The package of subsidies offered to the Kansas City Chiefs by the Missouri Legislature during last year’s special session was bad.

But that bill was not nearly as bad for taxpayers as what is being offered to the team by our neighbors in Kansas. House Bill 2793—the Kansas Sports Authority Act—offers the team, well, it seems, everything.

The bill sets up a Sports Authority to administer the site of a new stadium. That in and of itself is not unique. The Truman Sports Complex, in which the Chiefs and Royals currently play, is administered by the Jackson County Sports Complex Authority. But the power and portfolio of what is being considered in Kansas is breathtaking. Consider the following:

• The authority board includes “a representative of the professional sports team” using the facility as a voting member. This means the Chiefs would have a vote on such things as negotiating its lease, financing, and operations. Having the team oversee itself is a crazy conflict of interest and uncommon in other similar authorities if not absolutely unique, for obvious reasons.
• But the Chiefs aren’t merely one of several votes on the authority. The bill allows additional sports facilities to be placed under the authority if the governing body requests it and the Chiefs also recommend it—giving them an unusual role in expanding the authority’s jurisdiction. This provision may exist because team ownership wants to make sure nobody else can siphon away public funds.

• The authority’s powers “shall not be exercised in a way that conflicts with the terms and conditions set forth in the STAR bond agreement dated December 22, 2025.” This means the authority is locked into the already-negotiated agreement with the team, limiting its ability to adjust terms later.

The three items hand the Chiefs an incredible amount of power. The bill gives the Chiefs a voting seat on the governing authority, binds that authority to the STAR bond agreement the Chiefs negotiated, and gives the team an effective veto over whether additional sports facilities are added to the authority.

But wait, there’s more!

• Contractors must use competition only “to the extent reasonable and practicable in the authority’s sole discretion.” This is a significant weakening of competitive bidding requirements, increasing the risk of opaque contracting and favoritism.

• The authority is exempt from multiple statutes including the Kansas Civil Service Act and the Kansas Administrative Procedure Act, removing the standard hiring, rulemaking and administrative oversight safeguards that normally apply to public entities spending public funds.

• The authority must submit annual reports and testify if legislative committees request it. But this so-called oversight is largely after-the-fact reporting, with no routine legislative approval required for major contracts, bonds or development agreements.

• You read that correctly: the authority may issue special-obligation bonds for stadium construction and infrastructure. Although not legally state debt, political pressure often arises if revenues underperform, creating potential taxpayer exposure. If you doubt this, read up on the fiasco over Platte County and the Zona Rosa shopping center.
• In addition to capturing the increase in sales taxes in the approximately 300-square mile STAR bond district, the authority will be exempt from paying state and local sales and use taxes on purchases of materials, machinery, and services used to construct or equip the facility.

• “Insofar as the provisions of this act are inconsistent with the provisions of any other law, whether general, specific or local, the provisions of this act shall be controlling.” Yeah, that’s in the bill. The authority’s statute is designed to override conflicting state or local laws, potentially weakening local regulatory control.

• And what happens when the stadium is completed and paid for? Nothing. The statute does not include a sunset provision or dissolution trigger. That means the authority could become a permanent quasi-government entity in perpetuity.

• But at least the authority’s power is limited to the stadium, right? Nope. The authority’s purpose includes not just sports facilities and infrastructure used for it, but any “civic, community, athletic, educational, cultural and commercial activities.” “Commercial activities” seems like something that could cover, well, anything.

Kansas State Senator Mike Thompson claims that this measure will set up an unaccountable  “shadow government.” That seems like an over-the-top claim, but the provisions of this bill suggest he is at least directionally correct.

The post Kansas Sports Authority Lets Chiefs Play as Home Team, Referee and Rulebook appeared first on Show-Me Institute.

This stonewalling is troubling. Transparency is fundamental to good governance. As residents, we deserve to know where and how our tax dollars are spent, particularly when public funds benefit the relatives of city officials. The city’s response—offering vague explanations while withholding records—only deepens the suspicion that something is being hidden.

It’s not enough to claim there are checks and balances in place. History shows that, without public oversight, those checks can be woefully inadequate. City leaders should be proactive in clearing up any appearance of impropriety. If the grants are above board, there should be no issue with releasing detailed information.

This issue echoes the broader problem of cronyism in public spending. Whether it’s sweetheart deals to developers or insider grant allocations, we’ve seen too many instances of public resources being funneled to those with the right connections. These practices erode trust and damage the city’s credibility.

Public officials must recognize that transparency is not optional—it’s a duty.

The post STL Should Come Clean About Leadership Conflicts appeared first on Show-Me Institute.

The EDC’s primary job seems to be the promotion of economic development subsidies in Kansas City. It lobbies on behalf of such subsidies before the city council and is funded largely through fees collected on projects that are approved to receive taxpayer subsidies. Nothing is wrong with any of that, in a vacuum.

