Jefferson City is awash in taxpayer cash. Missouri’s state government is slated to receive $2.7 billion in federal stimulus funds from the American Rescue Plan Act along with $9 billion from the “bipartisan” infrastructure bill. In addition, the state expects to bring in nearly $2 billion more in net revenues compared to just before the pandemic. What is disconcerting is how quickly some lawmakers—including self-proclaimed fiscal conservatives—have shed sound economic principles in their rush to find ways to spend the money, forgetting the wise words of Nobel Prize winning economist Milton Friedman that “there is no such thing as a free lunch.”

The simple, alluring, and false logic is as follows: either Jefferson City spends the money or the funds get sent back to the federal government to misspend on other boondoggles. But Missouri does not have to choose whether Jefferson City or the federal government gets the privilege of misspending taxpayer money. There is another way—one in which state lawmakers apply a strict cost–benefit test to all proposed spending and in which Missouri taxpayers are the beneficiaries of direct fiscal relief from any unused funds that fail to pass such a test.

To begin, it is crucial that lawmakers be aware that misspent money today—even if it has the false appearance of being “free”—can saddle Missouri with fiscal obligations, a weaker economy, or both, in the future. Because the funds are a one-time injection rather than a reliable stream of future revenue, Jefferson City must avoid engaging in spending that creates long-term future commitments (for example, in the form of unfunded maintenance). Lawmakers should also be wary of any government investment that crowds out private-sector investment. Infrastructure spending ought to enhance the private sector, not compete with it.

The other obstacle to sound cost–benefit analysis is the mistaken belief that the cost of the stimulus and infrastructure funds is zero because Washington, D.C., will both supply the money and reclaim any unspent funds. After all, the message to lawmakers has been that states cannot use the money to offset tax cuts. But this is an oversimplification of the options available to state officials. For starters, as long as state revenues stay above their inflation-adjusted 2019 level, the American Rescue Plan Act provides a safe harbor that deems states to be in compliance with the restriction against using stimulus funds for state tax cuts. That inflation-adjusted revenue threshold is likely to be around $10.8 billion in 2023, which is $600 million less than the $11.4 billion in revenues the state is projected to take in. Thus, state lawmakers immediately start out with a cushion of $600 million that they can provide in tax relief without risking stimulus funds.

Second, the American Rescue Plan Act only prohibits state governments—not local governments—from using stimulus funds to offset tax cuts. Moreover, it explicitly allows the state to transfer some of its funds to localities. Nothing in principle stops Jefferson City from distributing money to localities on the condition that they use the money to enact temporary local sales or property tax cuts. When using such transferred funds, localities must abide by any restrictions that apply to the state, but the American Rescue Plan Act does not impose any restrictions on local tax cuts. To create an even more secure legal hedge, Jefferson City could come to an agreement with localities that they use much of their own $1.2 billion in earmarked local stimulus funds for tax cuts, and the state could transfer some of its funds to localities to put toward sound public investments. This way the funds allocated originally to Jefferson City would be used on public investments, while localities would focus on tax relief.

Lastly, the American Rescue Plan Act allows state and local governments to apply stimulus funds toward mitigating the negative economic consequences of the pandemic, chief among which is the decades-high inflation that Americans are suffering through. Seven percent inflation in 2021 caused real wages to drop 2.3 percent, which amounts to an almost $900 “inflation tax” on the average worker. Jefferson City could simply opt to send direct fiscal relief to Missouri workers to offset this tax.

With coffers flush with cash, it is true that state lawmakers have a rare opportunity to make pivotal public investments to improve private-sector productivity. However, they would be wrong to view the money as “free” or the cost of spending the funds as zero. Instead, they should apply the same cost–benefit test that they would use for spending financed from state tax dollars with the knowledge that any unspent money need not go back to Washington, DC—it can end up directly in the pockets of struggling Missouri families.

The post Flood of Federal Money Is Not a Free Pass for a Spending Binge appeared first on Show-Me Institute.

A Missouri Times article explains what the expired economic development tax credits are:

The New Generation Cooperative Incentive Tax Credit, Meat Processing Facility Investment Tax Credit, and Agricultural Product Utilization Contributor Tax Credit programs offered by the Missouri Agriculture and Small Business Development Authority (MASBDA) that sunset in 2021.

What kind of effect do they have? Well, that depends on whom you listen to. According to the Missouri Farm Bureau, the effects would have a larger impact than discovering a giant oil field in rural Missouri and turning Cuba, Paris, and Lebanon (MO) into the next Kuwait (note: there is no Missouri city named Kuwait). From a Farm Bureau commentary in favor of the programs (emphasis added):

The largest of these programs is the New Generation Cooperative Incentive. This tax credit helps investors draw in private investment for value-added processing. To date, $63 million in tax incentives have generated over $501 million in private investment.

