiums downtown is relatively new. Prior to that, in the 1960s and ‘70s, new stadium construction moved to the suburbs—just as the Chiefs moved from Municipal Stadium to Arrowhead in 1972 at public expense. (Kansas City leaders are nothing if not suckers for developers’ slick sales pitches.)

The trend to move stadiums back downtown started in 1992, when the Baltimore Orioles opened Camden Yards. The deal struck by the Orioles owner, Peter Angelos, is a cautionary tale for Kansas City.

Neil deMause, freelance journalist and editor of the website Field of Schemes, has covered the Orioles for years. In 2019, he noted rumors of a possible Orioles move to Nashville. Orioles CEO John Angelos, son of the elderly owner, then inked a lease keeping the Orioles in place for 30 years.

Well, not exactly. According to deMause:

. . . the new lease gives Orioles owner John Angelos, or whoever buys the team from him, an out clause where he can leave early if he can’t come to an agreement with the state on a development deal for the area around Camden Yards by the end of 2027.

Maryland Governor Wes Moore extolled the agreement as protecting taxpayers, but it didn’t. In fact, the governor weakened his negotiating position because of that 2027 deadline—he either caves to Angelos on area development or risks triggering that out clause. Or, as Sherman has done in Kansas City, the owners could seek to renegotiate a subsidy package years before the lease expires.

The Angelos family recently announced they are selling the Orioles to billionaire David Rubenstein for over $1.72 billion.

Here’s the point: In 2019, when the rumors started that the team may relocate, the Orioles were valued at $1.3 billion. After renegotiating leases, additional subsidies, and an area development agreement, the team sold for over $1.72 billion. That’s a 33% increase in value driven not by playing baseball, but by negotiating deals—deals taxpayers paid for with subsidies.

Beyond the cost, deals like this allow developers to influence who sits on the other side of the negotiating table by backing sympathetic (or simply malleable) politicians. Here in Kansas City, Burns & McDonnell was one of the largest contributors to local political candidates, including Mayor Sly James, the year it applied for and received millions of dollars in taxpayer-funded subsidies. Incidentally, Sly James is now on Sherman’s stadium tax campaign payroll.

Whether you’re on the diamond or in city hall, it pays to play ball.

But nothing about this is about baseball. It’s about money and contracts.

If voters agree to the new stadium tax, elected leaders will have less leverage to strike a good deal on community benefits agreements, leases, and more. If the measure is defeated, Sherman and the county, in a stronger position, will go back to the negotiating table—hopefully cutting a better deal for taxpayers.

Sherman and his partners want to make as much money as they can, and that is fine. Voters need to be just as clear eyed about the costs and benefits of this proposal.

The post Royals Move Downtown Is Not About Baseball appeared first on Show-Me Institute.

Perhaps it shouldn’t be surprising that Burns & McDonnell is at it again, benefitting from a little-debated tax credit expansion passed by the state legislature and signed by the governor that could net them $300 million over 15 years. The Kansas City Star, in a piece worth reading in its entirety, reports that:

Since 2011, Missouri has issued $39 million in tax credits to Burns & McDonnell, according to state records. The company can receive credits for every 25 new jobs it creates and $1 million it invests in its headquarters.

The expanded credit, inserted into the economic development package with almost no debate, will cover not just its physical assets but investment in cloud computing services. It would allow the company to claim 8 times the value of a software license.

Hand-picking which companies have their taxes reduced puts a great deal more power in the legislature, encourages businesses to invest in lobbyists rather than in their core competency, and creates an unjust situation where businesses that don’t receive handouts subsidize their competition through the tax code. If taxes are too high, lower them for everyone—don’t play favorites.

Perhaps most importantly, such tax schemes are so poorly managed that they hardly work. It should not be surprising to learn that the men and women elected to local and statewide office are imbued with no magical forecasting powers to divine the growth industries of tomorrow. It’s a crapshoot.

As a result, Missourians are left holding the tax bill while corporate cronies and their amen chorus in the legislature congratulate themselves. It is unjust, unworthy of the Show-Me State, and an indelible stain on the records of those who would call themselves small-government, free-market conservatives.

The post Taxes for Thee, But Not for Me (Part 2) appeared first on Show-Me Institute.