The problem is that the EDC is also funded out of the city’s general fund to provide staffing assistance to the city’s several economic development agencies, such as the Tax Increment Financing (TIF) Commission, the Planned Industrial Expansion Authority (PIEA), and the Land Clearance for Redevelopment Authority (LCRA). The EDC even assists PortKC, which many fear is facilitating and approving subsidies that elected leaders would oppose. It is important to note that the members of these commissions and authorities are not paid and are free to vote as they see fit. But the staff they depend upon for advice and council have a financial interest in every vote. The more subsidies these agencies hand out, the fatter the EDC’s bottom line—and the EDC’s budget has doubled since 2000.

In 2015, for example, $1 million of the EDC’s $5 million organizational budget was funded through the Kansas City general fund, but $3 million came from fees the EDC received from the TIFs it approved. So the EDC is getting three times more money from TIF projects than from the general fund.

Show-Me Institute analysts have published concerns about this before, and others—including those at the Kansas City Business Journal—have as well. Steve Vockrodt and Steve Roberts wrote this in the Business Journal back in 2010:

Among the options the EDC executive committee has explored are consolidating boards that deal with tax incentives—the Tax Increment Financing Commission, Land Clearance for Redevelopment Authority and others—and having the city finance the agency to remove the potential for conflict that exists because the EDC is partly financed by revenue and fees from development projects.

The manifestations of the EDC’s conflict of interest are numerous. Consider the following:

• Back in 2015 members of the TIF Commission were so frustrated with the lack of financial transparency and professional services that they threatened leaving the EDC. Mayor James and the city council intervened and changed the process. TIF recipients now pay fees to city hall instead of the EDC, and financial reporting and auditing of TIF projects is now contracted out, instead of being handled by the EDC.
• The EDC apparently adheres to no long-term vision of what is best for Kansas City. Instead, it merely acts to assess each developer request as they are submitted. The EDC’s online application form suggests no particular policy goals that subsidies are meant to achieve, only that “Applications will be reviewed by EDC staff to determine the best course of action.” The recent discovery that at least one hotel was seeking a subsidy to protect itself from the overdevelopment of hotels suggests that no one at the EDC is taking a long-term view.
• The recent Strata deal—in which developers claimed a downtown office tower project was infeasible without public subsidies—was reworked by the city council to dramatically reduce overall subsidies and remove them completely for the tower itself. One wonders whether the EDC is capable and willing  to substantively vet developer applications for subsidies.
• Back in 2017 when Kansas City was trying to measure the value of its economic development policies, the then-CEO of the EDC wrote to the city hall staffer overseeing the study:

We need a report that explains and supports the city’s economic development policy in the context of local and regional competition. Such a report would be helpful in dealing with the KCMO Library and citizen petitioners interfering with an orderly eco-devo policy.

Kansas City spends at least $175 million each year on economic development subsidies. The organization charged with helping city leaders discern good subsidies from bad has demonstrated it is not up to the task, not looking out for the interests of Kansas City, and possessing an attitude of self-preservation that creates significant conflicts of interest. The EDC’s role should be significantly reformed or discarded altogether.

The post Kansas City’s Economic Development Corporation Is in Need of Overhaul appeared first on Show-Me Institute.

Businessman John Wannamaker famously quipped, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” The same may be true for Kansas City’s economic development incentives, but when the City Council sought to study their effectiveness, the folks who benefit from the current system had their own ideas.

Kansas City leaders have been enriching politically connected private developers through a seeming endless stream of taxpayer incentives. Politicians and developers alike claim the subsidies are necessary to revitalize downtown Kansas City. This is debatable. Though taxpayers have subsidized new restaurants and bars, data from the city’s Regulated Industries Division indicate that the number of liquor licenses and health cards has been flat citywide. Subsidies didn’t create businesses or jobs, they merely moved them. And thanks to generous incentive deals, they moved to areas where they don’t contribute to the tax base.

Likewise, the city has given generous subsidies to companies to build their headquarters here; this includes H&R Block, which, rather than actually adding jobs just moved them from elsewhere in the region. Kansas Citians recently learned the subsidies to hotels are so big and numerous that the market is overbuilt—causing the city’s convention and visitor’s bureau to fret that hotel room rates may crash! Meanwhile, all these subsidies direct money away from a school district in which 90 percent of children qualified to receive free or reduced-price meals.

Worse, none of these subsidies appear to be helping Kansas City’s economy. A recent report from the Brookings Institution ranked Kansas City 78th out of the top 100 metropolitan areas in economic growth—a score that is likely padded by the growth of Johnson County, Kansas.