For those of you keeping score at home, that statement claims an economic impact eight times the government investment. Whether you call it an economic multiplier, a cost-benefit analysis, or whatever, the claim that it generated an eightfold impact is absurd.  Even the Missouri state economic development agency makes much lower economic impact claims for this credit (and their claims are also almost certainly way too high). If you are asking yourself if an obscure Missouri state agency funded with other people’s money is capable of creating an economic return eight times the cost of the program, the answer is no, it isn’t.

Government officials cannot predict the future (which often makes the credits useless), and are often influenced by political calculations (which is what can turn the credits from useless to harmful). Missouri should let these tax credits remain dead, and the same thing goes for the film tax credit (wasteful), the low-income housing tax credit (rampantly abused by developers), and just about every state and local tax credit program we have.

Investment in rural Missouri is absolutely needed. State tax credit programs are not the way to do it.

The post Let Expired Agricultural Tax Credits Stay That Way appeared first on Show-Me Institute.

The lawsuit challenges the authority of the Biden administration to set the “social cost of carbon” (SCC) through executive order and direct all federal agencies to use this value in their evaluation and issuance of regulations. The SCC is an attempt to place an economic value on the damage that each ton of carbon dioxide (CO2) emissions causes to society. The damage comes from things such as health impacts, climate impacts, and the expected impact of future environmental changes on the economy over many decades. The SCC is used in cost–benefit analyses of a wide range of environmental and energy policies, ranging from regulations on air conditioners and microwaves to new laws on electricity generation.

The new administration set the SCC at $51 per metric ton of CO2, in contrast to the prior administration’s value of $7 per ton of CO2. While there’s nothing inherently wrong with trying to evaluate the economic consequences of CO2 emissions for society as a whole, the SCC has shortcomings as a policy tool.

Here’s how a simple cost–benefit analysis using the SCC would work. Suppose a particular policy would reduce 10 tons of CO2 and costs $200 to implement. If the SCC is $51 per ton, this program would provide $510 (51 times 10) worth of societal benefits. $510 of benefits is greater than a $200 cost, meaning the policy would be in theory beneficial and a cost-effective way to reduce CO2 emissions. If the SCC is $7 per ton, this program would provide $70 of societal benefits, and it would not be worth the $200 cost.

The SCC is an attempt to place a value in today’s dollars on costs that may not occur, if at all, until far into the future. The calculation of this present value of potential future damages is done in the reverse manner to how one uses interest compounding to project the future value of current investments in a savings account. In this case, though, the “interest rate” in present value calculations is called a discount rate.

Calculating the present value of future potential damages is very sensitive to the chosen discount rate, with relatively modest changes to the discount rate (say, from 3 to 5 percent) producing drastically different estimates of the present value. These changes can be so large as to mean the difference between concluding that additional CO2 emissions would result in catastrophic environmental damages or that society would be significantly worse off implementing emissions reduction policies. Even if two SCC models have the exact same scientific predictions about future climate impacts, slightly different discount rates can produce wildly divergent cost–benefit assessments about environmental policies and the damage of CO2.

Recent academic literature on the SCC also reveals uncertainty regarding the economic impacts of climate change. How humanity adapts to a changing climate is an uncertain area of environmental research. Moreover, unforeseen technological breakthroughs can quickly change environmental projections, such as how fracking turned the United States into a world leader in emissions reductions over the last 15 years by replacing coal usage with natural gas.

In sum, calculating the SCC is subject to policy, legal, and value judgments in addition to scientific considerations, and all of these layers can have significant economic and practical consequences.

Missouri’s lawsuit raises the important question of which branch of government should determine the official SCC, as well as the appropriate procedures that should be followed in evaluating energy and environmental policies and regulations that affect everyday life.

The post Why is Missouri Suing the President Over the Environment? appeared first on Show-Me Institute.

• The city’s TIF policy “does not clearly define the evaluation process or criteria to be used in project selection.” Without clear criteria, city officials have subjective power to pick which companies or developers receive hundreds of millions in tax incentives. This creates horrible incentives for companies and gives too much power to lawmakers.
• The city’s policy “does not include effective project cost limits or overall program cost controls.” The city’s TIF program has grown significantly over the years. Limits and cost controls would cap TIF usage, which would help assure that the approved projects have been carefully vetted and that only the best projects are selected.
• The audit also discovered that “projects were approved with flawed cost-benefit analyses, including overestimated revenue projections.” A cost–benefit analysis is supposed to be completed in the application process and helps to determine if TIF should be awarded. The audit found that of the thirteen projects analyzed, eight had cost–benefit analyses that contained serious flaws or were missing the cost–benefit analysis altogether.

