There is a lot of ongoing discussion about eliminating personal property taxes. There have been bills introduced to eliminate them. It’s a major topic of debate around the state, particularly in St. Charles County.

Personal property taxes are the taxes levied on your car, boat, livestock, business equipment, farm equipment, and more. (Thanks to data centers, the business equipment part has become much more important in the past year or so.) Missouri indeed taxes personal property more than most other states. I am perfectly fine with eliminating the tax. But people should understand that if personal property taxes were eliminated, the Hancock Amendment would allow local governments to then raise real property taxes by the amount lost in personal property taxes.

So, if the state eliminated all personal property taxes statewide, it would likely end up as a revenue-neutral switch where we taxed land and buildings slightly more and taxed mobile assets not at all while removing a tax that most people find particularly annoying. I think that would be a modestly beneficial switch; I just don’t want to sell it as a tax cut.

But could counties on their own eliminate personal property taxes? Yes, every county and taxing district in the state could eliminate personal property taxes if they wanted to. They just don’t want to and I understand why.

Currently, St. Louis County is the only county that is required to set different tax rates for different classes of property. RSMo §137.073 requires every local government within St. Louis County (including cities, school districts, streetlight districts, etc.) to set a property tax rate for each subclass of property. This means that there are different tax rates for residential, commercial, agricultural, manufacturing, and personal property. The requirement to break down the tax rate by subclass was originally intended for the entire state, but eventually the rest of the state was given the opportunity to opt out if their county commission chose to, which every county in the state did. As a result, the rule currently only applies within St. Louis County and (for an unknown reason) the city of Gladstone in Clay County.

In the rest of Missouri, every government with property tax authority sets one tax rate, which is then applied to all subclasses of real and personal property. There are a few exceptions to this (primarily cities that have never taxed personal property, such as Independence), but almost all governments outside of St. Louis County set the same rate for all real and personal property. But here is the key: Any county in Missouri can adopt different tax rates for different property classifications whenever it wants to.

County officials could require all the taxing entities within their county to set different rates, and then county officials could set the county rate for personal property at zero. But county officials could not tell other taxing districts within the county to apply those new, variable rates. Would any of them choose to set the personal property tax rate at zero? Well, let’s just say that since this switch was made in St. Louis County, I know of no taxing entity that has voluntarily set the personal property tax rate at zero (other than some municipalities that don’t have property taxes at all, such as Chesterfield, or had never set a personal property tax, such as Westwood).

What would happen if a county set its personal property tax rate at zero and no other governments followed? In St. Louis County, the county portion of the tax bill is about five percent. It is a largely similar percentage around Missouri (varying slightly, of course). If St. Louis County government set its personal property tax rate to zero tomorrow, the average car and boat owner would see a five percent reduction in their annual car or boat tax bill. That assumes no other local taxing districts got approval from voters to raise their rates at the same time, which would more than offset it.

The fact is that unless school districts agree to also lower personal property tax rates, any attempt by counties to end personal property taxes will produce underwhelming results. I still think it would be a good thing. We should tax fixed assets like land and buildings instead of mobile ones like cars. It would be a general improvement in tax policy and remove a minor annoyance for most people (i.e., their annual car tax payment).

Let’s just not pretend it would be a large tax cut.

The post What If You Eliminated Personal Property Taxes and Nobody Noticed? appeared first on Show-Me Institute.

Startling to me, anyway. None of the legislators on the committee seemed bothered.

Is there any public benefit to this secrecy?

There can be when vendors are bidding competitively for a state contract—say, road construction. Protecting proprietary financial or technical details in that context may encourage better bids and serve the public interest.

But stadium subsidies are different—there’s no obvious reason why secrecy is necessary or helpful. When public officials negotiate deals to hand out taxpayer money, the public deserves transparency. Teams may want discretion. State representatives may want to negotiate without tipping off competing states. But neither, in my opinion, is a good enough reason to give it to them.

Yet secrecy has become the norm. Kansas City Mayor Quinton Lucas won’t release the city’s proposal for a downtown stadium to the Royals—even though Clay County released its proposal. The city also kept its 2017 Amazon HQ2 bid under wraps, while many other cities disclosed theirs.

Judging by the lawmakers’ lack of reaction, non-disclosure agreements are now standard operating procedure. They shouldn’t be. Even if elected officials are fine being left in the dark, the public shouldn’t be.