In the face of public unrest over Kansas City’s subsidy culture, the city council called for a study of incentives and their impact. As reported in the Star, the city awarded the study contract to a trade group sponsored by developers and their lawyers. The resulting study, if one wants to use that term, contained so many methodological lapses that a reader could be forgiven for thinking they were intentional. When the report was presented to the council, it was clear that it did not deliver on its basic purpose: helping policymakers adopt better policy.

From my own investigation into the study process—using the open records law to examine the proposal and bids received, draft reports, and emails—it is clear that the incentive report relied greatly on individuals and organizations with interests in maintaining the current system. One email from a development financier made explicit that the study needed to politically protect the subsidies against the interference of “citizen petitioners.” That note was dutifully passed on from the head of the organization that vets subsidy applications, to the city employee overseeing the study, to the vendor writing it. And when the Greater Kansas City Chamber of Commerce drafted a statement opposing an effort by those same “citizen petitioners” to cap tax-increment financing incentives, they cited the study’s findings. The report seems to have accomplished its mission.

The way this study was undertaken should outrage everyone in Kansas City, especially the councilmembers who called for it to be written. The council should retract the study, investigate how it was conducted, and act swiftly to hold individuals and organizations accountable. A new, independent study is needed.

Moreover, the system by which Kansas City awards such subsidies is in need of overhaul. Taxpayer funds should be protected against self-interested developers, attorneys, and consultants, as well as the organizations they fund. Taxpayers have sacrificed too much—and seen too little return—for mere half measures.

The post KC’s economic development study parroted exactly what the city wanted appeared first on Show-Me Institute.

Contrary to what proponents of economic development subsidies are claiming, the incentives aren’t really driving companies’ decision-making. The Upjohn Institute for Employment Research released a study in February which concludes in part that, “for at least 75 percent of incented firms, the firm would have made a similar location/expansion/retention decision without the incentive.” Amazon’s choice to move its new headquarters to New York City and a suburb outside Washington, DC, illustrates the point: companies do what is best for them, and tax incentives are rarely enough to outweigh other factors (like quality of workforce, for example) that influence decisions about where to set up operations.

Cities are starting to reevaluate their incentive programs. Nashville recently suspended the use of tax-increment financing (TIF) pending a study. St. Louis completed a broader study of economic development incentives in 2016 and is now considering reforms.

Kansas City undertook an effort to study its incentive regime, but the process seems intended to obfuscate. In a July 2016 story in The Kansas City Star, Mayor Sly James seemed to appreciate exactly how important a well-done study of incentives could be in improving policy. He said,

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.

By October 2016, the mayor appeared to be backpedaling. In a speech to city employees he said, “City Hall doesn’t do a good enough job of promoting how economic development benefits the city.” That suggested a shift in purpose from a serious analysis of city policy to merely a public relations effort to promote existing policy.

Kansas City received eight bids—ranging from $174,000 to $287,000—on the proposed study, including from the PFM Group, an asset management company that had conducted the above-mentioned study in St. Louis. The highest bid came from the Council of Development Finance Agencies (CDFA), which according to its website is “a national association dedicated to the advancement of development finance concerns and interests.” It is not an accounting or economic evaluation firm, but a trade group seemingly placed in a conflict of interest.

Kansas City contracted with CDFA and paid the firm $350,000—more than what CDFA bid on the project, and approximately twice as much as St. Louis paid PFM for their 2016 study. There was now more reason to suspect this was not going to be a serious or rigorous analysis.

CDFA presented its report to the Kansas City Council on August 16, 2018—16 months past the original contract deadline. The report was a disappointment, but not a surprise. Rather than undertake the rigorous work of measuring the real impact of subsidies, CDFA simply assumed that subsidies had a positive economic effect. For example, it appears that the authors tallied up the value of a given economic development incentive and then divided it into the jobs or tax revenue that project generated. As a result, the CDFA report concluded, incredibly, that “each incentive dollar invested generated $3.83 in additional tax revenue.”

Importantly for policymakers, the report made no attempt to determine how or if a given incentive caused the subsequent development. It made no effort to determine if some projects generated more and better returns on incentives invested than others. During the presentation, council members continually questioned the consultants assembled about how the report could help them make better decisions in the future, or when incentives in a particular part of town met with diminishing returns. The consultants could not answer, because the study avoided such important questions.

Some organizations with an interest in promoting economic development incentives, such as the Greater Kansas City Chamber of Commerce and the Downtown Council, have uncritically parroted the $3.83-per-dollar-invested return rate on incentives. They should have known better. The editor of the Kansas City Business Journal called the report a “hot box of poo” and wondered, “did Kansas City blow a couple hundred thousand dollars on a completely useless study?”

While other cities are taking this issue more seriously, it appears that in Kansas City the answer is yes.

The post How Not to Study Economic Development Incentives appeared first on Show-Me Institute.

Kansas City issued a request for proposals with the deadline of June 12, 2016. Eight companies submitted bids to complete the work. The companies and their total bid prices are listed below. Note that CDFA, which was awarded the project, was the highest bidder. The final contract award was even higher: $350,000.