I read with interest a story in The Kansas City Business Journal that your company may be considering a move (back) to the City of Fountains. This is exciting, and the people of Kansas City would welcome you with open arms. According to the Journal,

A move could allow the company to consolidate its employees in a single location. A move to Missouri also could allow Waddell & Reed to receive sizable development incentives from the state and city agencies.

While this may be an opportunity for your company, it may affect not only your commuting time, but also your wallet. If you aren’t familiar with local economic development policies, let me bring you up to speed. In order to benefit from having more and bigger employers, cities often offer them incentives to relocate within their boundaries. They may include simple property tax abatements or more complicated programs like tax-increment financing (TIF). Cities may offer assistance in issuing bonds to pay for construction or forgo the sales taxes your company would otherwise pay on construction equipment. Heck, if you’re building a hotel, we might just give you a fat check!

Kansas City believes that these short-term costs are worth it over the long term. The economic research literature on the matter says otherwise, but certainly the company and its development partners see a great boon.

Given that Kansas City levies a flat tax on all earnings of people who either work or live within the city boundaries, you may experience a 1 percent reduction in income if Waddell & Reed does relocate. However, if your executives get the same incentive package that Burns & McDonnell did for its recent campus expansion at Bannister and Wornall Roads, you’ll be happy to know that half of your 1 percent earnings tax will be returned to your employer to offset the cost of development. Don’t think of it as a tax increase—think of it as a reduction in salary.

As the Twitter hashtag reads, that’s @howwedokc. City leaders tax workers so they can offer subsidies to their employers. (We also divert funds away from schools in which 90 percent of students are in the free and reduced-price lunch program to pay for successful companies’ headquarters buildings, but that probably won’t affect you.)

And if you find after a while the Kansas City just isn’t for you, remember that once these incentives expire, your company will likely start looking to move back to Kansas to take advantage of whatever incentives it may offer. If that turns out to be the case, as it was in 1990, we’ll certainly miss you. But just like Applebee’s before you, we know you’ll likely be back.

Regards,

Patrick Tuohey

The post An Open Letter to Waddell & Reed Employees appeared first on Show-Me Institute.

We’ve built a new entertainment district along with several luxury apartment high-rises, corporate headquarters buildings, and hotels—including an 800-room convention hotel. We’re trying to build a new single-terminal airport, revive the 18th and Vine Jazz District, and expand the streetcar. There is also talk of building along the riverfront, possibly including a new sports stadium!

But along with building structures, we’re also building a reputation—and not a good one.

Perhaps you have also heard about a years-long, nation-leading spike in homicides, an underperforming Kansas City Public School District, and a nonexistent affordable housing policy. Maybe you’ve read about blighted structures on the East Side collapsing under their own weight. You may be aware that the police department has about 10 percent fewer uniformed officers than it did before the homicide rate jumped.

These things are related. Our leaders are falling over themselves to offer generous tax incentives to everyone from Amazon to Burns & McDonnell to Cerner while city services are being starved of tax revenue because those companies are no longer paying. Recently, both the Kansas City Library and Mid-Continent Public Library turned to taxpayers to make up for funds lost to such subsidies. Sometimes service providers like the Community Mental Health Fund are less able to help those in need.

Like a crazed Christmas shopper, we’ve paid for much of this development spree armed with credit and questionable judgment. Kansas City’s leaders were warned about high levels of debt in 2012 in the Citizen’s Commission on Municipal Revenue. But since then our debt per capita has only risen, and last year city leaders sought and were granted 40 more years of debt.

If you’re looking for a metaphor from the season, it might be that we’re hanging a lot of shiny ornaments on a dry, dying Christmas tree.

Proponents argue that without generous subsidies, wealthy corporations could not afford to build their luxurious headquarters buildings. Beyond the question of why taxpayers should support such things, the research from around the country tells quite another story. A 2018 study from The Upjohn Institute for Employment Research concludes in part, “for at least 75 percent of incented firms, the firm would have made a similar location/expansion/retention decision without the incentive.”

Another cost of these burdensome baubles on our community Christmas tree is they make it harder for us to keep the tree itself alive and healthy. Consider the time and attention spent on the new airport terminal or the convention hotel that might have been used addressing housing policy or the homicide rate.

We are diverting money and seeing no real gain. So why do city leaders keep doing it?