The post Why Is the Department of Economic Development Keeping Secrets? appeared first on Show-Me Institute.

First Ward Councilman Tom Oldham commented that he feels that Chapter 353 is a great tool, as evidenced by his visits to Elm Springs, a community that also took advantage of the Chapter 353 program. Elm Springs went from blight to beauty as a result, Oldham said.

(Note: I assume he meant Excelsior Springs, which has a 353 plan, and not Elm Springs—I can find no municipality in Missouri with that name.)

Did a 353 urban redevelopment plan really turn Excelsior Springs (or Elm Springs?) from blight to beauty? Of course not. Granting some properties in a designated area a tax abatement if they undergo the required legal process isn’t going to grow the economy. If you want to cut taxes, great—cut taxes for everyone, not just a designated few. The idea that politicians are qualified to pick the right companies or properties is absurd.

Economist Dick Netzer once mocked the exaggerated claims of success by economic development officials and politicians by writing, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Those claims of subsidy success often border on the absurd. I once heard a Clay County economic development official claim that “all of the growth” in the town of Liberty—a fast growing, exurban community north of Kansas City the likes of which have been growing across the nation for decades—was due to a tax increment financing (TIF) package. All of it, he stated with certainty, as if suburbanization didn’t exist until Missouri’s TIF law was passed in the late 1980s.

Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about ten percent of the time (as measured by job creation), and the other 90 percent are simply a waste of money. They added that, like the Clay County official mentioned above, economic development officials often credit all new employment and growth to tax subsidies.

The City of Saint Louis has been using tax incentives like 353 urban redevelopment plans, Enterprise Zones (EZs), TIF, and other subsidies as redevelopment tools for over half a century. How has it worked out? Colin Gordon, in his 2008 book Mapping Decline, documents the decline of the City of Saint Louis. The book’s research is exhaustive. The dominant theme of the book is the use of urban renewal tools and tax subsidies—and their absolute, total failure. From his conclusion:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by—and compromised by—the same assumptions and expectations and prejudices that had created the condition in the first place.

The dirty little secret that nobody seems to want to recognize is that 353 Plans, EZs, TIF projects, , tax abatements, and other subsidies do not work. They don’t succeed in growing the local economy, be it urban, suburban, or rural. The panoply of subsidies that come into play when a large area is declared blighted can have a number of adverse side effects. They shrink the local tax base, introduce more cronyism and favoritism into the economy, encourage more government planning of the economy, and increase the chances of eminent domain abuse. As a famous Swedish economist once said:

It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.

The Chapter 353 urban redevelopment plan didn’t help grow Excelsior Springs. It didn’t help grow St. Louis, nor any of the other cities that have such a plan. It won’t help grow Sedalia, either, but it will be great for the politically connected parties who get the tax subsidies they are after.

The post Sedalia Doesn’t Need a 353 Redevelopment Plan appeared first on Show-Me Institute.

In a city or county manager system, the manager is employed by elected officials to run the day-to-day operations in a (hopefully) non-partisan and less politicized manner. Many municipalities use city managers or city administrators (a very similar system where the professional manager has slightly less power) in Missouri, including Kansas City and Springfield. Clay County is the only county that uses a county-manager system; it just instituted the system in 2021. The system works well, in my opinion, for small to mid-sized cities. I am less sold on this system for larger cities and, especially, counties.

Overall, the academic evidence suggests that adopting professional management would reduce corruption, improve financial reporting, lead to more broadly focused legislation (and fewer narrowly targeted measures), reduce political conflict, and increase innovative policy thinking (in ways both good and bad). These changes would be generally beneficial for the City of St. Louis and St. Louis County, though the idea that politicians would now have more time for “innovative” thinking terrifies me. Usually, that “innovation” means harmful policies involving subsidies and mandates.

On the other hand, there is not enough evidence to state that professional management would significantly affect taxes and spending, government employee pay levels, or the quality of local services, despite what proponents of city manager systems claim.

The last claim regarding the quality of local services is key. Would the adoption of a city or county manager improve the quality of basic governmental services? (For example, would the snow get cleared off the roads faster under a city manager?) The presumption of better service quality with professional management is common, and it may be correct in some cases. But the evidence is not as clear as its supporters would suggest. Professional management might well perform better than management by elected officials. But as one academic stated, “For decades, analysts have presumed this performance gap exists, but they have yet to empirically demonstrate that any differences actually exist.”