I have attached electronic copies of the RFP and all the bids at the bottom of this post. Feel free to dig through them and let us know what you find. Here are some things we found noteworthy:

• Collins Noteis & Associates (“a WBE-certified firm specializing in urban planning, community planning, economic development planning, and government affairs”) is listed as a subcontractor on at least two of the bids: EPS and EDR.
• EPS’ bid includes as a subcontractor Parsons & Associates, which is a Kansas City–based public relations firm whose work would account for just over 10 percent of the cost. Why is a PR firm contracting to provide economic analysis?
• CDFA’s winning bid included participation of the W. E. Upjohn Institute for Employment Research. This is promising because the Upjohn Institute recently published a study concluding that:

The existing research on incentives is that in some cases they can affect business location decisions, but that in many cases they are excessively costly and may not have the promised effects. The new research suggests that much of this consensus is justified.

• CDFA’s bid lists the Hardwick Law Firm LLC as a “team member.” Herb Hardwick, founder of that firm, still serves as counsel to the Kansas City TIF Commission—whose work CDFA will be assessing. This could be a significant conflict of interest.

The CDFA contract is operating under its fourth deadline extension, which ends in late July. We don’t know if a fifth extension will be sought or granted. But given the great cost, the delays, and questions raised by the choice of vendor, one wonders if anyone at City Hall is interested in a serious analysis of our incentive regime.

The post City Chooses Highest Bidder to Conduct Economic Development Analysis appeared first on Show-Me Institute.

On November 1, 2016, the Council of Development Finance Agencies (CDFA) signed a contract with Kansas City to study the city’s economic development practices. Show-Me was critical of the City for hiring CDFA,  because they are a trade association whose mission is “to promote the common interest of Development Finance Agencies with respect to public policies and programs.” In other words, this group is being hired to analyze the success of the programs they promote. That hardly sounds like an impartial researcher. (But then our TIF Commission staff is funded by fees collected from TIF recipients, so conflicts of interest seem to be the standard operating procedure.)

Nevertheless, a study such as this is warranted, because Kansas City spends or diverts a lot of tax money to private developers. Studies of TIF and other incentives have found they are largely a waste of taxpayer money. This includes a report recently completed in St. Louis for the very corporation that doles out these dollars. That study concluded that TIF does not spur investment or create jobs; that it is not used in the economically struggling areas that need it; and that the level of reporting on these subsidies is poor. Other studies by universities and research institutions have likewise found TIF policies greatly wanting. Kansas City is due such an examination.

The contract signed with CDFA set a maximum payment of $350,000 for the study and set a deadline of May 1, 2017 for the final report. In an October 2017 email, Kerrie Tyndall, the director of economic development for Kansas City, wrote that the report should be received by the end of 2017—seven months late. In a November 2017 Kansas City Star story, Steve Vockrodt wrote that the report should be released in January 2018—eight months late. Ms. Tyndall indicated to me in March that the report should be delivered in mid-April—11 months late. As of this writing, May 25, there still is no report.

It is noteworthy that Public Financial Management, Inc., the company retained to provide analysis of economic development subsidies in St. Louis completed its study in 15 months and for half the cost of what Kansas City authorized. The Show-Me Institute issued its own analysis of TIF use in Kansas City and St. Louis after less than a year of study and at no cost to taxpayers.

A pricey, publicly funded and repeatedly delayed report on subsidies—performed by a group that supports such spending—isn’t likely to build confidence among residents. Kansas Citians deserve better policy and better policymaking.

The post Where Is That City Report on Economic Development? 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.

First of all, CDFA is not an accounting or financial auditing firm. According to their website, they are:

a national association dedicated to the advancement of development finance concerns and interests. CDFA is comprised of the nation’s leading and most knowledgeable members of the development finance community representing hundreds of public, private and non-profit development entities.

Their mission is “to promote the common interest of Development Finance Agencies with respect to public policies and programs,” which isn’t exactly what you’d expect from an independent, disinterested organization.

In short, we’ve agreed to pay up to $350,000 to an association that represents development financiers and their “interests” to evaluate the effectiveness of our development financing. How likely is it that CDFA will be critical and impartial? This is a legitimate concern, because Mayor James has already stated that “City Hall doesn’t do a good enough job of promoting how economic development benefits the city.” Are we paying for analysis, or for cheerleading?

To assess their own economic development programs, the Saint Louis Development Corporation hired The PFM Group, an independent public financing advisory company. Of themselves, PFM writes,

Founded April 11, 1975 on the principles of expert, unbiased advice, the PFM Group of companies also provides investment advisory and management/budget consulting services to clients across the country and are recognized as industry leaders. 