In response to the audit, a city spokesman said that most suggested reforms are not required by state law. Just because something isn’t required by the state doesn’t mean it shouldn’t be done in order to instill fair practices and proper use of taxpayer funds. The problems with the TIF program have been talked about for years, and research suggests that incentive packages like these don’t work. How many chances do the city and this program get? How many times do these problems need to be pointed out before we start to see some real change?

The post How Many Chances Does TIF Get? appeared first on Show-Me Institute.

The USDA’s cost-benefit analysis found that shifting these two agencies to Kansas City would reduce costs by 11.3 percent, saving taxpayers roughly $300 million (in nominal terms) over the next 15 years. These savings stem primarily from the fact that Kansas City has dramatically cheaper real estate than D.C., as well as marginally lower cost of living. The USDA’s report noted that the median sale price of a home (a major factor in determining cost of living for employees) in Kansas City is $205,400, compared to $420,000 in D.C.

This isn’t a surprise to me; I moved to Kansas City from Washington, D.C. in 2005. Nor should it surprise anyone who read our paper on the competitive advantages of the Kansas City region, as the paper mentions low cost of living as a major advantage for Kansas City.

While we don’t know exactly were in the region the USDA will locate, it was disheartening to read in The Kansas City Star that $26 million in “unspecified” incentives were part of the deal. The authors reported:

Greg LeRoy, executive director of the watchdog group Good Jobs First, accused the USDA of engaging in an Amazon-style selection process that made states compete for the jobs with incentives.

“It’s outrageous that the USDA would run an auction. This is the extreme version of privatized behavior by the federal government. Uncle Sam has no business running auctions, dangling jobs on state and local taxpayers,” he said.

LeRoy said the final competition the USDA is setting up between Kansas and Missouri is reminiscent of how corporations set municipalities against each other after a region has been selected.

“This is classic site location consultant chicanery…This is an ugly, extreme version of Uncle Sam imitating Jeff Bezos. Yuck. If I were a Missouri or Kansas taxpayer, I would never stand for this. And as a federal taxpayer I’m cross-eyed.”

It’s a shame that the USDA encourages such behavior. It’s a shame that the Kansas City region plays ball, and it’s a shame that we’ll now fight among ourselves for the specific USDA location.

I discussed this topic with Pete Mundo this morning on KCMO Talk Radio. Click here to listen to the segment.

The post USDA Moves to Kansas City, Gets Incentives appeared first on Show-Me Institute.

It is important to realize that this marketing campaign, even though it uses biker-oriented talking points, is not talking about 36 cyclist lives—the latest annual data from 2017 showed zero cyclist fatalities. Instead, it estimates:

• 15 lives saved by increased physical activity
• 6 lives saved by improved air quality
• 15 lives saved by a reduction in fatal car crashes (not crashes that occur because a cyclist was involved—any fatal car accident counts)

Only the physical activity category is directly connected to bikers who would use the lanes.

There are problems with these estimates. Physical activity benefits, while hard to measure, are dependent upon more Kansas Citians choosing to bike instead of drive. Only 0.3 percent of commuters used bikes in 2018, and a survey noted that fewer than 50 percent of respondents were interested in biking more. More bike lanes could mean an increased number of bikers—but it’s just a projection, and there’s no way to know how many more bikers we’ll see with expanded bike lanes, let alone what the actual health benefits will be.

Six lives saved by improved air quality also seems a stretch. The number was achieved by expanding data from research in New Zealand. Even if this study was properly applied to Kansas City, the boasted number is the highest estimate possible. An economic summary of the Bike KC Master Plan read:

Assuming 1 death due to air quality for every 100 million vehicle miles traveled and 1 per 40 million vehicle starts (trips), the bike plan could reduce Kansas City air pollution fatalities anywhere from 1-6 deaths per year . . . [emphasis added]

The most puzzling estimate is that of fatal crash reduction. The economic summary of the bike plan noted that 228 fatal car crashes occurred within the city limits of Kansas City from 2015-2017, and that 94 of these occurred along the route of the proposed bike lanes. While the summary boasts a 47 percent reduction in these crashes due to the way bike lanes will change the flow of traffic, no crash data was included.

Upon reaching out to the authors of the economic summary for more information, I was told that they did not have any data on the cause of these car accidents: 

The dataset provided by the Mid-America Regional Council did not provide any context on the causes of the crash. There has been some analysis of the contributing factors in fatal crashes . . . but our FHWA source on road diets does not differentiate by crash cause or even crash severity. It is simply an empirical measure on the impact of road-dieted streets on total crash volume. These benefits accrue to all users, regardless of mode or how many people take up bicycling.