One reason might be explained by another Christmas metaphor: gift giving. A Show-Me Institute study of tax-increment financing (TIF) projects in Kansas City from 2002 through 2018 found that developers’ campaign contributions to city council and mayoral candidates increased in the years leading up to their TIF applications and then dropped off in the years after TIF was awarded. This finding suggests a TIF-for-tat arrangement between developers and city leaders, and it could help explain why an economic development policy universally decried as suspect remains popular—and increasingly so—in Kansas City.

The final days of a year are often a time to take stock and reflect. As Kansas City prepares for local elections, we need to focus more on the real issues affecting our municipal tree—crime, infrastructure, education, and debt—and less on the distracting and ultimately unsuccessful policies of economic development subsidies.

The post Kansas City’s Christmas Tree appeared first on Show-Me Institute.

The bill in question was SB 859, which was heard by the Senate Economic Development Committee on February 20. A copy of my own testimony is here. The bill is fairly straightforward; it would limit the circumstances under which TIF can be used and would require a third-party analysis of the need for a taxpayer subsidy.

Opponents of the bill included members of the Economic Development Corporation of Kansas City, whose budget is dependent upon fees generated by the TIF projects they oversee. In fact, EDC staff once received bonuses because the group received so much money from TIF fees. The two officials testifying for the EDC offered anecdotal evidence of TIF success, highlighting two or three projects. But there are at least as many projects in which TIF has been abused, including the world headquarters buildings of Burns & McDonnell and H&R Block, along with other failures such as the Power & Light District and the never-actually-built Citadel. In fact, I am confident that in a battle of anecdotes opponents of TIF would win handily.

Other opponents of reform at the hearing included representatives from a few businesses that have benefitted from these taxpayer subsidies. They urged legislators to “be careful” lest reform hinder Missouri’s ability to fight a subsidy border war with Kansas (a border war, incidentally, that is a “financial folly for taxpayers”). If only those same businesses urged local officials to be careful with the TIF subsidies they give out so easily.

But good public policy ought not be based on mere anecdotes. Even if you don’t care what the research indicates, good policymaking is dependent on good information. And the research on TIF is clear: It doesn’t work at spurring investment or creating jobs. If you don’t want to depend on Show-Me Institute research, you can look at a UNC-Chapel Hill study on Chicago, or to the Upjohn Institute for Employment Research for nationwide data analysis. You can even turn to a study conducted for the St. Louis Redevelopment Corporation on the TIF subsidies that the corporation itself recommends and administers! This is the testimony that should matter.

Legislators should be wary of testimony from people with a vested financial interest in a bill’s outcome, or of testimony that amounts to little more than cherry-picked anecdotes. They should seek out broad research from disinterested parties—which, in the case of TIF, tells us that these subsidies are a waste of taxpayer money.

The post What I Saw at the TIF Hearing appeared first on Show-Me Institute.

Hiltzik even quotes urban economist Richard Florida, whose call to cater to “creative class” millennials was swallowed hook, line, and sinker by Kansas City and Saint Louis politicians. Florida later recanted.

Hiltzik doesn’t pull any punches and ends his column with a repudiation of film tax credits, which Missouri wisely ended in 2013. The whole column is worth reading.

The post Evidence from Across the Country: Economic Development Subsidies Don’t Work appeared first on Show-Me Institute.

When the original story broke on May 11, we learned that Burns & Mac has offered their own airport solution:

One key to the proposal for Burns & McDonnell is that it would get an exclusive arrangement with the city to provide the design and come up with a guaranteed maximum price.

Other firms would not have access to make their own offer, nor would the city request bids. James said the city would waive bidding requirements in accepting this plan and that it is legal for the city to do that.

That last part was called into question and the city rescinded the plan shortly thereafter. But Burns & Mac remained the sole provider and they were strident in going it alone.  The CEO of architectural firm BNIM was caught off-guard and wondered why they—and other Kansas City firms—were not included. This could not have been mere oversight; we’re told that Burns & Mac developed the plan over several months with 25 employees working on the project full time. Perhaps they thought at the time that their long-standing relationship with the Mayor was all they needed.

That changed quickly. The no-bid contract fell apart, as did the poorly considered right-of-first refusal option, along with the short window for considering proposals. Now that the deadline has been extended and other international companies are considering making proposals, Burns & Mac is teaming up with those KC firms they once thought unnecessary. Previously, Burns & Mac added general contractors JE Dunn and McCownGordon to their team. At the same time, the firm is publicizing data from a poll they themselves commissioned, raising concerns that I described in a previous post.