For $180,000—roughly half of what Kansas City proposes to spend—PFM completed a substantive analysis of St. Louis economic programs and concluded that TIF and abatement are extremely costly and have little or no economic development impact. (We’ve reviewed their findings here.)

Other studies of economic development subsidies like TIF have been conducted by scholars at universities such as the University of North Carolina-Chapel Hill and Washburn University in Topeka. These studies, along with works published in the Journal of Urban Economics, and in Urban Studies have raised serious concerns regarding the impact of economic development subsidies.  Other regions have found substantial costs associated with little economic benefit, so Kansas City should take its self-evaluation seriously.

States like California, which ended TIF in 2012, and cities like St. Louis should be applauded for facing the reality of their economic development policies. Not so in Kansas City. If our leaders are serious about promoting good policy, they need to be willing to seek out independent, disinterested research and make the appropriate changes.

The post Kansas City Hires Fox to Watch Henhouse appeared first on Show-Me Institute.

The potential for conflicts of interest here is obvious. The EDC doesn’t just have financial relationships with the organizations they regulate—they depend on those relationships for over half of their budget. Worse yet, the more subsidies that are awarded, the more money they collect in fees. While TIF Commissioners—who make the final determination on the awarding of subsidies—are appointed by the mayor and are themselves unpaid, they rely on recommendations from EDC staff.

Then we issued a press release bringing attention to the post. Rob Roberts of The Kansas City Business Journal received our release and wrote about it. But apparently neither he nor EDC CEO Bob Langenkamp, who was quoted in his piece, clicked on the link in the email or read the actual post to which the release referred. That’s a shame, because Langenkamp was made to look foolish. For example, Roberts wrote,

As EDC CEO Bob Langenkamp pointed out, the Tax Increment Financing Commission of Kansas City recommends approval of TIF projects to the City Council, which makes the final decisions.

This is exactly what we assert in our post, as cited above. Roberts also wrote,

Langenkamp also corrected Tuohey’s claim that the majority of the EDC’s funding comes from administrative fees associated with TIF projects.

“If you look at the current EDC budget, you’ll see we’re not receiving any administrative fees,” Langenkamp said. “They’re collected by the city.”

Yet in an August 23 email to me, Langenkamp wrote that $3 million of the EDC budget is from “the annual admin fee on active/approved TIF projects.” Langenkamp may respond that his email refers to previous years and not the current budget, but the distinction is largely meaningless. Due to the TIF Commission’s dissatisfaction with the quality of financial management by the EDC, the TIF fees now go to City Hall, which assesses a fee for outside bookkeeping and then channels the remaining funds back to the EDC. The City is merely a pass-through; the EDC still gets funds generated from TIF fees. If anything, this makes the process more questionable because now the city administration also gets a cut.

The Show-Me Institute is not the only one to question the nature of EDC funding. In 2010, one outlet published a piece that included this passage:

Among the options the EDC executive committee has explored are consolidating boards that deal with tax incentives—the Tax Increment Financing Commission, Land Clearance for Redevelopment Authority and others—and having the city finance the agency to remove the potential for conflict that exists because the EDC is partly financed by revenue and fees from development projects.

The author of that piece? Rob Roberts of The Kansas City Business Journal. The difference now is that the portion of the EDC funding generated by fees has grown immensely—even if it is filtered through City Hall along the way.

The post The EDC Gets It Wrong appeared first on Show-Me Institute.

The EDC oversees, among other groups, the city’s Tax Increment Financing (TIF) Commission. This places them in the middle of the debate over how and to what degree Kansas City subsidizes development. Ideally, the EDC would be structured to facilitate the judicious use of city resources to promote economic development. However, the way the EDC is funded seems far from ideal. Since 2000, the EDC budget has doubled. That may or may not be warranted, but what should concern taxpayers is the growing percentage of their revenue that comes from fees associated with the TIF projects they oversee.

In 2015, for example, $1 million dollars of the EDC’s $5-million organizational budget was funded through the Kansas City general fund; but $3 million came from fees the EDC received from the TIFs it approved. So the EDC is getting three times more money from TIF recipients than from the general fund.

The potential for conflicts of interest here is obvious. The EDC doesn’t just have financial relationships with the organizations they regulate—they depend on those relationships for over half of their budget. Worse yet, the more subsidies that are awarded, the more money they collect in fees. While TIF Commissioners—who make the final determination on the awarding of subsidies—are appointed by the mayor and are themselves unpaid, they rely on recommendations from EDC staff. That arrangement may not be working so well.

Last year the TIF Commission considered leaving the EDC, “as a result of board members' concerns with the level of financial information and professional services they are receiving for their money.” Since then the EDC’s financial reporting and auditing functions have been contracted out to a private firm through City Hall.