How can a 47 percent reduction in fatal crashes be a realistic estimate when there is no available data on what caused the crashes? If the reduction is due to fewer cars traveling the roads with the bike lanes, does that simply mean the crashes occur on the alternative routes these cars travel? Stating the number of crashes occurring within city limits and presenting some traffic flow statistics from other areas does not seem compelling. If BikeWalkKC wants to claim 15 fewer lives taken annually by fatal car accidents as a result of expanded bike lanes, shouldn’t there be more data to back that claim up?

By portraying the Bike KC Master Plan as a strategy that will save 36 lives per year, BikeWalkKC is not avoiding the real problem at hand: this project will cost hundreds of millions in taxpayer dollars, money that could be better spent elsewhere. As my colleague Patrick Tuohey noted,

Kansas City has significant needs, significant transit needs. They are not biking. It is infrastructure. It is infrastructure repairs. It’s getting those steel plates off our streets.

The use of questionable statistics will not help develop solid city policy. If the city has millions of dollars to toss around and is concerned about saving lives, a better idea would be hiring more police officers, not building more bike lanes.

The post Would Kansas City Bike Lanes Actually Save 36 Lives per Year? Probably Not appeared first on Show-Me Institute.

The Kansas City Business Journal reported that the consultant who prepared the study couldn’t show “how much development might have occurred in the absence of all incentives.” This is no small oversight. Kansas City is spending or diverting hundreds of millions of dollars into various development schemes at significant cost to school districts, counties and other basic services. We ought to have some sense of whether this is working. No private sector CEO worth her salt would permit such a significant investment of resources without any idea of the return it was likely to generate.

Worse, the report’s inability to connect investment with return was not a bug; it was intentional. Plenty of organizations, academic and otherwise, have conducted research into this very relationship. In 2016, the St. Louis Development Corporation—the River City’s version of the Kansas City’s Economic Development Corporation—conducted exactly this sort of study and determined that the use of incentives could not be said to drive private investment or create jobs. Incidentally, the company that produced St. Louis’s study, The PFM Group, also submitted a lower bid on the Kansas City project than the vendor the city eventually chose.

A 2018 working paper published by the Upjohn Institute of Employment Research concluded in part, “For at least 75 percent of incented firms, the firm would have made a similar location/expansion/ retention decision without the incentive.” That is a devastating conclusion—and one that is largely supported by research elsewhere. Is Kansas City wasting three out of every four incentive dollars?

Unfortunately, city leaders don’t seem to want to know; the study they commissioned did not even attempt a but-for analysis. City Manager Troy Schulte heralded the study and encouraged developers to make more use of the program. Are we really to believe that every economic development incentive program in Kansas City is a wild success? Really?

The biggest disappointment of the study, as alluded to in the Business Journal’s editorial on the matter, is that the report cannot help policymakers sort good projects from bad. It cannot ensure that future decisions regarding incentives are data-driven. It simply took every bit of economic growth the city has seen and attributed it to the incentives that came before. That is not analysis that encourages better policy. It is political cheerleading, and it is unworthy of the people and policymakers of Kansas City.

The post Kansas City Incentive Study Misses Opportunity appeared first on Show-Me Institute.

The Show-Me Institute has weighed in on such public projects, from the Stan Span to trolley systems in University City and Kansas City. In each instance we asked, just as you would before taking out that home-improvement loan, whether the projected benefit of the project was greater than the projected costs borne by taxpayers. And even if we make the somewhat dangerous assumption that the costs won’t increase as the project goes on, the answer too often is “no.”

Our conclusions are shared by Harvard economics Professor Edward Glaeser. In a recent article that appeared in the City Journal, Glaeser exposes the fairy tale of infrastructure investment as an economic cure-all. It isn’t that he (or we) believes that well-thought-out investment in roads and bridges is unimportant. Quite the contrary. The problem is that the way in which policymakers decide which project goes forward often leads to costly miscalculations that in the end simply do not deliver the promised improvements.

A couple myths about infrastructure that Glaeser dispels are:

• Infrastructure spending stimulates economic growth. Japan, which spent over $6 trillion on “construction-related public investment” between 1991 and 2008, and has arguably one the world’s best train systems, has not experienced sustained economic growth in over two decades. Will building more highways in areas with little population improve economic conditions in U.S. States? It seems unlikely.
• The public benefits, so funding should be done with general tax revenues. It is a near fact of life that funding a project from afar reduces the discipline needed to make sure it is done in a cost-efficient manner, and—perhaps more importantly—makes it less likely that the project will actually benefit the public (and not just those proposing it). Ill-advised, federally funded projects such as Detroit’s People Mover Monorail and Alaska’s Gravina Bridge (a.k.a. “the bridge to nowhere”) serve as cautionary tales. Spending federal funds on local projects like Kansas City’s trolley system is similarly likely to yield little or no economic benefit.

