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Boone County could cut its property tax rate. This not only would help Kraft, but all the other property owners in the county as well.

Even better, Boone County could shift away from property taxes and toward a land value tax. Land value taxes are taxes levied against the unimproved value of land and not the buildings, personal property, or other improvements on that land. A broad spectrum of economists support the land value tax versus other types of taxes because it is non-distortionary (i.e., it doesn’t alter behavior, unlike income and sales taxes).

If Boone County imposed a land value tax instead of a property tax, companies like Kraft would not face increased taxes after improving their plant. Unfortunately, only Kansas City is allowed to levy land value tax. There would need to be a change to the State Constitution in order for Boone County to levy a land tax.

Boone County (like other counties and cities) faces a difficult dilemma. It either can erode its property tax base with abatements to select businesses or risk having those companies being lured away to locations that offer subsidies. A land value tax won’t completely eliminate that problem (a jurisdiction could offer to not tax the land at all or provide that business some type of tax rebate), but it will make it more financially viable for businesses to expand facilities already present. If the State Constitution were changed, counties would have another policy option available to retain businesses other than having to resort to tax abatement.

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However, what if you’re among the more than 10,000 residents who feel that Columbia needs a bit more in the way of police and fire protection? I’d say don’t despair. There are other means by which the city can increase revenues without resorting to a property tax increase.

For instance, the city could look at the fire expense reimbursement that it receives for services that it performs for the three colleges located in town. According to the Columbia budget, these reimbursements are declining and have been for the past couple of years. Columbia can renegotiate with these colleges in order to get higher reimbursements.

Columbia also could look into privatizing its water and electric utilities. The sale of these types of utilities can bring in an immediate infusion of cash to cities’ bank accounts. For example, the city of Florissant, Missouri, privatized its water utility in 2002 and received $14.5 million from the sale. More recently, the residents of Arnold approved the sale of their sewer system, which brought the city $13.2 million. Not only can the sale of the utilities themselves bring in more money to the city, but privatization can also expand the city’s property tax base, which would generate more revenue in the future.

The instances of crime and fire have declined in Columbia, yet for those who believe that public safety is underfunded, there are other ways to raise revenue besides a tax increase. Maybe it’s time they explore them.

The post Proposed Property Tax Increase Fails in Columbia appeared first on Show-Me Institute.

Recent  news of the city of Columbia offering special incentives to American Airlines, but not to Delta, prompted Phil Garcia to write about the consequences of rent seeking (and even compared the situation to his children wanting more allowance). Garcia commented how rent seeking hurts competition and raises taxpayer burdens. Check out his excellent letter to the editor in the Jefferson City News Tribune — Your Opinion: Airport ‘rent-seeking’.

Also read our posts explaining why Columbia made a poor decision, and a related op-ed about how Columbia intends to pay for an airport expansion.

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Although the case raised many issues, the most interesting was the government’s cost estimate that will accompany the ballot title in November. Here, the voters must be especially diligent in their research if they want to make an informed decision. The estimate suggests that “increased state and local government wage and benefit costs resulting from this proposal will exceed $1 million annually.” This summary, which was highly contested throughout the court hearings, is technically correct — the cost will exceed $1 million — but it does not give an accurate picture of the probable cost, which may be closer to $16 million annually. How can that be? To arrive at the conclusion that the cost to the state would “exceed $1 million annually,” the auditor sent requests to 25 local public employers (such as Linn State Technical College and the City of Columbia) requesting an estimate of how much the wage increase would cost them annually. The auditor landed on the $1 million total because only seven entities responded with an actual estimate. Just seven of the hundreds of public employers in Missouri were counted to come up with this fiscal note summary. Because the auditor cannot force entities to respond with such estimates, it would not be prudent to blame that office. That being said, voters should know that the estimate they will see this November does not provide even a close estimate of the cost. In fact, the expert witness for those challenging the initiative suggested the true cost would exceed at least $16 million annually.

Remember the old adage, buyers beware? Here, it is voters beware.

The language you will see in the voting booth may suggest that Missourians will get a lot of change for a little price, when the reality is quite different.

For more information about the effects of the minimum wage, check out other Show-Me Institute publications on the subject.

The post Minimum Wage Initiative Cost Estimate May Mislead Voters appeared first on Show-Me Institute.

The demolition of the Regency Hotel site. Photo by Timmy Huynh of the Columbia Missourian.

Since 2005, the City of Columbia has entered into the business of subsidizing development in a big way. The Columbia City Council approved its first Tax Increment Financing (TIF) project in 2009 and is considering another one.

In 2010, the city actually bought property for $3 million in order to lease it to IBM for $1 (yes, just a dollar) for at least 10 years. In fall 2011, the Columbia Missourian reported that IBM had hired just 101 full-time employees, far short of the 800 jobs promised.

