But now we have good news out of St. Louis County regarding transit. County government has rejected all of the various options for MetroLink expansion into St. Louis County. (This is different from the proposed MetroLink expansion in St. Louis City, which unfortunately has been approved locally. The East-West Gateway Council of Governments is currently seeking federal funding for this project, which I hope it won’t get.)

The problem for the various proposals to expand into St. Louis County is that there is no dedicated way to pay for them, at least not yet. The route starts in the city but the expansion primarily serves the county—so is the city or the county going to pay for the first few miles of the expansion? Would the county pay for light rail inside the city? Would the city pay for part of a light rail expansion that mostly “benefits” residents of the county? (Note the use of quotation marks as there is no overall benefit.) Who knows?

This doesn’t mean that light rail expansion in St. Louis County isn’t going to happen, but anything that puts it in doubt is good news in my book.

The other good news in the story is that St. Louis County is now considering bus rapid transit (BRT) as an alternative to MetroLink:

AECOM [the county’s consulting firm] also has been asked to study the use of rapid bus lines, either using new rights-of-way just for buses or designated lanes on existing roads. Those could be deployed instead of MetroLink expansion or in conjunction with it.

BRT has been used in Kansas City with success, and it is something that Metro should consider for St. Louis. BRT moves people effectively at a fraction of the cost of light rail, streetcars, or trolleys. Unfortunately, it seems spending enormous amounts of money is a good thing from Metro’s point of view, no matter how much of it is wasted.

Increased use of BRT could be the transit option St. Louis has been looking for.

The post The Light Rail Line Less Traveled appeared first on Show-Me Institute.

The post MetroLink Expansion appeared first on Show-Me Institute.

In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the St. Louis Marketplace or the Olde Towne Plaza in Ballwin, we can list plenty of private business projects government had no reason to get involved in but did, to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

St. Louis Mayor Tishaura Jones came into office two years ago pledging to make changes to the city’s economic development process. To a small degree, her administration has reduced the subsidies it is giving out to companies, and for that she deserves credit. But they also figured out a way to somehow make a bad process even worse by imposing an “economic justice” imperative on it. So now, instead of listening to development officials fabricate how their corporate welfare led to jobs, growth, and so on, we get the additional pleasure of hearing how tax subsidies lead to more “equity.” Death can’t come fast enough.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, suburban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. Chesterfield officials talk about the Valley TIF there in much the same way, as if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

The self-aggrandizement of the economic development industry would be understandable if the system worked, but it doesn’t. The East-West Gateway Council of Governments (EWG) did a major study of TIF and other subsidies a decade ago and concluded that they created one job for every $370,000 in tax subsidies. That is a terrible return on the subsidy, as EWG stated. Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies. Yet our region continues to pass out tax subsidies like other people’s candy, evidenced by the atrocious decision of the St. Louis County TIF commission to approve $300 million in subsidies for the “blighted” part of Chesterfield just last month.

If we really wanted to help our community grow, residents of the St. Louis-area could get no better gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post St. Louis Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In addition to the $51 million that has already been spent on the Loop Trolley project, the East-West Gateway Council of Governments has recently decided to approve an additional $1.2 million of spending from federal grant funds and an additional $540,000 local match.

While St. Louis residents may want government officials to abandon this project that has been characterized by incompetence and countless setbacks, the cheapest solution for taxpayers is actually for the trolley to run. The federal government has threatened to demand repayment of $37 million in grants given to St. Louis if the trolley stops running. Abandoning this project does not mean that taxpayers would abandon paying for it. Because of this potential clawback, city officials argue this additional funding is necessary for sustaining the trolley and avoiding a bigger financial blow.

Despite concerns about self-sustainability, trolley tickets have been free to riders since its re-opening on August 4th. Although I understand that making tickets free could boost popularity by attracting people to try the trolley, there needs to be a long-term economic plan if it will truly be self-sustaining.

Trolley officials should seek to maximize profit with methods such as ticket prices, advertisements, renting to private parties (Nashville does this often), and possibly even filming for commercials and movies/TV shows. The goal should be to reduce the burden on taxpayers—who have already paid entirely too much for this project—as much as possible.

Like it or not, the Loop Trolley is most likely a long-term part of St. Louis’s future. However, it does not need to be a long-term drain on taxpayer funds. A plan for self-sustainability through trolley revenue is a necessary next step.

The post The Legendary Loop Trolley Saga Continues appeared first on Show-Me Institute.

The Federal Transit Administration (FTA) is threatening to claw back the $37 million in grant money it gave to get the Loop Trolley up and (briefly) running. According to the FTA, trolley officials must submit a plan by February 1 to restart the trolley by June 1, and the plan must include at least three cars running four days per week.