Although this is a step in the right direction, it doesn’t resolve the conflict inherent in having the EDC benefit financially from every TIF project approved. While TIF Commissioners may be dissatisfied with the quality of reporting from EDC staff, there is no other place for them to go; they do not seek out second opinions. Taxpayers are displeased with the frequency and degree to which Kansas City doles out subsidies; but without EDC funding reform, prospects for improvement seem dim.

The post “For It Is in Giving That We Receive.” appeared first on Show-Me Institute.

However, last March a Cole County judge invalidated much of SB5, ruling that several of its most important provisions were unconstitutional. Although the decision will be appealed, it has jeopardized the protections that SB 5 had provided to Missourians.

Regardless of the fate of SB5, concern about court fines and fees should extend beyond traffic tickets and percentages of budgets. State Senator Eric Schmitt (the sponsor of SB5) sponsored legislation in the recently completed session to extend the protections against taxation by citation.

SB 572 (passed by the legislature this session) lowers and caps fines applicable to both municipal traffic and ordinance violations and adds municipal ordinance violations to the calculation of the 20% municipal revenue cap allowed to come from municipal fines and fees.

The use of taxation by citation in any form invites unpredictability and conflicts of interest among the courts and law enforcers. For the benefit of government and the people of Missouri, tax policies should be set so that revenue is reasonably stable and predictable.

The first step to solving any problem is admitting that one could exist. The legislature has recognized that funding municipalities using traffic fine collections, and now municipal ordinance violations, is bad policy—and that’s a great start. The next step is to fully address taxation by citation in all its forms.

The post Making Sure Municipal Courts Are Not Tax Collectors appeared first on Show-Me Institute.

So: How many Senators, charged with working for the public interest today, intend to seamlessly curry favor with their former colleagues on someone else's behalf immediately after leaving office? The public deserves to know.

The post Exactly How Many State Senators Plan to Immediately Become Lobbyists? appeared first on Show-Me Institute.

Earlier this week, Uber announced that it would provide free UberX rides in Saint Louis for the Fourth of July weekend. That seemed like a huge benefit for the city, as the holiday week is notorious for drunk driving accidents. Free ridesharing has been a promotion many other cities, including Kansas City, allowed while policymakers worked out regulatory hurdles. But despite support from just about everyone, including Mayor Slay, the MTC said thanks but no thanks.

That action was bad enough, but subsequent statements by the MTC’s chair are downright embarrassing for that commission and the Saint Louis region as a whole. The chair of the commission wrote that complaints about Uber were down to “white privilege,” despite all the evidence that the entire Saint Louis community would benefit from ridesharing. The commissioner also openly insulted Chris Sommers, a more pro-ridesharing commissioner, for criticizing the MTC’s decision. Aside from calling on Sommers to resign and “work 4Uber,” the chair used extremely inappropriate language to disparage Sommers over twitter, completely unbecoming of a public official.

To sum things up, we have a commission with a chairman who is publicly insulting another commissioner and using race-baiting language to attack Uber. We have another commissioner who, last week, intonated that we should regulate just about every job that exists and said that Uber is a want, not a need in Saint Louis. Worse yet, those two individuals are among those commissioners who don’t represent the taxi industry. How can we expect this body to come up with efficient, modern for-hire vehicle regulations? Might it be better at this point just to dissolve the commission and start fresh? 

The post It’s Time to Disband the Metropolitan Taxicab Commission appeared first on Show-Me Institute.

On a Sept. 30 invoice obtained through an open records request, Global Prairie listed this item: “Discuss ongoing community dialogue opportunities with Bob Berkebile and team.” Berkebile, the co-chairman of the Advisory Group, leads the architecture firm BNIM and is clearly a fan of the new terminal proposal. He did not invite other members of the advisory group in on this meeting; they are not the “team” mentioned in the invoice. Berkebile did not even inform members of the Advisory Group that he was meeting with the airport’s public relations firm. We don’t know what was discussed.

A few months before, Berkebile and co-chair David Fowler asked Advisory Group members not to engage in public forums. On July 11, 2013, KCPT and the Citizens Association partnered with the Kansas City Library to host a panel discussion on the proposal to build a new airport terminal and Kansas City International Airport (MCI). Members of the Advisory Group were invited to participate, but received an email the day before from Fowler and Berkebile stating that:

Participating in forums, like this one, might unintentionally give the perception that the Advisory Group has taken a hard position and, as such, devalue the work of the group as a whole.  Therefore, Bob Berkebile and I, as co-chairs, are asking the members of the Advisory Group not to hinder these groups from having forums but not to participate on those forums at this time.

It is a fair request that Advisory Group members not partake in matters that might impact the groups’ legitimacy. Unfortunately, Berkebile’s subsequent surreptitious meeting with the airport’s public relations team gives exactly “the perception that the Advisory Group has taken a hard position and, as such, devalue[s] the work of the group as a whole.” That is unfortunate.

The post Advisory Group Leader Meets With Airport PR Folks appeared first on Show-Me Institute.