It may not be a tax subsidy, but it is certainly a failed bet: The city has also built a very expensive parking garage that garishly lights up downtown Columbia in the evenings. The Missourian has reported that it costs more than $3,000 each month to keep the lights on in that garage. Of course, the cost of the parking lot is $21 million, and its parking revenue appears to have been paltry.

To this former Columbia resident, the city’s development bets seem contrived. The City Council, hoping for a better hotel, approved a large TIF for the Regency Hotel site on Broadway (demolition site pictured above). In my humble opinion, if the replacement of any hotel in Columbia could merit subsidy, I would nominate the Arrow Head Motel, which looks a little worse for the wear.

Now, the Columbia City Council is moving aggressively forward to allow for the awarding of Enhanced Enterprise Zone (EEZ) subsidies. The City Council voted 7-0 on Monday to set up an EEZ board, the first step needed to hand out EEZ development subsidies, despite the fact that many people showed up to protest that move.

What, exactly, is wrong with Columbia? The unemployment rate in the Columbia metropolitan statistical area is lower than the rest of Missouri. Columbia has a large college campus that guarantees a certain level of sales tax revenue and occupied apartments. It hosts football games that draw even more commercial activity to the city.

And yet, Columbia officials argue that a large swath of their downtown should be considered “blighted” and that the city needs development subsidies.

I wonder, to what success are those officials looking? I have pointed out before (in a Columbia newspaper) that TIF has a very poor track record on both sides of the state when it comes to creating long-term growth.

The Wall Street Journal just highlighted Kansas City’s bad development bets. The Saint Louis area’s use of development incentives has been so inefficient that we have spent more than $370,000 per job created. And the Associated Press just reported that the Kansas City development incentive border war has resulted in $750 million in incentives spent to move jobs across state lines.

Development subsidies that taxpayers fund are no way to provide long-term economic growth. But if Columbia’s city officials are itching to get into the development game, they should do so with their own money, and on their own time.

The post What Is The Matter With Columbia? appeared first on Show-Me Institute.

That is pretty much how Columbia city leaders responded to objections to the recent Enhanced Enterprise Zone (EEZ) designation declaring more than half of Columbia as blighted.

“The word ‘blight’ is just semantics,” the Columbia mayor told a crowd.

“Blight” is not semantics. In this context, it is a word loaded with hidden meaning that the mayor and others do not want to discuss. It does mean that Columbia is taking a major step toward much heavier use of taxpayer subsidies for all types of commercial activity. Once you have blighted more than half the city, it is a short step to the point where almost every development receives some type of subsidy. That is not a “maybe.” That is the current reality in Saint Louis and Kansas City.

The dirty little secret that Regional Economic Development, Inc. (REDI), the local media, and Columbia city officials do not want you to know is that EEZ, Tax Increment Financing (TIF), Community Improvement Districts (CID), and other subsidies do not work. They do not succeed in growing the local economy. “Call me blighted and give me the money,” as one city councilman stated, may be an oafish example of out-of-control government, but even worse is the abject economic ignorance it displays.

The panoply of subsidies that come into play when a large area is declared blighted have a number of adverse side effects. They shrink the local tax base, 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 Columbia supporters of the EEZ, the same group that supported the recent TIF projects and the downtown Columbia CID, say that other cities have used these tools with great success (for example, an editorial in the Columbia Daily Tribune, Aug. 13, 2009). In this, they are completely wrong. They might as well stare you in the face and tell you the sun rises in the north. The City of Saint Louis has been using urban redevelopment tools such as Enterprise Zones and many others for half a century. How has it worked out? Mapping Decline, a 2008 book by Colin Gordon, documents the decline of the city of Saint Louis. The book’s research is exhaustive. The dominant theme is the use of urban renewal tools and tax subsidies (including EEZ) – and their absolute, total failure. From the 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.

I can already hear readers in Columbia saying, “But we’re not Saint Louis.” You are right, you are not; so do not follow a path that will make your city repeat Saint Louis’ mistakes. It is one thing for Saint Louis to try to these projects and have them fail. It would be even worse for a city like Columbia to follow that example with the knowledge that the entire process has failed. At least the trailblazer who takes the wrong path has an excuse.

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

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For more information about the Mackinac Center for Public Policy, please visit its website.

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The name of the panel is derived from the fact that the proceeds from property forfeited under state law is put into a fund for schools, but this law can be skirted by using federal forfeiture law, which allows 80 percent of the proceeds from forfeited property to be given back to the law enforcement agency that initiates the forfeiture. The event is open to the public, so if you are in the area come on down to hear about one of the more egregious ways the government can violate your property rights. You can RSVP on Facebook here.

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(Headline reference here, which is meant both to celebrate the Rush concert in Saint Louis this Sunday, and to annoy my colleague David Stokes.)

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The show lasts from 4:00 to 6:00 p.m., and I’m scheduled to speak at 4:30. The show is also available online, so if you are around a radio or an Internet connection, you should listen in!

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