The question for Council members and voters ought to be: Does any of this yield a better, more cost-effective product for the people of Kansas City? The companies involved should not drive the decision-making. After all, if Burns & Mac didn’t think they needed BNIM et al. before, why do they think they need them now?

The post Policy, Not Politics, Should Drive Airport Decision appeared first on Show-Me Institute.

Process matters in public policy. Moving past a fast-track no-bid contract to an open and transparent bidding process is necessary for good decision-making. As a city-wide vote is required, there will be a public campaign on what to do. The public has been wary of the proposal up to this point.

That may be changing. Steve Vockrodt at the Star has authored a piece about a public opinion survey conducted by Remington Research and paid for by Burns & McDonnell, the firm that was to be awarded the no-bid contract before the City Council got involved.  Vockrodt wrote:

The latest poll by Remington said 40 percent opposed the single-terminal idea, while 22 percent were unsure.

Those results ticked upward by double-digit percentage points when respondents were told about a Burns & McDonnell plan to privately finance, design and build a new single terminal. Support on that basis grew to 55 percent favoring the proposal, compared to 23 percent against and 22 percent unsure. The polling suggests that respondents warm to a local firm’s involvement in the project as well as a private financing model.

Unfortunately, neither Remington nor Burns & Mac have released the full survey. This is important as surveys can be subject to bias—both intentional and not. Having worked in public and corporate polling for 15 years, I know that opinion research can not only measure public opinion, but be used to influence it. That is why the American Association for Public Opinion Research’s (AAPOR) Code of Ethics requires researchers to release, among other things:

The exact wording and presentation of questions and response options whose results are reported. This includes preceding interviewer or respondent instructions and any preceding questions that might reasonably be expected to influence responses to the reported results.

Vockrodt quoted Councilwoman Katheryn Shields as being skeptical of a poll sponsored by a firm that had so much to gain from the debate. She offered, “I’m astonished that a company with the reputation of Burns & McDonnell would continue to needlessly interfere with the bid practices of this city.”

The public has been engaged in the discussion of a new terminal at MCI for at least 4 years. The debate has been less than transparent, and many of the arguments in favor of a new terminal have been proved false. Councilwoman Shields is right: For the sake of good public policy, it is incumbent on all the participants, including Burns & Mac and other applicants, to respect the process.

The post On KCI, Process Is Important appeared first on Show-Me Institute.

Consider a recent story in The Kansas City Star, which states that Burns & McDonnell would be given “the opportunity to equal other proposals if it chooses, since it brought the idea to a municipality to begin with.” The Star called this “nuance,” though apparently some thought it was a serious problem. Seven days later, the Star reported that:

City Manager Troy Schulte said Monday that the city’s lawyers had advised that the right of first refusal could potentially be subjected to a legal challenge, so it was eliminated.

How did a proposal outside the city’s municipal procurement code provisions, and possibly even fodder for a lawsuit, get past the corporate attorneys at Burns & Mac and all the attorneys on the City Council, including Mayor Sly James himself? Why did the City Manager announce the decision to allow Burns & Mac the right of first refusal without consulting with the city’s attorneys beforehand? If he did consult with them, how did they initially miss it? And how did The Kansas City Star, the city’s paper of record, unquestioningly describe a potentially unlawful bidding practice as mere “nuance?”

Could it be that this policy proposal—if it can be called that—is being rushed through? That may be an odd question to raise about a matter that has been under discussion in Kansas City for years, but it appears to be what is happening.

The public wasn’t convinced of the need for a new single terminal before this latest political fiasco kicked off. The deadline of a public vote in November has created a false sense of urgency—resulting in the kind of mistakes you’d expect from people more concerned with getting something done fast than with getting it done right.

The airport is an important and valuable asset. The consequences of a mistake in the planning or implementation of its development will reverberate throughout the region for decades. There is no reason to rush this decision—good policy is not served by hurried half-measures. The Star—and the airlines themselves—ought to suspend their calls for a November election, and the Council ought to ignore false deadlines. 

The post Ready-Fire-Aim Approach Yields Predictable Results at KCI appeared first on Show-Me Institute.