There is much more to Glaeser’s article, and I cannot do it justice in this space. I think you will agree, after reading his article, that maybe that new road or light rail extension being peddled by the local mayor or city council isn’t as critical to the region’s economic vitality as some might have you think.

The post About That New Home Addition . . . appeared first on Show-Me Institute.

Not as triumphantly as its advocates might hope (or try to suggest).

On an average day in 2015, over 41,000 trips were taken on KCATA’s system. Since its opening in May, the Kansas City streetcar has had an average daily ridership of 6,365, or 15% of total transit ridership. That’s a significant number of boardings, but still substantially lower than a busy bus route (the #70-Grand in St. Louis has over 9,000 boardings a day) and many times more expensive.

Buses outperform the streetcar in others ways, too. First, the streetcar is primarily moving passengers who are already near their destination downtown; it isn’t usually getting people from home to work, etc., like buses currently do. More importantly, the streetcar route has been served by MAX bus-rapid-transit service and local bus service for years. And the streetcar travels in traffic, at the same speed as buses. From a transportation perspective, the streetcar is redundant and unnecessary.

“But streetcars have a greater capacity than buses!” rail advocates reply. Streetcar vehicles can purportedly hold up to 150 passengers; however, articulated buses, with over 50 seats and standing room, can accommodate 75 passengers. The City could simply run two buses for each streetcar to match capacity and enjoy significant cost savings (an articulated bus costs 18% of what Kansas City paid for each streetcar vehicle).

In essence, the streetcar offers a more expensive way to move people along a short, 2.2-mile route that Kansas City’s bus system already serves. Is this really the best use of taxpayer money?

The post Streetcars: Suddenly a (Poorly Performing) Transportation Service appeared first on Show-Me Institute.

According to the Star, the cost of Kansas City’s streetcar is comparable to similar projects in cities like Tucson, Seattle, Cincinnati, and Portland. The paper got their “data” from the Community Streetcar Coalition, which is a pro-streetcar lobbying organization (of which the city of Kansas City and KCATA are members), not a research group.

In dissecting the numbers, the first thing to note is that streetcars are virtually all incredibly expensive for the level of service they provide. That service is comparable to a short bus route, yet they are often an order of magnitude more expensive. That being said, the Star’s claims on the relative expense of the Kansas City streetcar are disputed. According to a report by AECOM (an architectural consulting firm), Kansas City’s streetcar system is more expensive per mile than Tucson, Seattle, and Cincinnati. Furthermore, the system is much more expensive per mile than many “vintage” streetcar lines like the Loop Trolley in Saint Louis, as the following chart demonstrates:

*2014 dollars                                                                                                                                                                                                                                                                                       

Of course, there are different ways of estimating cost per mile, and (being custom projects) no streetcar system is exactly alike. Asking which streetcar has the highest cost per mile is akin to identifying the most costly SUV on the market given factors like gas mileage, amenities, and dealer warranties. However, arguing the Kansas City streetcar is not the most expensive streetcar out there is a little like saying the Escalade is a better value than the Land Rover. It’s an expensive luxury, whether or not it’s the most expensive luxury.

When Kansas City planned its streetcar, it did not plan a cost-effective transportation system. Instead, it opted for an expensive status symbol designed to move money, not people. And while its costs may be comparable to similar vanity projects in other cities, that in no way indicates shrewd spending by Kansas City planners. 

The post Kansas City Streetcar Advocates Argue Expensive Streetcar Not Country’s Most Expensive appeared first on Show-Me Institute.

Now that a year has passed we can return to the plain facts. The CEO of Southwest Airlines, the carrier with the largest MCI service, was recently in town to showcase a Missouri-themed airplane. While here, as the Star reported, he said of the MCI terminal:

“I agree and Southwest agrees we definitely could stand to make some improvements. The question still remains exactly what is the best way to do that in the most cost-efficient manner,” Kelly said.

Air travelers are sensitive to price, something Kelly said is evident each time oil prices climb and the cost of flying jumps.

“It absolutely kills traffic,” he said.

People use airports to get on and off planes. They do not go to airports to eat at fancy restaurants or to buy socks or baseball caps. MCI is a highly regarded airport by passengers exactly as it is, and any changes need to be sensitive to the costs and convenience to airlines and travelers.

MCI is a relatively cheap airport for airlines to serve. One benefit is the many morning flights out of MCI because Southwest parks their planes here overnight. If airport fees rose to cover the costs of a new terminal, these planes might find cheaper accommodation elsewhere. Same for those midday direct flights to LaGuardia that originate from the West Coast. They stop here because MCI is a cheap place for them to fuel up and collect passengers. If fees rise, they may choose to connect in other cities and cost us the direct service.