Interestingly, the one proven downside of professional management is lower voter turnout for local elections. It seems that when you depoliticize local government (which is not a bad thing), people understandably depoliticize their own involvement with local government.

I remain unconvinced that professional management is the cure for the governmental problems in the City of St. Louis or St. Louis County. Adding another layer of bureaucracy is rarely the right solution.

The post Is Professional, Non-Partisan Management the Solution for St. Louis Government? appeared first on Show-Me Institute.

Two Clay County Commissioners, Jason Withington and Scott Wagner, as well as Jackson County Executive Frank White, stated publicly that Kansas City—which sits in Jackson County—made a significant offer over and above the Jackson County sales tax that changed the course of those negotiations.

What was that offer?

We don’t know. Similar open records requests to Kansas City were denied citing ongoing negotiations. Clay County leaders initially denied requests as well. However, the Clay County Commission was made aware of the records request and the dubious claims made to keep those records closed. On February 22, the commission agreed to release the documents.

The Kansas City Council should follow suit. As I wrote to all the members of the Council on April 15:

The City denied my records request (R012348-030124) relying on an understanding of Missouri statutes that allows for sealed bids to be closed. But the negotiations with the Royals were not the result of any bid responding to a city-issued RFP or RFQ. They were more likely similar to any negotiations for incentives that go through the EDC—which are all public documents. Even if they were sealed initially, the vote itself is a clear sign that those negotiations are ended. The documents are public.

Please exercise your legislative authority by directing the city to release these term sheets, any related documents and their various iterations over time. The April 2 campaign was dogged by a lack of transparency—the measure’s defeat is a clear signal that Kansas Citians should know more, not less, about these negotiations.

I’ve received no responses to that email. There is no indication that the city is in any ongoing negotiations. And even if it were, there is no reason to keep the prior negotiations secret.

The post Release Those Records, Kansas City! appeared first on Show-Me Institute.

The Populous slide deck (available here) is dedicated to the problems facing Kauffman Stadium, including the infamous Alkali-Silica Reaction (ASR) or “concrete cancer.” The deck indicates that when this appears, it must be replaced. The report also highlights problems facing several parts of the stadium and concludes “the age of the building systems and outdated technology will force replacement of major mechanical, plumbing and electrical systems as their service life expires.”

The final slide lists the renovation cost estimate as $1.072 billion. That is more than the new ballpark cost estimate of $1.005 billion. These estimates suggest that a financially prudent decision would be to build a new park.

But wait . . .

On page 9 of the term sheet the Royals presented to Clay County on September 28, 2023, the cost of a new ballpark in North Kansas City is listed at $1.277 billion. That’s 27 percent higher than the Populous estimate of $1.005 billion. That increase may be due to inflation, which would also affect the cost of repairing the K. We don’t know the projected costs of the plan to build a stadium in the Crossroads district that voters rejected on April 2 because no one will tell us. We also don’t know the cost estimates of building in the East Village.

Unfortunately, there is so much we don’t know about these proposals. The Star reports that the city manager is now in talks with both the Chiefs and the Royals and that a public vote may not be necessary. It would be a shame if the lesson that new stadium proponents learn from the April 2 vote is that the public should be even less informed and involved in how the city spends tax dollars.

The post Documents Give Conflicting Numbers on the Cost of a New Stadium appeared first on Show-Me Institute.

Linked here are documents regarding those negotiations received through an open records request:

• Email exchange setting up the initial August 15, 2023, meeting between Royals representatives and Clay County leadership
• July 7, 2023: The initial term sheet for the proposed lease agreement
• September 15, 2023: Clay County’s term sheet discussion points
• September 28, 2023: Royals’ presentation on the proposal
• October 17, 2023: Clay County’s revised proposal
• November 20, 2023: Royals’ second presentation
• December 2023: Clay County’s summary of negotiations to date
• Email exchanges between Royals leadership and various North Kansas City government agencies detailing infrastructure costs from JE Dunn, a fiscal impact analysis by bakertilly Municipal Advisors, and a letter from local police to the Royals. It also includes a letter from the Royals putting the negotiations “on hold with Clay County, Missouri, as we work through a competing opportunity in Jackson County.” That last letter is dated January 16, 2024.

The post Details of the Negotiations Between the Royals and Clay County appeared first on Show-Me Institute.

The Kansas City Royals and Kansas City Chiefs released a joint statement Friday to stay in Jackson County, pending voters’ approval of a sales tax extension.