• People in Kansas City love their airport. Pride in a local airport probably isn’t very common around the country, but it is a very important aspect of this campaign. Mayor James, before celebrating criticism of the airport, counseled consultants not to criticize the airport for that very reason.
• The plan at hand is to spend $1.2 billion to reduce the number of gates we have now. Where else does a city spend that sort of money to get less service?
• The matter of financing has never been an issue with the Show-Me Institute. Back in 2014, we listed some reasons to oppose the airport terminal, but the cost to taxpayers is not one of them. Financing only became an issue when city leaders said that the airlines agreed to finance the project. They didn’t.
• Regardless of whether the financing is done publicly or privately, it would result in a higher cost to travelers to pay down the debt. That higher cost would make MCI less attractive to airlines and travelers alike. Consider Cincinnati, where ticket prices were so high that local businesses flew employees out of Dayton, an hour away. Or consider Sacramento. Or San Jose.
• We published a piece in 2014, “Five Good Reasons to Reject New KCI Terminal.” At least four of those reasons still stand, and the piece remains a worthwhile read.

According to the Star story, Kansas City engineering firm Burns & McDonnell has proposed to privately build and finance a new single terminal at MCI. However, there appear to be strings attached:

One key to the proposal for Burns & McDonnell is that it would get an exclusive arrangement with the city to provide the design and come up with a guaranteed maximum price.

Other firms would not have access to make their own offer, nor would the city request bids.

Not surprisingly, Steve McDowell, CEO of BNIM (another architectural firm in KC), expressed concern that such a deal would exclude a great deal of area architectural and engineering talent, telling the Star that “some of the best work in the country is coming out of our city, and I’d hate to see that not taken advantage of for the design of our gateway.”

• The Show-Me Institute is aligned with The Kansas City Star editorial board calling for a policy debate that is “open, fair, complete, fact-based and inclusive.” If the past four years are any indication, it’s fair to wonder whether that debate will happen.
• Lastly, the Star mentions that privately financed airports are nothing new; they’re common in Europe. And therein lies an idea worthy of consideration in Kansas City. If Burns & McDonnell is eager to build and operate a new terminal, why don’t they buy the whole thing? The Show-Me Institute published a paper on this not too long ago. (See page 17.) Not only is Branson’s airport privately owned, but the Kansas City Council previously considered privatizing MCI.

If the City is open to private financing and private operations, how far are we from private ownership?

The post Important Background on the Airport Discussion appeared first on Show-Me Institute.

This year’s campaign is dubbed Progress KC. So far, the biggest contributors include Burns & McDonnell, JE Dunn, Mark One Electric, and several development and law firms.

Supporters are counting on the Heavy Constructors to help fund the campaign. That group, whose members stand to benefit from the infrastructure jobs, won’t officially decide until later this month.

It was nice to see the Star make a point of mentioning that financial backers of the 40-year property tax increase such as Burns & McDonnell, JE Dunn, and the Heavy Constructors have a bottom-line interest in the matter. They will likely get a lot of the money that they are asking taxpayers part with. But at least two of the biggest donors have something else in common.

Both Burns & McDonnell and JE Dunn do not pay the full property tax on their respective headquarters buildings. Or rather, thanks to Kansas City’s generous tax subsidy programs such as tax increment financing (TIF), much of their property, sales, and earnings taxes are returned to them to offset the costs of their impressive corporate pleasure domes. Readers of The Pitch may recall that Burns & McDonnell contributed heavily to convince voters to keep the earnings tax, and then lobbied the city to have a portion of its own earnings tax returned to it to build that same headquarters.

Walter Johnson, a professor of African American Studies at Harvard University recently spoke at the Kansas City library and referred to this sort of practice as “a fundamentally feudal model of corporate citizenship.” Rather than pay taxes to support institutions that are vitally important to the community—such as schools, libraries and the like—these corporations seek to avoid taxes and instead give charitably to the causes they themselves deem worthy. Johnson concludes:

Corporations shouldn’t have to keep their communities afloat through charitable giving. That’s what taxes are for, and that’s why paying them is typically considered a civic obligation, not an act of generosity.

That Kansas City is suffering from years of infrastructure mismanagement is a cold, hard fact. And it won’t surprise anyone to learn that those most eager to enact the tax will profit from its adoption. Yet it is a civic shame that those same corporations calling for an increase in others’ property taxes have spent so much effort trying not to pay their own taxes. Burns & McDonnell and JE Dunn should accept their own civic obligation before passing it on to others.