Going forward, it is still tough to know who to believe on even the simplest details of the negotiations. Aviation Department Director Mark VanLoh recently told a Northland chamber group that he expects to have a recommendation before the city council by the end of summer. That seems unlikely. According to Austin Alonzo, Southwest’s CEO said, “We’ll get there, and I think patience is probably the right thing because it is a pretty complicated question.” The Star reported that the deadline for a final recommendation is May 2016.

The post Shocker! Airlines Want to Keep Costs Down appeared first on Show-Me Institute.

The Charlotte Observer reports,

When Charlotte was planning to build its streetcar line last decade, one touted benefit was cost savings. The idea was that an electric-powered streetcar is cheaper than a diesel-powered bus and that a larger streetcar provides more economies of scale than a smaller bus.

But as the costs of a 4-mile streetcar line are coming into focus, an analysis shows that the streetcar will likely be more expensive to operate than city buses and the Lynx Blue Line.

The specific overruns in Charlotte are detailed in the article.

My colleague Joe Miller points out that some streetcar advocates claim streetcars have lower operating costs than buses because they compare the costs of operating a streetcar at full capacity to a bus at full capacity (120 passengers versus 60). However, in real life the transit systems don’t normally operate at anything close to full capacity, so their numbers are very inaccurate. Even then, this doesn’t include the enormous capital costs of rail.

Regular readers of this blog will not be surprised that streetcars are inefficient. We have been highlighting the poor economics of rail transit for some time. The same Charlotte Observer article also points out that the supposed economic development benefits of the rail line—those so dramatically emphasized in Kansas City—”are difficult to evaluate in a cost-benefit analysis of a transit project.”

The initial streetcar website in Kansas City relied heavily on data prepared by the Charlotte Area Transit System (CATS), so it is no surprise that the claims made were similar. As Charlotte deals with higher-than-expected construction and operational costs, Kansas City voters should be pleased that, at least in this instance, they made a wise choice by not going along with other streetcar cities.

The post Streetcar Costs Balloon in Charlotte appeared first on Show-Me Institute.

Read our analysis:

The post Show-Me Now! KCI New Terminal: A Flight Of Fancy? appeared first on Show-Me Institute.

Dave Fowler, co-chairman of ATAG and a former managing partner at KPMG in Kansas City — one of the world’s largest auditing firms, — shockingly wasn’t ever concerned with the cost details. And whenever people provided financial information that did not align with the city’s talking points, it was dismissed. The affordability of the whole scheme was never seriously considered.

Until now.

Joe Miller, a policy researcher at the Show-Me Institute, has compiled all the cost data and concluded that over 30 years, it would be cheaper to renovate the Kansas City International Airport (MCI) twice than to build a new $1.2 billion terminal. Add this analysis to the many other points we’ve raised about the environmental or competitive need for a new terminal and it becomes impossible to find any worthwhile reason to tear down one of the country’s finest airports.

The post The Report The Airport Advisory Group Doesn’t Want You To See appeared first on Show-Me Institute.

The TDD is intended to raise $471.9 million to complete the nascent streetcar system throughout the inner city. Our position is that these systems are less efficient at moving people than buses and that the promises of economic development from streetcars are without empirical basis. To their credit, most streetcar supporters spend their time arguing that the streetcars bring economic development and do not try to claim that streetcars are more efficient people movers.

Nevertheless, many proponents have the idea that it is cheaper in the long run to build a streetcar system than to expand bus service. This post addresses these arguments and asks how many buses the Kansas City Area Transportation Authority (KCATA) could buy and operate if it were given the resources of the $500 million streetcar plan.

Using data from the National Transit Database, KCATA, and actual performance of streetcars in Portland, I estimated yearly operating costs and revenue streams for the streetcar and an expanded bus system. While any such calculations on an unfinished system require some estimation, my calculations are streetcar-friendly by assuming high ridership, elevated farebox recovery, and controlled capital and operating costs.

The findings were that KCATA could buy and operate 105 additional buses for the same cost of building and operating 7.6 miles of streetcar lines.  To satisfy objectors who might claim huge life cycles for streetcars, I also made a calculation assuming the streetcars were not replaced and that only buses were replaced. This reduction in streetcar costs meant KCATA would only be able to buy and operate 100 buses.

To put that in perspective, KCATA currently only operates 257 buses for 61 bus routes that serve the entire Kansas City region. Adding 105 buses would significantly improve regional services and would utterly transform bus service if they were bound to the TDD meant to serve the streetcars. The chart below shows what type of bus service 7.6 miles of streetcar lines buys:

The case is clear. Whatever one believes about the economic development promises of streetcars, in terms of providing mobility, buses are far more cost-efficient than streetcars.

The post Kansas City Streetcar Expansion Could Buy More Than 100 Buses appeared first on Show-Me Institute.