The statement comes amid the Royals’ plans to build a new $2 billion ballpark district as they look at locations in both Jackson County and Clay County.

The teams said Friday they are committed to staying in Jackson County — and provid[ing] over $200 million in economic benefits — if voters approve a 40-year extension of the 3/8th-cent sales tax in April.

The sales tax extension will help the Chiefs renovate Arrowhead Stadium at the Truman Sports Complex and assist with the Royals’ new stadium in downtown Kansas City.

It wasn’t news that the Chiefs planned to stay put. Driven in part by the Royals’ public relations disaster, the Chiefs had confirmed months ago they indeed intend to remain at Arrowhead (despite flirting with Kansas two years ago), and it was clear the football team was only waiting on the baseball team to make its decision. The Chiefs’ involvement at this juncture also puts a more popular brand in front. Frankly, the baseball team is probably better off with Chiefs superstar and Royals co-owner Patrick Mahomes leading the final charge to the ballot box rather than majority owner John Sherman, who’s helmed the Royals’ push to this point. I’m sure Sherman would agree.

Will taxpayers accept this rose? It won’t come for free. Now that the Royals have decided on Jackson County as their first choice, it will now (likely) be up to voters to decide in April whether to continue subsidizing not one, but two sports teams into 2071—that is, nearly to the 22nd century. Where will that baseball stadium be? Unlikely at its current site, where the taxpayer-financed and recently upgraded Kauffman Stadium seems destined for the wrecking ball. At least two new Jackson County sites are in contention, and a final site announcement may be weeks or months away, if it comes before the vote at all. In the meantime, we wait.

In the interest of balance, I will say that the Royals’ behavior—though misguided and wrongheaded—is consistent with the behavior of countless other private businesses, in and outside the professional sports industry, when it comes to tax incentives and public financial support. The Royals want something for free, regardless of whether they’re owed it. That’s their prerogative, and it’s up to taxpayers to finally say, “No, our tax dollars should go to legitimate public services and not to a private entertainment operation.”

But odds are that Jackson County taxpayers won’t say no—they’ll likely approve the tax extension for the Royals’ (and Chiefs’) benefit, even as other notable local challenges, like murder, remain unaddressed. Taxpayers can do better. I hope they do.

The post Royals Officially Probably Staying in Jackson County appeared first on Show-Me Institute.

Taxing bodies that depend entirely on property taxes get crushed by the choices that cities make. Often, voters in those taxing bodies don’t live within the city that makes the decisions and cannot punish or reward elected officials with their votes. The most obvious example of this was in Shrewsbury, but it happens all over the place. With county TIF commissions, voters can hold elected officials responsible for the subsidy choices that they make.

Five counties currently have county TIF commissions: St. Louis, Clay, Cass, St. Charles, and Jefferson. Counties that use the county TIF commission mechanism have been more careful and judicious in the use of TIF than counties where municipalities dominate the decision-making process. This is particularly true in St. Charles and Jefferson counties, but even in St. Louis it has been better overall. St. Louis County thankfully rejected the odious Maryland Heights proposal, but it has also approved other bad subsidies (e.g., the Chesterfield TIF). Clay County and Cass County are fairly new to this list, so it remains to be seen if they will be better or not.

The exact statutory language is in RSMO: 99.820.3(1). Personally, I think that Greene, Platte, Franklin, Boone, and Camden counties should be the next five added to this list. Earlier this year in Osage Beach (Camden County), I testified at a hearing where all 6 members of the TIF Commission from the city instituted a TIF over the objections of the representatives from the county and school district. That is how TIF works, and it is terrible.

The post TIF Decisions Should Be Made at the County, Not City, Level appeared first on Show-Me Institute.

Phil Davis: [sighs] I don’t know what he’s up to, but he’s got that Rodgers and Hammerstein look again.

Betty Haynes: Is that bad?

Phil Davis: Not bad, but always expensive.

I’m afraid things are about to get more expensive with the Royals:

The Royals had previously announced a decision on a new Kansas City ballpark by the end of September. Now, as of Sept. 21, the team is looking to push off a decision as negotiations continue with both Jackson County and Clay County officials over the cost and funding of the projects. If the team goes downtown, the new ballpark would be located in the East Village near the downtown loop, on a 27-acre site bounded by 8th Street to the north, 12th Street to the south (where the main entrance would be located), Charlotte Street to the east to Cherry Street to the west; if the team does go with North Kansas City, an 18th Avenue and Fayette Street ballpark location would be part of the 90-acre site. The target date for both locations: 2028.