The post Taxes for Thee, But Not For Me appeared first on Show-Me Institute.

Back when City leaders referred to themselves as “geniuses,” City Hall was handing out subsidies to everyone. H&R Block kicked off the feeding frenzy with their downtown office building, followed by the financially disastrous Power & Light District deal that has taxpayers footing the bond payments. In recent years taxpayers have chipped in for wealthy corporate headquarters for Burns & McDonnell and Cerner, and subsidized luxury high-rise apartment buildings. Even The Star itself has received a tax abatement. Once taxpayers and parents raised an objection to a subsidy for architectural firm BNIM to build in a hip part of town, the Council considered some reforms. Mayor Sly James would have none of it and complained that “we may as well put up a sign that says Kansas City is once again closed for business.”

Obviously, James is wrong. As Kansas City contemplated subsidizing a Hyatt hotel downtown, Marriott was building two on their own dime a few blocks away. The owners of Ward Parkway Mall are building a restaurant plaza without any subsidies. And now we learn of this proposed 13-story, 257-unit apartment building just west of Country Club Plaza. This is great news, not just because someone wants to invest in Kansas City, but because they are willing to invest their own money rather than seek taxpayer subsidies.

As Show-Me Institute writers have pointed out for years, not only do subsidies starve cities, counties, schools, and libraries of the revenue they need to provide basic services, subsidies also pervert developers’ incentive structure. And all this for projects that research shows likely would have been built anyway.

Real private investment—without taxpayer subsidies—is a true sign of economic health. City leaders need to put the brakes on handing out subsidies and let more private investment come.

The post Development Can Happen without Subsidies appeared first on Show-Me Institute.

Trump has said some traditionally infrastructure-y words when he talks about this. “We’re talking about a very large-scale infrastructure bill,” the president-elect said in a long-ranging interview with the New York Times published Wednesday. “… [a]nd we’re going to make sure it is spent on infrastructure and roads and highways.” A proposal to privatize infrastructure projects released by Trump’s economic advisors describes the “complex network of airports, bridges, highways, ports, tunnels, and waterways” that underpins private sector growth.

Bliss worries that Trump will be more inclined toward “major new property development,” rather than infrastructure. She even cites Paul Krugman’s column, where such spending is often boosted, in The New York Times where he writes,

And we already know enough about [Trump’s] infrastructure plan to suggest, strongly, that it’s basically fraudulent, that it would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall. Progressives should not associate themselves with this exercise in crony capitalism.

The President Elect’s infrastructure plan may or may not amount to crony capitalism. As my colleague Patrick Ishmael recently wrote, the Carrier deal in Indiana invites the accusation. Yet this is exactly the sort of crony capitalism that progressives seem to love in Kansas City and St. Louis. Recall that we’ve redirected hundreds of millions of tax revenue into property developments for wealthy corporations such as Cordish, Burns & McDonnell, Cerner, and H&R Block.

Meanwhile, important infrastructure spending (read: roads, bridges, sewers, etc.) is squeezed, because the city cannot afford it. We’ve heard that the city wants to borrow $800 million for such spending—but we have as much detail about where that money will go as Trump has given on his plans. Hopefully, those funds won’t go toward  “fraudulent” infrastructure projects instead of those truly necessary for the public good.

Policy debate on infrastructure is welcome, as is skepticism toward government spending. But if you want to be critical of fraudulent public programs that appear only to enrich the well-connected, you don’t need to travel to Washington to find it—or even leave Kansas City.

The post Kansas City and “Fraudulent” Crony Capitalism appeared first on Show-Me Institute.

Such an analysis, if done correctly, will take some time to complete, however, we will be working to complete it as soon as possible. The report will provide the sort of data and facts that can lead to reasonable and responsible improvements to our economic development policy.

It’s been three months since that piece, and no study is forthcoming. A subsequent Star story, however, suggests that the City’s effort may be more interested in highlighting incentives than in assessing them.

Mayor Sly James said at a recent meeting of KCStat — a data-crunching initiative of the city’s meant to improve its effectiveness — that City Hall doesn’t do a good enough job of promoting how economic development benefits the city.