Perhaps in an overeager attempt to answer our questions, the Aviation Department has produced a plethora of cost estimates. In July, keeping the existing terminals supposedly was going to cost about $600 million, with little explanation of those costs. We questioned that number, stating:

KCAD has yet to release an independent analysis of the supposed $600 million improvement costs. But if history is any guide, it is inflating costs. The last renovation of MCI’s terminals took place from 2000 to 2004, and cost the airport $183.4 million . . .  The Aviation Department should explain why the new renovation would cost more than double the adjusted expense of the last.

Aside from criticizing the cost estimate, we also pointed out that it is unclear when these repairs are required.

However, by September of 2013, the price estimate of the airport increased, with a range from $645 million to $785 million. Again, we questioned the estimates, stating:

. . . as of a presentation on Sept. 10, the Aviation Department now claims the cost will be between $645 million and $785 million. A cursory inspection of these estimates prompts many questions, as the itemized repair costs are much larger than those for identical or similar items in the new terminal plan’s budget.

Again, there was no time estimate for these needed repairs.

In the last week, those estimates took a nosedive. The Aviation Department now claims that the repair costs are actually between $365 million and $460 million, a 43 percent decrease in the estimate. The department also stated those figures could be lower by a third if one of the terminals is mothballed. Of course, the estimate still prompts questions, like why the repairs to the central utility cost 25 percent more in the repair estimate than in the new terminal plan. The Aviation Department actually put a timeline on these repairs this time, to be completed in 2020. They also began discussing alternatives, such as a structure that centralizes security between the existing terminals.

The debate about the new terminal plan has already been underway for months. An Airport Terminal Advisory Group has met numerous times to make a recommendation to the Kansas City City Council. But with these new estimates, everyone will need to reconsider the cost of the new terminal plan. Moreover, the lack of consistency and transparency in the Aviation Department’s repair estimates mean no one can trust that these estimates are accurate or final.

The post The Kansas City International Rehab Roller Coaster appeared first on Show-Me Institute.

That’s what makes support for a minimum wage increase from unions and big business seem so odd at first glance. Why would unions such as the American Federation of State, County and Municipal Employees (AFSCME) support a change of policy that would hurt hundreds of thousands of Americans? Why would some businesses want to increase the cost of labor?

A few reasons stand out.

For starters, artificially raising the cost of non-union labor can make union labor more attractive. As the Cato Institute noted more than a decade ago:

Unions are labor cartels that attempt to restrict the supply of workers entering given occupations. Since non-union labor is priced below the cartelized price of union labor, it is an attractive substitute for union workers. Because unionization of all potential competition to the cartel is impossible due to the high policing costs that would be involved, unions resort to the minimum wage. By artificially increasing the wage rate of lower skilled workers — who could substitute for union workers — the minimum wage increase the demand for union workers and hence their wage rates.

Hypothetically speaking, if the labor of an entry-level employee with no experience is worth $7.50 per hour in the open market but the law requires he be paid $15 per hour, trained union labor costing $20 per hour looks considerably more attractive. By harming non-union labor, unions are able to help themselves.

Moreover, some large businesses have supported increasing the minimum wage because it would harm their competition. Costco, for instance, supports raising the minimum wage today at least in part because the entry-level wage for a Costco employee is $11.50, more than $4 per hour above the federal minimum. At a minimum wage of $10.10 per hour, Costco’s business model would remain largely unaffected.

But you know who would be affected by the change in the law? Businesses, large and small, whose profit margins are far narrower. That’s especially true of small businesses in our communities already suffering under a mountain of tax and regulatory burdens in a difficult economy.

Yes, there are, no doubt, some in both the business and labor camps who in good faith might think a minimum wage increase won’t hurt our vulnerable poor. But labor and business leadership know better, and the economics are as clear as the incentives.

The post Why Would Unions And Some Big Businesses Support Raising the Minimum Wage? Some Reasons appeared first on Show-Me Institute.

. . . its [Southwest’s] costs would spike under a $1.2 billion proposal for replacing the current three-terminal configuration at Kansas City International Airport with a single terminal . . . the single-terminal proposal would triple its costs . . .

And that:

. . . the $1.2 billion proposal would be a disincentive for airlines to service Kansas City . . . the airline is confident it [Kansas City Airport] could come up with something for the community at a lower cost.

Southwest Airlines handles 40 percent of the commercial flights (almost 2 million passengers in 2012) out of Kansas City, and the Aviation Department cannot take its opinion lightly. We are with Southwest in hoping that planners for Kansas City International Airport can come up with a more cost-effective plan.

The post Southwest Says MCI Terminal Plan is Too Expensive appeared first on Show-Me Institute.