According to the FTA’s regional director, any potential litigation over the money the FTA wants back would involve the Loop Trolley Transportation Development District (LTTDD) and the East West Gateway Council of Governments. This is because while most federal money the LTTDD received from the federal government came directly from the FTA, some also came via grants distributed by the East West Gateway.

Saint Louis area officials are concerned that failing to get the Loop Trolley running again would make it harder for the Saint Louis region to receive future federal transportation grants.

So what should be done about the trolley?

At this point, the most sensible decision seems to be whichever would cost taxpayers less—either running the trolley to satisfy the FTA’s conditions or paying back the $37 million.

However, it’s not clear how many years the trolley would have to operate to satisfy the FTA’s terms. According to a letter from the FTA’s regional director to the Saint Louis City mayor, grant recipients must operate the project throughout the useful life of the property, which the regional director specified as between 12 and 40 years in the trolley’s case. But with the Loop Trolley’s operating budget of slightly over $1 million to run only two vehicles (and add in any additional costs from maintenance and indirect costs to Loop businesses), there are a number of variables that make it difficult to accurately calculate  whether operating the trolley will cost less than paying back the grant.

Assuming the variables can be nailed down, it is possible to do the math and see which option is better for taxpayers. The problem is that even if, by the numbers, running the trolley is the less expensive option, that does not mean it actually will be. Any effort to restart the trolley would need to avoid the blunders that dogged the construction and past operation of the trolley in the first place.

If only the federal government guarded its (our) money this closely all the time.

The post New Year, Same Problems with the Loop Trolley appeared first on Show-Me Institute.

The East-West Gateway Council of Government’s preliminary plan is to award a $1.3 million federal grant on October 27 to help restart the trolley (the East-West Gateway already has the federal grant money but is still making final decisions on how to spend it). The trolley has already received $51 million in taxpayer funding but didn’t even last two years because ridership and revenue were less than one-tenth of what was projected.

Members of the East-West Gateway board must remember that this is the same trolley organization that comes back to taxpayers in different costumes every year asking for more candy—er . . . money. Some years the disguise is construction delays; some years it’s money to get more cars on the tracks.

The costumes this year are congestion mitigation and air quality, but these new costumes aren’t any more convincing.

For the trolley to relieve traffic, Delmar Loop shoppers traveling from miles away must stop their cars just short of their destination and take the Loop Trolley for the final two miles of their trip rather than driving the last two miles and parking closer. Shoppers simply haven’t been willing to do this, as poor ridership numbers attest. More to the point, anyone who drove on Delmar Boulevard when the trolley was still running knows that a gigantic train car sharing the road with cars driving and parking only creates more confusion and congestion, not less.

Since the trolley runs on electricity it may in theory improve local air quality, and supposedly the trolley scored well on an East-West Gateway greenhouse gas emissions reductions test. But claiming that the trolley is going to significantly reduce emissions seems questionable. An electric trolley only reduces transportation emissions if it gets people out of their cars. Moreover, don’t forget how that electricity is generated—coal. Given that coal emits much more greenhouse gases than gasoline per unit of energy, the trolley would have to get a lot of people out of their cars to make even a slight difference.

If backers of the trolley really want to start the party again, securing funding from private investors would be much better than handing out tax dollars this Halloween.

Until this happens, however, maybe the most appropriate costume for the trolley is a zombie.

The post Here’s a Scary Halloween Idea: Restarting the Trolley appeared first on Show-Me Institute.

However, reality paints a different picture. For option A, the trolley shut down in December 2019 because hardly anybody wanted to ride it. Neither ridership nor ticket sales exceeded 10 percent of what the Loop Trolley Company predicted.

Option B is an example of what economists call the sunk cost fallacy. The sunk cost fallacy is when an individual keeps doing something that isn’t working just because he’s already invested time or money into it. It’s like buying a movie ticket, realizing that the movie is terrible after ten minutes, but deciding to stay anyway because you already bought the ticket. The money is a sunk cost. The movie will not magically get better just because you paid for the ticket.

Similarly, taxpayers have already spent $51 million on the trolley. The trolley made less than $33,000 in its one year of operation, meaning that for every dollar the trolley made, it received over $1,500 from taxpayers. It suffered numerous construction delays, routinely cut its operating hours, and its extended construction harmed the local businesses it was supposed to help.

It strains credulity to think another $1.2 million of taxpayer money will somehow make the Loop Trolley successful. It’s even less logical to think that this $1.2 million is necessary because of the first $51 million taxpayer dollars.