Will the proposed $350,000 study aim to assess policy or “promote” successes? Existing research into the city's economic development policies does not paint a pretty picture. The Show-Me Institute conducted its own examination of TIF abuse in Kansas City broadly as well as individual analyses of questionable tax abatement (TA) projects such as for H&R Block and Burns & McDonnell. We’ve also highlighted independent university research that shows that subsidies like TIF have no impact. Still, some pundits in Kansas City simply “don’t care.”

While we wait for the Kansas City report, let’s consider a similar report recently completed in St. Louis. My colleagues Graham Renz and Michael Highsmith are releasing a series of pieces (the first of which is available here) examining that report. In short, the study found that:

• Development incentives have little to no positive economic development benefits. The $709 million the city has spent on TIF and TA has not created jobs, revitalized neighborhoods, or increased long-term tax revenues. 
• Rather than TIF and TA being used in economically depressed areas, they are used mostly in neighborhoods with strong housing markets. In fact, nearly two thirds are used in just three neighborhoods in the central corridor.
• The level and quality of reporting on incentives is so poor that officials and the public “cannot readily determine what may or may not be deemed a project worthy of consideration for a City tax incentive.”

The sheer amount of money being diverted away from important city services makes this an important area for the city to examine. While Kansas City works to analyze the data, the honest examination from St. Louis should serve as a model—and a warning.

The post What an Honest Economic Development Study in Kansas City Might Conclude appeared first on Show-Me Institute.

The Show-Me Institute stands arm-in-arm with those decrying the decades of neglect suffered by the East Side. In fact, we authored the chapter that exposed the fact that city economic development policy favors wealthy developers in the Urban League’s “2015 State of Black Kansas City.” Kansas City leaders have for years turned a blind eye to the economic decline suffered by our urban core. Worse still, city leaders have actively pursued development policies that diverted important resources away from schools and libraries in that same community.

Just as Kansas City’s shameful past of red-lining and block-busting a generation ago aided and abetted racial segregation, subsidies for today’s wealthy developers have diverted property taxes away from important city services on the East Side and toward the millionaires and billionaires at Burns & McDonnell, Cerner, and VanTrust.

Kansas City has so hollowed out its tax base through these diversions that the city must borrow money to provide basic services like tearing down dangerous buildings and repairing roads. While Kansas City suffers a two-year spike in homicides, our cash-strapped police force has fewer uniformed officers than it had in 2011.

Desperate for the basic services that the city government should be providing, communities on the East Side have resorted to community improvement districts (CIDs). The Independence Avenue CID charges a one-percent sales tax in order to provide security and beautification—things residents feel they cannot get from the police or the parks department. As a result, families living in the urban core are paying a higher tax rate on food just to feel safe while they shop.

Vernon Howard Jr., senior pastor of St. Mark Union Church, was correct when he told the Star, “City, county, state and federal jurisdictions have not, to date, focused upon the inner city with the kind of zeal, investment, intentionality and creativity as have been vested within mostly white and wealthier neighborhoods and communities.”

I empathize with East Side leaders, but their solution may only make matters worse. Adding another sales tax means poorer residents will be forced to pay more out of their pockets to get services they should already be getting for their earnings taxes, property taxes, (already high) sales taxes, COMBAT taxes, and all the rest.

If Kansas City is to thrive, it needs to dramatically overhaul its taxing and spending policies. We need to limit our profligate spending on touristy frou-frou and focus on providing services quickly, efficiently, and compassionately; we need to stop subsidizing wealthy corporations and luxury high-rises; and we must focus on developing the things that make Kansas City great—rather than merely mimicking Portland or Denver or Dallas. Because as jobs and population numbers attest, we are losing that game.

The post The Consequences of Bad Policy appeared first on Show-Me Institute.

The Mid-Continent Library system spends just short of $44 million each year. As far as we at the Show-Me Institute can tell, they appear to be managing their budgets well. The library itself makes an additional point:

In addition, tax incentives and abatements by local government have impacted the revenue that would generally result from the growth of the Library’s tax base. The Library’s budget has been essentially flat for the past 8 years.

It appears that the cost of those tax incentives and abatements given to private developers—which we’ve discussed elsewhere–amounts to about $7 million a year in lost income to the library. The levy will replace that lost income.