The fact that negotiations are continuing with both counties is concerning, precisely for the reason Quentin Lucas mentioned at the outset when Clay County’s bid was announced: the longer this bidding war goes on, the worse served local taxpayers are going to be. It’s hard to envision a circumstance where longer negotiations would decrease the amount of money shoveled over to the Kansas City Royals at the end of this process, so moving the decision date from late September to late October is a very unwelcome development.

Again, no public money should be going to a project like this, but if it is, it would be far better for that decision to be made sooner and not later. The decision coming later than was promised should concern all taxpayers.

The post Royals Put Off Stadium Decision Another Month appeared first on Show-Me Institute.

That said, I should make and reiterate a few points about the Royals’ stadium issue, now that it’s back in the news.

• The stadium renderings are cool. It’s easy to poo-poo big-dollar construction proposals as being sales jobs of dubious eventual reality, but that doesn’t make the prospect of something new any less interesting. The eventual financing plan for the stadium will likely be bad policy, but it’s understandable why people might get excited at what a future ballpark might look like. That’s obviously why they had the press conference this week: to stoke support and excitement.
• But cool renderings don’t change the fact that taxpayers shouldn’t pay for professional sports stadia. The renderings for these stadia could have put a helicopter port on the roof, a rocket ship in the parking lot, and a theme park in center field, but a cool drawing doesn’t make giving tax dollars to rich baseball tycoons an appropriate “investment” by the public. Developments like this generally do not expand the pie of disposable income in a region; instead, they tend to redirect spending that was previously being spent by consumers at other restaurants and entertainment options in the region. Ask bar owners in Westport what they think the immediate impact of the Power & Light District was on their traffic and you’ll get a sense of the potential risks of subsidizing new competition to existing businesses this time around.
• The “$2.8 billion” construction impact figure presented by the Royals is not a game changer. As I told KMBC 9, I believe that the Royals believe their numbers and that stadium construction would create “$2.8 billion” in economic activity in and around the ballpark. But what’s that really mean, other than to repeat the obvious? When the team is promising $1 billion in private financing to go along with $1 billion in public support, yeah, those are two giant wheelbarrows of cash being dumped into one spot that get you pretty close to the headline number. But that doesn’t change the fact that half of the spending would be coming from the public to create a district that would compete with other entertainment districts, including Westport and the Power & Light District.
• And speaking of the taxpayer-subsidized Power & Light District, it hasn’t and won’t ever pay for itself. One of the biggest public spending projects in the last couple of decades was the Power & Light District in Kansas City’s downtown. From the beginning, the city was on the hook to pay off the bonds for the property if tax revenue from the district wasn’t high enough. The result? Over the last 16 years, Kansas City taxpayers paid the nearly $170 million gap between what the district costs and what the district generates in tax revenue to pay the bonds. It’s easy to make promises of success when the cost of failure is borne by someone else, and there’s no guarantee taxpayers—whether in Jackson County or Clay County—won’t get soaked this go-around, too.

There is a bit of deja vu here, of course; about this time in 2022, I was talking about a potential move for the Chiefs, whose lease at the Truman Sports Complex ends when the Royals does. But the takeaway now with the Royals is the same as it was with the Chiefs—sports teams should pay for their playthings themselves. The Royals may be the kings of Kauffman, but when it comes to sovereign action in the real world, public officials should reject spending tax dollars on anything but legitimate responsibilities of government. Subsidizing sports teams isn’t one of those responsibilities.

The post Hey! Hey! Hey! Hey! Pay for Your Own Stadium appeared first on Show-Me Institute.

Well, I have some bad news. On Friday, word broke that the Royals have been talking with North Kansas City and Clay County officials for a ballpark development, and those talks have gotten fairly serious. According to two county commissioners and the mayor of North Kansas City:

Over the past few months leaders from Clay County and the City of North Kansas City have had conversations with the Kansas City Royals about the possibility of developing a new baseball stadium and adjacent ballpark district in North Kansas City. This plan would include commercial, residential development and entertainment experiences adjacent to the stadium, complementing the amazing businesses and entertainment options that already exist in downtown North Kansas City today. We look forward to continuing our work with the Royals and have additional meetings scheduled with them.