If backers of the trolley want to find private investors to support the trolley because investors think it’s a worthwhile idea, that’s one thing, but trying to make taxpayers the investors is a different story. Several members of the East West Gateway Council of Governments just recommended that the full body vote for approval of the $1.3 million in federal funds at their October 27 meeting. However, members of the East West Gateway Council of Governments should make sure to look at the big picture before committing any more taxpayer money to the Loop Trolley.

The post The Loop Trolley and the Sunk Cost Fallacy appeared first on Show-Me Institute.

The post Loop Trolley Funding through Federal Grants appeared first on Show-Me Institute.

In other news, backers of the Loop Trolley are once again asking for financial support to restart the little trolley that couldn’t. The Loop Trolley Company is asking the East-West Gateway Council of Governments—an agency that coordinates governmental action in the greater St. Louis area—for $1.26 million to restart trolley service.

The Loop Trolley has been beset with problems since the beginning. After several years of construction delays, the first cars did not hit the tracks until late 2018, two years after the scheduled opening, and even then only two cars ran four days per week. Daily service was supposed to start in April of 2019, but instead operating hours were cut later that year to only 29 hours per week with only one car running.

Why the dismal performance? Simply put, people did not want to ride the trolley. Ridership was less than 10 percent of what was expected, and its first full year of operations brought in $32,546 instead of the expected $428,672. The only way the trolley made money was by collecting $51 million in taxpayer money, nearly $34 million of which was from the federal government. After just 13 months of operation, when local governments declined to bail out the trolley one last time, the trolley shut down.

The trolley was billed as a boon to business, but all the construction and taxes levied to pay for the trolley took a toll on local businesses, as many closed or moved elsewhere. The University City government even gave out loans to businesses suffering due to problems caused by the trolley.

Backers of the trolley admit that more taxpayer money will be needed to get the trolley running again, and they expect trolley service to start again in 2022—but this time with free fares Thursday through Sunday—if the $1.26 million grant is approved.

Why would it be different this time? Will $1.26 million get the trolley to daily service? Will it finally put more than two cars on the line? Will it bring ridership over the vaunted 10 percent threshold? Based on the trolley’s track record, there’s no real reason to think the answer to any of these questions is “yes.”

After several years and $51 million of other people’s money, isn’t it time to realize that doing the same thing over and over again just won’t work?

The post The Loop Trolley and the Definition of Insanity appeared first on Show-Me Institute.

Add one more study to that list. This week the Show-Me Institute unveils its own study of TIF in Missouri, specifically in Saint Louis and Kansas City. Authored by T. William Lester and A. Rachid El- Khattabi of the Department of City and Regional Planning at the University of North Carolina–Chapel Hill, the study focused on the but-for analyses used in TIF findings; the argument that development would not happen at a particular site without taxpayer subsidies.  According to the authors,

Overall, the analysis conducted in this study finds no support for the claim that TIF generated tangible economic development benefits in either Kansas City or Saint Louis.

Specific to each city studied, the study offers that there is zero—or perhaps even a negative—relationship between TIF and economic development:

In Kansas City, the estimated impact of TIF designation across all categories is very close to zero with relatively small standard errors, which suggests that the TIF program in Kansas City has been ineffective in promoting business development. In Saint Louis, the results are slightly negative and, for the most part, statistically significant.

Policymakers, developers, and many in the media will likely continue to eschew research and point to new buildings as proof of the effectiveness of development subsidies. But the question that studies like this one this answers is not whether development occurs, but whether it would have happened without the subsidy. The roar of research on the matter is deafening—economic development subsidies do not deliver their promised economic benefits.

The full Policy Study, as well as a shorter Policy Brief, are available at the links below.

The post Does Tax-Increment Financing Pass the But-For Test in Missouri? appeared first on Show-Me Institute.

                The East-West Gateway Council of Governments, which is responsible for coordinating transportation spending in the Saint Louis region, releases a transportation improvement program (TIP) every year. That program contains all scheduled transportation projects receiving federal aid for the next four years. The latest TIP, approved on July 29, shows the costs of projects (including the Loop Trolley) from 2016 to 2019.

                Despite the fact that the program was released months before the public was told that the Loop Trolley would be over budget, and Saint Louis County residents knowing they were on the hook for the those overruns, the latest TIP accurately puts the Loop Trolley’s cost at about $51 million. When the TIP was proposed (and commented on), the trolley’s cost was still only $44 million. But on the day the TIP was approved (July 29), the East West Gateway board approved a final additional project, sponsored by Saint Louis City, to improve “Delmar, DeBaliviere, and Loop Trolley Infrastructure.”

                The funding for that project comes from a $5.4 million federal STP-S grant, requiring a $1,350,000 local match. That grant should sound familiar, because that’s precisely the grant Saint Louis County is now being asked to match, which will cover cost overruns on the Loop Trolley.