We don’t have a view on whether voters should approve the levy increase, but it is clear that municipal handouts to wealthy corporations such as Cerner and Burns & McDonnell are not free. (To add insult to injury, these same corporations won’t have to pay this increased rate, either.) A levy increase such as this, which seeks to recoup diverted funds, can rightly be described as a TIF tax.

The post The TIF Tax appeared first on Show-Me Institute.

This shouldn’t be surprising. Much of the claims and the reporting on downtown development, the streetcar, TIF subsidies, and the like make the same mistake. They’re based on the assumption that a development that occurred after a subsidy occurred because of the subsidy. It’s a common logical fallacy, post hoc ergo propter hoc, (after therefore because of). And Kansas City is rife with it.

Consider the recent construction of a new Burns & McDonnell world headquarters building at Wornall and Bannister in Kansas City. In order to believe that economic development incentives were responsible for this project being undertaken, you have to believe that without taxpayer subsidies, Burns & Mac would never have developed the land, which sat on property adjacent to their existing headquarters and which their partner, VanTrust, already owned. Yet that is what we’re asked to believe.

Similarly, Rose and others point to the new buildings downtown and talk of a Renaissance. But the Power & Light District has not resulted in a net increase of jobs, businesses or tax revenue. H&R Block, whose building kicked off the downtown development binge, seems to be a study in obfuscation and failure. Not only is the streetcar a drain on resources, but according to Jackson County, the aggregate market value in the area around the streetcar is actually lower today than it was in 2012 and growing more slowly than the County as a whole.

The impacts of these investments are very real, resulting in the diversion of hundreds of millions in property tax revenue over the past decade away from taxing jurisdictions such as schools, libraries, and mental health funds, all of which are denied the money they need to operate. But the promised return on those investments never materializes.

As I told Rose when he said he didn’t care, if you don’t care about the research, we can’t have a discussion. Policies must demonstrate some sort of return: increased tax revenue, more jobs, an increase in population. Otherwise we’re just relying on the word of people who are lining up to take our money—and guess what they’re telling us? They want more, more, more.

The post “I Don’t Care What the Research Tells You” appeared first on Show-Me Institute.

A spokesman for the Show-Me Institute—funded in large part by St. Louis multimillionaire Rex Sinquefield, an ardent earnings tax foe—said this week that the city should stop offering tax incentives and tighten its fiscal belt. The spokesman’s claim: These subsidies are “north of $100 million a year.”

Add all of the city’s investments in economic development — through the earnings, sales and property taxes as well as direct public subsidies for projects—and it’s $77.6 million of diverted revenue this fiscal year.

That’s a big number. But it’s not close to being “north” of $100 million.

We at the Show-Me Institute have been telling this to people since we first got the numbers from the city's own finance department in February 2015. Those documents, available via the link at the bottom of this post, show that the subsidies for fiscal year 2014 are $93 million, and do not include the subsidies for Burns & McDonnell and Cerner. The latter subsidy, which the Star unequivocally endorsed, might be the biggest tax diversion in the history of the state of Missouri.

The problem is that the Star's editorial board likely only considered the city’s portion of TIF subsidies. The problem with TIF, however, is that it allows the city to divert money from other taxing jurisdictions such as schools, counties, and libraries. In short, the city is offering subsidies with other people's money.

I would welcome the opportunity to look over the documents the Star used to reach their conclusions. Do they include Cerner and Burns & Mac? Do they include bond payments on the Power & Light District and the Citadel? Do they include earnings tax subsidies given to the Star itself? How about TDDs, CIDs, Chapter 353 property tax abatements, etc? If not, then their calculation of the cost of subsidies is embarrassingly incomplete.

The post Kansas City Star Editorial Board Gets Subsidies Wrong Again appeared first on Show-Me Institute.

Overall, Kansas City redirects $100 to $110 million each year to developers for the various TIF projects in town. That doesn’t include some of the recent ones like Burns & McDonnell, the Kansas City Star, and Cerner. In fact, according to the Washington Post, Cerner is the biggest recipient of taxpayer subsidies in the state of Missouri. Their last subsidy from Kansas City may be the biggest in the city’s history.

When will city leaders decide that we’ve subsidized enough and start trying to reap the rewards of all the previous spending? Given recent news regarding Two Light and the Star, the answer appears to be no time soon.

The post Kansas City’s Debt appeared first on Show-Me Institute.