The Royals confirmed in a recent media report that they are considering a location in North Kansas City. We think it is important that we communicate our efforts with the community, and the reason we plan to work with the Royals on behalf of our respective jurisdictions to select a North Kansas City site for the planned new stadium. Although no agreement has been reached by either Clay County or North Kansas City to take action on, we are striving to lay the groundwork necessary for a plan that is positive for the city, the county and our entire community.

A vote on a countywide tax for the stadium could come as early as this November, a quick turnaround for such a seemingly late-breaking project. Apart from the expected taxpayer subsidy, the potential North Kansas City sites have a few advantages, including no Kansas City earnings tax (and so instant raises for Royals employees) and a more stable crime situation than Kansas City, which just had its 88th murder of 2023, including seven murders in just the last four days as of this writing.

I expected both the Chiefs and Royals would remain in the region but thought that the Chiefs were the most likely to head to Kansas or some other non-Kansas City, Missouri jurisdiction. Friday’s news upends that assumption, with both teams leaving Kansas City’s boundaries now a legitimate possibility. No taxpayers should subsidize the Chiefs or Royals, but if Kansas City lucks out and gets to enjoy the teams without having to line their pockets, all the better.

And to North Kansas City and Clay County, I’ll just say this: Really? C’mon now.

Really?

The post “The Kansas City Royals of North Kansas City”? appeared first on Show-Me Institute.

This November, Clay County residents will vote on reducing an obscure tax that places the county at a competitive disadvantage compared to its neighboring communities.

In 1985 the State of Missouri changed the way local governments tax commercial and industrial property. It eliminated the tax on business merchandise and inventory and replaced it with a surtax on the value of commercial real estate. Every county that year calculated the new surtax at a revenue-neutral replacement level for the lost business inventory taxes. Among the reasons for the change was a desire to base the tax on the value of real estate, which is more consistent than the ever-changing values of inventories. The change, made by an amendment to the state’s constitution, was explicit that the replacement levy calculated by the counties could be lowered only by voters, not elected officials, and that the surtax would not adjust downward as assessed valuations increased. This puts the commercial surtax at odds with most other property taxes in Missouri, for which the tax rate is supposed to go down as assessed valuations go up.

When the rates were established in 1985, most of the collar counties around Kansas City and St. Louis were much smaller than they are today, with fewer businesses. Consequently, these collar counties set their commercial surtaxes at a low rate. But Clay County, likely because of inventory taxes generated by its massive Claycomo Ford Plant, bucked that trend. It set its surtax rate at $1.59 per $100 of assessed valuation. That is the third-highest rate in the state, and the highest in Western Missouri. By comparison, Jackson County has a commercial surtax of $1.44, while Cass’s rate is much lower at $0.54 and Platte’s surtax is a mere $0.36.

Assessed valuations have grown enormously since the tax was introduced. For example, the commercial assessments in Clay County have gone up 287 percent between 1985 and 2021, from $302 million to $1.17 billion, yet the surtax rate has never been reduced to offset that increase. The combination of a high tax rate and the difficulty of reducing it puts Clay County at a competitive disadvantage compared to other counties in its area, especially its Northland neighbor and competitor, Platte County.

This is a problem for Clay County. These differences may not have been a big deal in 1985, when the tax alteration was a neutral one for Missouri businesses and more of them were located in our central business districts. But it is a problem now. After much discussion and debate, the Clay County Commission decided in July to propose lowering Clay County’s surtax to $1.44, equal to Jackson County’s rate. If passed by voters, this modest reduction in the commercial surtax rate would both spur economic activity in Clay County and reduce the perceived need for tax incentives. As Clay County continues to grow and assessed valuations continue to increase, revenue reductions for local governments that receive the tax money will be miniscule or nonexistent. Even with the tax cut, revenues from the tax will almost certainly grow past current levels in the near future. That’s not voodoo economics; it simply reflects expected growth in population, business, and assessed valuation.

Clay County leaders deserve credit for placing this surtax reduction proposal on the ballot this November so voters can have a say in making their community more economically competitive. If approved, this reasonable and beneficial tax cut will help grow Clay County’s economy, and everyone benefits from that.

The post Clay County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

In November, voters in Clay County (and also Laclede County) will have the opportunity be the first counties in Missouri to reduce their commercial property surtax rate.

See a map of commercial surtax rates across Missouri here.