Unfortunately, this places Stephens in a clear conflict of interest as her boss at the Platte County EDC is none other than Mark VanLoh, who is the director of the Aviation Department. In short, Stephens has been asked to serve on a voluntary group charged with passing judgment on her boss’ magnum opus. What’s worse, Stephen’s isn’t shy about her support for the new terminal and this seems to cloud her ability to perform her job on the advisory group.

During the Nov. 5 meeting, Stephens identified herself as one of the advisory group members who is urging a quick vote on the new terminal project. Starting at the 53:45-minute mark, Stephens asserts that because of her position on the Platte County EDC, she has “that kind of opportunity to visit with many of those stakeholders that others around this table may not.” It’s reasonable to expect that a person in her position should know what airport stakeholders are thinking, after all, the airport is in Platte County.

But it appears she does not. The week after Stephens urged a quick vote based on her ‘special knowledge’ of stakeholders, Southwest Airlines — the airport’s biggest stakeholder — announced that the new terminal proposal is too expensive, creates a disincentive to serve Kansas City International (MCI), and that Southwest felt it was not adequately represented in new terminal discussions. Exactly what is the value of having the “kind of opportunity to visit” with stakeholders if these strong views from the biggest stakeholder were missed?

Stephens may mean well in her service to the advisory group, but she is not as dialed in to the views of airport stakeholders as she presents. And how can her input be taken seriously when her very livelihood is dependent upon the man on whose plan she is being asked to pass judgment?

The post Who Is Alicia Stephens And Why Should Kansas City Care? appeared first on Show-Me Institute.

Members of the advisory group are studying the airport to decide if the Aviation Department should build the new $1.2 billion terminal they want. Those lessons have been presented by, well, the Aviation Department. But the advisory group wants to get an independent point of view, so it is seeking a consultant. Those interested are to apply through, who else, the Aviation Department.

This might be excusable were it not just the latest in a series of events demonstrating that the advisory group is not really expected to tell Mayor Sly James anything he doesn’t want to hear. Consider the following:

• The appointed head of the advisory group built airports for a living, including the current MCI.
• The mayor has said, while flanked by the group’s leaders, that anyone who opposes a new terminal is uninformed [July 9 Kansas City Star, story taken down].
• The City Council told the Aviation Department to go ahead with its plans while the advisory group meets.
• Proponents of the new airport spent at least $117,000 on public relations consulting and yet refuse to speak in public about their plans.
• One member of the advisory committee works for an economic development council headed by the Aviation Department’s administrator.
• The advisory group began its series of meetings by removing opponents at the very moment its leaders were saying the meetings were to be open.
• City Councilman Ed Ford said that Kansas City is going to get a new terminal regardless of what voters think.

The advisory group will continue its meetings well into 2014 with no end in sight. No one knows what their decision will be, but it’s clear that any information they receive will either be gathered by the Aviation Department or those it approves, such as the so-called independent consultant.

The post The Airport’s Self-Dealing appeared first on Show-Me Institute.

We know that government departments such as the airport do not pay taxes. This is also true for tenants on airport land. According to Karbank Real Estate Co.,  which competes against the taxpayer-subsidized airport, the assessed value of the Blount International facility on airport land is slightly more than $7 million, or one-third the appraised value. As a result, the affected tax districts have lost almost $650,000 in annual tax revenue. The Park Hill School District alone is denied $380,000; Kansas City proper loses slightly more than $107,000; Mid-Continent library loses $22,000.

Of course reading this, you might think that officials in Platte County — the county in which the airport is located — are up in arms about this deal because they are losing thousands of tax dollars to an airport that undercuts private taxpaying developers. But you’d be wrong. The Platte County Economic Development Council not only supports the airport in the past deal, but also in the current plan for a new terminal. Heck, Alicia Stephens, executive director of the Platte County EDC, supports the new terminal project and the mayor appointed her to the Airport Task Force!

But don’t worry about Stephens losing her job for supporting deals that cost Platte County dearly. Her boss, the chairman of the Platte County EDC, is none other than Mark Van Loh — the head of the Kansas City Aviation Department, whose developments are robbing Platte County of tax dollars.

Reasonable people are left with two compelling questions: How can Stephens credibly serve on a task force in which she will be asked to pass judgment on a proposal by her boss? And why does Platte County tolerate its EDC chairman having such a clear and significant conflict of interest?

Here is a table Karbank compiled that provides a breakdown of tax revenue NOT being paid on property that the airport developed:

Not satisfied with giving away the house on rent and taxes, the Aviation Department signed a lease agreement that stipulated, (emphasis added):

In the event that ad valorem real property taxes are assessed against the Premises, the bonus value of this Lease, the Infrastructure Improvements or any component of the Premises or the leasehold estate created by this Lease (“Taxes”) and paid by Lessee, City shall either pay Lessee an amount equal to such Taxes or credit such amount against Rent owed to City by Lessee.