The Aviation Department once claimed that the cost of repairing KCI’s existing terminals would be around $600 million. However, as of a presentation on Sept. 10, the Aviation Department now claims the cost will be between $645 million and $785 million. A cursory inspection of these estimates prompts many questions, as the itemized repair costs are much larger than those for identical or similar items in the new terminal plan’s budget.

For example, the Advance Terminal Planning Study’s cost for a modification to the central utility plant, which the Aviation Department now claims is a cost ceiling, is $19.6 million. But in the September presentation on repairing the old terminal, the estimated cost for the same project is $20-25 million. Notice that, for the same project, the highest possible price in the new terminal plan is less than the lowest possible price quoted in a repair plan.

As for requirements for parking structures and roadways, the Advance Terminal Planning Study predicts that the new terminal will require an entirely new loop road system, a new parking garage, and significant demolition, all at a cost of $320 million. But in the September 10th presentation, the cost of merely refurbishing current roadways and parking, which is seemingly a lot less extensive than what is required for the new terminal, is placed between $210 and $260 million. One of the reasons given for this inexplicably large expense for refurbishment is to “increase parking capacity.”  KCI has more parking spaces than any peer airport in its planning study and almost three times the spaces of St. Louis-Lambert Airport. Why KCI requires more parking capacity needs explanation.

If these discrepancies are because the Advance Terminal Planning Study’s numbers are too optimistic, the Aviation Department should be using a higher estimate than $1.2 billion for a new terminal. If not, the estimate for the cost of refurbishment is too high. Advisory Committee co-chairmen Bob Berkebile’s call for independent analysis is welcome if it can clear up these questions.

The post Is The Aviation Department Inflating Repair Estimates For KCI? appeared first on Show-Me Institute.

If you want to travel from the Loop to Forest Park in Saint Louis, there is no shortage of options: You can walk, bike, drive, take the bus, or ride the Metrolink. As if that were not enough, government planners, who are more than happy to spend your tax money for services you never even thought you needed, have dreamt up yet another alternative.

The Federal Transit Administration recently approved a $25 million grant to develop a trolley system running from the Missouri History Museum in Forest Park to the University City Library on Delmar, a distance of 2.2 miles. The total construction cost will reach close to $45 million — almost $20 million per mile of track. Private donations will pay for just a small portion (less than 12 percent) of this exorbitant cost; taxpayers will finance most of the project’s construction and operational costs. Local sales taxes, federal grants, and rider fares will pay for the trolley. However, fares will only cover 30 percent of annual costs. A meager 6 percent will come from advertising and sponsorship from private funds, with sales taxes funding 64 percent.

What is wrong with simply expanding bus service, which could be done at a tiny fraction of the cost? The government estimated rubber tire trolley (buses disguised as trolleys) capital costs to be $4.5 million, about 10 percent of the cost to build a fixed track trolley. Expanding bus service, without purchasing new buses that look like trolleys, would cost even less to start up and maintain.

Believe it or not, a 2011 environmental assessment explained that a fixed track system was chosen not just in spite of, but because of, the high cost, which supposedly proves the government’s commitment to revitalizing the area. According to the report that the Federal Transit Administration and the East-West Gateway Council of Governments prepared, a rail system “cannot be removed without substantial expense and time,” whereas rubber tire options “can be cancelled or rerouted with little expense or effort.” By this logic, the planners of the system are bound to create a white elephant — defined as a burdensome possession whose cost is out of proportion to its usefulness or worth.

There is no evidence to suggest that building a streetcar along Delmar will result in an economic windfall to the area. The plan’s proponents have not presented any kind of cost-benefit analysis to the public.

Proponents of the Loop Trolley like to throw around the term “economic development” as if it is an automatic result of spending lots of money. They assume that the creation of a streetcar will magically revitalize the less desirable areas of the neighborhood between the Loop and Forest Park. If that is the case, then why is it so difficult to obtain private financing for this system? Many of the trolley’s supporters are Loop business owners. If they believe in the project so strongly, why don’t they fund it? Instead, government is using money that could otherwise be spent on education or public safety — or remain in taxpayers’ pockets.

Supporters of the Loop Trolley may point to other streetcar projects, such as the one in Portland, Ore., as purported evidence that the Trolley will generate millions of dollars of economic development. What they do not mention, however, is the hundreds of millions of dollars of infrastructure subsidies, tax breaks, and other incentives Portland gave to developers to entice them to build in the streetcar corridor. Former Portland Transportation Commissioner Charlie Hales even admitted that rail transit alone will not stimulate development along transit corridors.

Saint Louis does not need another white elephant conjured up through the misdirection of taxpayer money.

Kacie Galbraith is a research assistant at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post The Loopy Rationale For A Loop Trolley appeared first on Show-Me Institute.