The commercial surtax is a property tax levied at the county level on commercial property only. Unlike other property taxes, it does not adjust downward as assessment value increases, and it cannot be lowered by elected officials. Per the Missouri Constitution, it cannot be raised, and only voters can lower it. To date, voters in Missouri have never lowered a surcharge tax rate, but in November, voters in Clay County will have the opportunity to be the first to do so. The modest reduction Clay County is proposing to equalize itself with Jackson County, in my opinion, is very good public policy, but more on that later.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

The post WATCH: Clay County Voters to Decide on Tax Reduction appeared first on Show-Me Institute.

Not to be outdone, Laclede County officials have also decided to put a surtax reduction before voters. While the Laclede County rate is not as high as the Clay County rate, it is nonetheless very high and by far the highest among neighboring counties. Laclede County’s rate cut is also larger than Clay County’s. Laclede County officials are proposing to reduce the surtax from $1.03 per $100 of assessed valuation to $0.51. The key thing to remember is that the surtax does not roll back as assessed valuations increase, so over time as the local economy grows—and this tax cut should help it grow more—the rate remains the same and the tax revenue generated by it will increase. For the record, the $0.51 rate is right on average for Missouri counties. (Some are saying that the average rate is $1.02, but whoever calculated that clearly used a weighted average. The largest counties of St. Louis, Jackson, and Clay with their very high rates significantly alter the calculation. I think the unweighted average (mean: $0.53; median: $0.41) is preferable for comparing individual counties to each other, especially counties such as Laclede, which is economically competing more with Camden and Dallas counties than with St. Louis and Kansas City.)

The Lebanon R-3 school district is crying some wolf about the size of this rate cut. School officials claim the district will lose $275,000 per year from this; however, Lebanon R-3 is a large school district, and that figure is less than one percent of its total revenues. This is a district that received $4 million in federal stimulus funds alone last year and which is poised, like every Missouri taxing district, to soon see a significant increase in personal property tax revenues this year from the dramatic increase in used car values. The personal property tax windfall alone should make up for the potential loss of revenue from the surtax reduction, should the voters pass it.

This commercial property surtax cut should be a real benefit to economic growth and job growth in Laclede County, and it will be interesting to see what the voters decide.

The post Laclede County Proposes Its Own Tax Cut appeared first on Show-Me Institute.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

That is why we built this map. The map below shows the commercial surtax rate for every county in Missouri. The redder the county, the higher the rate. The rate varies from $1.70 per $100 of assessed commercial valuation in St. Louis County to $0.01 in Reynolds County. The unweighted average rate is $0.53; the median rate is $0.41. Please check out the map (there is also a download link at the bottom of the post) and see where your county fits.

The post Map of Commercial Property Tax Surcharges in Missouri appeared first on Show-Me Institute.

According to information I have received, personal property tax revenues are expected to increase by more than 20 percent in the following counties: St Louis, Jackson, Warren, Lincoln, Cape Girardeau, St. Charles, and St. Louis City. St. Charles County is taking the lead here; the county council passed a resolution declaring its intention to reduce the personal property tax rate this fall (after final numbers are in) to a revenue-neutral level to offset the large increase in assessed valuations. Good for them. Many local governments in Missouri need to follow this example, especially school districts, which receive the bulk of your property tax payments. Increased used car valuations should not be a revenue windfall for local governments.

I commend the St. Charles County Council and the county executive for this move. Hopefully others will follow the example of St. Charles County. I would love to see Hancock Amendment rollback provisions extended to personal property in the future. (Now they only apply to land and buildings.)

On the other side of the state, Clay County is moving forward with the first commercial surcharge property tax reduction in Missouri history. The county commission approved placing it before the voters on the November ballot. Clay County has one of the highest commercial surcharges in the state, and this proposal for a modest reduction to match Jackson County’s level is a smart, reasonable one. (For the reasons why the rate can only be lowered by voters, why Clay County’s rate is so high, and more history of this special tax, please read this.)

I also commend the Clay County Commission and the rest of the Clay County leadership team for putting this proposal before the voters of their community. There are a few other counties that I think need to strongly consider reducing their commercial surcharge taxes—I’m looking at you, Perry County.

The post Good News on Property Taxes in St. Charles and Clay Counties appeared first on Show-Me Institute.

The post Clay County Considers Commercial Surtax Reduction appeared first on Show-Me Institute.

That’s where House Bill 2873 (HB 2873) comes in.