In other words, Kansas City is on the hook for any taxes owed on the property should the abatement end. And it might. Karbank is suing the airport over the matter, alleging that the agreement, which they claim is effectively 100 percent abatement  in perpetuity, is unconstitutional. Whatever the results of the lawsuit, MCI needs to act like an airport, not Donald Trump.

The post ‘This Is What Airports Do,’ Part 2 appeared first on Show-Me Institute.

We provide Residential Development Consulting services to both non-profit and for-profit organizations. We provide expertise in structuring developments utilizing a variety of public and private resources, including federal CDBG and HOME funds; tax-exempt bond financing; and low income housing tax credit, historic tax credit and new markets tax credit transactions.

That probably should have come up at least in the author’s bio. Unfortunately, it did not.

While we are discussing the RHCDA’s portfolio of tax credit expertise, it should be noted that the Associated Press made this revelation about the New Markets tax credit program just this weekend (emphasis mine):

Missouri has authorized more than $120 million of tax credits through a program intended to entice wealthy investors to pour money into businesses in low-income areas, but the initiative has yet to produce even half the jobs that were anticipated, according to state figures provided to The Associated Press….

At the request of the AP, the state Department of Economic Development compiled a spreadsheet documenting every New Markets tax credit that has been authorized. The 9,679 “anticipated jobs” associated with the tax credits far exceeds the 823 “actual new jobs” and 3,141 “jobs retained” under the program, though those numbers could continue to rise.

This “tax credit job-shortfall” storyline is not unique. Indeed, the AP report on the New Markets program follows earlier, similar revelations about the Quality Jobs tax credit program, which I testified about earlier this year. In the case of the Quality Jobs program, 45,000 jobs were promised; according to state records, only about 7,000 jobs were created in reality. As I said then (emphasis mine):

In practice, there is no particular consequence to the state and its public officials claiming that new jobs will be coming, even if the jobs never materialize. That may explain the difference between the number of jobs state officials promise when a tax credit project is announced and the number of jobs actually created when the project winds down. To some officials, big tax credit promises look better than small tax credit promises, even if those promises do not pan out.

The same can be said of the consultants who go to bat for these credits. Acree even has the audacity to claim that the historic preservation tax credit is “Missouri’s most useful economy-boosting program.” A program that returns 23 cents on the dollar is our “most useful economy-boosting program”?! Does this suggestion horrify anyone else?

I have a better idea: Cut taxes with the money instead and let taxpayers invest their money themselves in their own businesses. Better yet, eliminate a tax or two instead of underwriting the projects of the politically well-connected. Missouri’s most useful economy-boosting program is the hard work and innovation of its taxpayers, not some bloated, special-interest government handout.

As story after tax credit story bears out, tax credit proponents/consultants have a terrible track record of substantive, sustainable, and enduring successes. The historic preservation tax credit is a central player in this ongoing, budget-busting, decade-long state development debacle. Suffice to say, I am looking forward to the findings of the state audit of the program, due to come out later this year.

The post Nota Bene: Historic Preservation Tax Credit ‘Consultant’ Supports Historic Preservation Tax Credit appeared first on Show-Me Institute.

The Tax Credit Review Commission held its regional meeting in a veritable monument to the tax credit programs they review: the Old Post Office building in downtown Saint Louis. It’s borderline poetic. From an article by Brian Hook in the Missouri Watchdog:

The DESCO Group and DFC Group developed a plan, using tax credits, to restore the [Old Post Office] building in 2000. The Missouri Court of Appeals, Eastern District, moved into the building in 2006.

Steve Stogel, co-chair of the Tax Credit Review Commission, is president of DFC Group in St. Louis.

Additionally, some individuals cited in their testimonies a recent study from Saint Louis University that evaluates the historic preservation tax credit program. After I delivered my testimony, co-chair Chuck Gross even handed me a paper copy.

The SLU study has a peculiar list of financial supporters:

DFC Group
Downtown Council of Kansas City
Kansas City Port Authority
Missouri Growth Association
Missouri Municipal League
Partnership for Downtown St. Louis
Urban District Alliance of Springfield

Listed first is DFC Group, which is co-chair Stogel’s company. The other organizations are groups that receive direct, concentrated benefits from tax credit programs. The Missouri Growth Association, for instance, is a trade association of commercial property owners, managers and developers. Also well represented in this list are city bureaucrats, a group with incentives to grow the size of government.

Isn’t this the very definition of a conflict of interest? How can the Tax Credit Commission evaluate the effectiveness of these programs objectively and fairly if its leadership uses tax credits to earn a living? How can the commission have sound judgment if it bases its decisions on studies for which the leadership paid?

The post The Definition of a Conflict of Interest appeared first on Show-Me Institute.