HB 2873 would create permanent email accounts with the office of the Secretary of State (SOS) where Sunshine Law requests can be sent to local government at all times. For example, Battlefield, Mo., might be “battlefield@cities.mo.gov,” or Clay County might be “clay@counties.mo.gov.” The simplicity of the system is its advantage. Residents wouldn’t need to track down everchanging contact information for a city or school district, because these permanent email addresses will always work. Moreover, the Secretary of State would retain a copy of all requests to ensure compliance from local governments. Local governments wouldn’t be able to plausibly deny that a request was lost within the recesses of the Internet.

What if a local government already has an active Sunshine Law email address? The proposal contemplates this, too, allowing local governments to have requests sent to the new SOS accounts forwarded to an existing contact point for Sunshine Law requests. Alternatively, they could manage such requests within the state’s own email system like you or I might with our work email, or with web email. Importantly, as soon as an email request was received by the email address hosted by the Secretary of State, the three-day clock for a response required under the law would start ticking. However local government chose to field these requests, they couldn’t simply ignore them or act like the email was not received. Indeed, the state would know better.

Also included in the bill is a fix to something we encountered on a handful of occasions during our Show-Me Curricula project. Some school districts claimed that the schools they manage were not covered under the Sunshine Law. This is, of course, nonsense, but HB 2873 strengthens language around who precisely is subject to the state’s public transparency requirements, specifically around schools.

Along with the Parents’ Bill of Rights and mandatory transparency provisions dotting a handful of legislation, HB 2873 stands as one of the most important transparency ideas of the 2022 legislative session. The bill would act as a check against local government Sunshine Law failures. It leaves no flexibility for schools to deny transparency requests made under the law. I look forward to its hearing and hope that it will pass either on its own or as a prioritized amendment before the end of the session.

The post Bill Makes Government Transparency Available to All Missourians appeared first on Show-Me Institute.

But first, some history. One might have reasonably guessed that the historic underassessment of property (finally corrected, for better or worse, under orders from the state tax commission [STC] in 2019) was a response to the famous judicial-desegregation case tax increases from Judge Russell Clark. After all, the best way around a big property tax hike is to keep assessments low. The tax rate doesn’t matter much if the assessed value is low enough. But Jackson County assessments were low compared to St. Louis prior to Judge Clark’s order in 1987 that doubled the Kansas City school district tax rates.

In 1985, Jackson County had 44 percent of the population of St. Louis City and St. Louis County, but only 32 percent of the residential assessed valuation. That is a significant difference, especially when you consider that the Case-Schiller real estate value index ranked Kansas City’s housing values higher than St. Louis’s, both then and now. That difference in assessed values grew over time. In 2018 (before the STC ordered redo), Jackson County had 54 percent of the population but only 36 percent of the assessed value of St Louis City and County. What to make of this and how it relates to Judge Clark’s order? I make of it that Jackson County was under-assessed from the start of the current system in 1985, and that the judge’s tax increases gave Jackson County politicians, voters, and taxpayers an incentive to keep those assessments low instead of trying to make them more accurate until more than thirty years later.

That matters for a number of reasons. As Kansas City is within multiple counties, if homes in Jackson County are under-assessed, but similarly valued homes in Platte, Clay, or Cass county are properly assessed, then those taxpayers are paying more property taxes to Kansas City than their Jackson County neighbors based on the same municipal tax rate. That’s just one example. There are many taxing districts that affect your property tax bill; some cross county lines and some don’t.

I don’t think it is far-fetched to believe that something along these lines happened. Judge Clark’s tax increases were outrageous (and some were quickly overturned), and Jackson County officials stated they were going to oppose them at the time. Once the income tax aspect of the order was overturned, keeping assessed valuations low would help deal with the property tax increases.

Fast forward to 2019. Jackson County was compelled (properly) to make its assessments more accurate and property assessments jumped. However, one last holdover from the desegregation case is the Kansas City school district’s exemption from the property tax rollback rules. So, when the assessments increased substantially, the school district had no obligation to lower its tax rate. Final result? Very large tax increases for many people. That is not supposed to happen through reassessment, but it did. This is all a very complicated issue, but there is one change that should be made going forward. It is time to remove the Kansas City school district’s rollback exemption, which is turning assessment increases into a tax windfall for Kansas City schools.

The post Jackson County Assessment Facts, Part 3 appeared first on Show-Me Institute.