                Given the timeline, it is almost certainly the case that regional planners have known about cost overruns on the Loop Trolley since mid-July. Indeed, they appear to have planned for dealing with problem by committing more federal funds (and the Saint Louis County match) to the trolley. However, they clearly did so before the county government, or county residents, had signed off on the plan. Those funds will come from county’s mass transit sales tax and could have been used to fund any number of other projects in Saint Louis County. No one should be under the illusion that Saint Louis only gets federal STP-S grants for streetcars; in the next 4 years the county is slated to receive 96 such grants.

                Might planners have known about the cost overruns before trolley construction began in the spring? Was this an attempt to make to the additional funding for the Loop Trolley a fait accompli once residents found out about it? We don’t know, but it is clear that the trolley funding process has not been as transparent as Saint Louis County residents could hope.

The post How Long Have Saint Louis Planners Known About Loop Trolley Cost Overruns? appeared first on Show-Me Institute.

While low fuel prices may give an unexpected boost to the economy at-large, they confound the expectations of city and state planners. Whether the source is the Mid-America Regional Council (MARC) (the Kansas City area planning agency), the Missouri Department of Transportation (MoDOT), or East-West Gateway (the Saint Louis regional planning agency), they all expected rising fuel prices to continue into the future. For example, in MoDOT’s October 2014 Financial Snapshot, they figured gas would average $3.26 in the upcoming year.

None of this is to blame these agencies for failing to predict future gas prices. The price of oil is historically volatile, and few predicted prices to fall as they have. What these government bodies should be faulted for is using what was at best an educated guess about the direction of gas prices as a standard plank in their arguments for billions of dollars of state and local investment in alternative transportation and restrictive land-use policies. For example, MoDOT used the trend in fuel prices as part of its argument that they needed the ability to fund billion-dollar passenger rail lines as well as support urban transit. MARC predicted that rising gas prices, along with other trends, would “demand for more walkable, transit-friendly development closer in.” This is part of their reasoning for recommending regional densification and urban refill.

Regional planners have consistently made the argument that citizens will increasingly use public transportation and live in denser environments, due in part to more expensive fuel. But instead of waiting for these markets to materialize and responding to steadily rising needs, residents are asked to spend billions today to meet uncertain demand down the road. What the precipitous fall in oil prices should remind us is that long-term predictions can be mistaken. While the estimates themselves may be prudent, using them to speculate with public dollars is not.

The post Fuel Prices Falling, Along With Planners’ Expectations appeared first on Show-Me Institute.

So how much will the proposed line cost? According to the Post-Dispatch: “The original north-south proposal was initially estimated at $1 billion in 2007 dollars. Members of the coalition would not venture a guess this week at the current price tag.”

The latest plan actually goes further north than the $1 billion plan suggested by East-West Gateway (EWG) in 2008. According to East-West Gateway’s Vision 2040 (released in 2011), the cost for a route from Florissant Valley Community College to Butler Hill (going further south than the current proposal) was more than $1.6 billion. It is therefore safe to assume that the plan will cost between $1 billion and $1.6 billion, probably closer to $1.6 billion when adjusted for inflation. To put that in perspective, this MetroLink expansion would cost between $2,700 and $4,406 for every person living near the proposed line.

Proponents hope, and likely require, that the federal government will pay up to half of the costs of building the new route. Even allowing that, the city and county would be on the hook for hundreds of millions of dollars in capital costs and additional annual operating costs likely to exceed $20 million per year. That will mean tax increases in the city and county, all to add 12,000 to 15,000 transit riders per day. For perspective, Saint Louis City and County combined have more than 630,000 daily commuters.

There exists a much more cost-effective way of increasing transit service along the city’s north-south corridor: Bus Rapid Transit (BRT). BRT can, and does in other cities, provide the speed and comfort of light rail service for a fraction of rail’s price. Metro is in the process of implementing BRT in Saint Louis right now, and we have argued that BRT routes serving the city and North Saint Louis County make the most sense. According to EWG, running BRT on Grand from Natural Bridge to Chippewa would cost a total of $24 million to implement. That’s less than half the cost of one mile of the proposed MetroLink expansion. In fact, Metro could afford to implement all five of its preferred BRT routes for less than 20 percent the cost of the north-south MetroLink proposal.

MetroLink proponents make the same ungrounded claims about the rail transforming marginalized communities as they did two decades ago (remember the golf course in East Saint Louis?). Now, just as then, it is not rail, but rather improved transportation that raises living standards. And in terms of improving transportation, the relative merits and incredible cost differential between BRT and light rail should be the end of the argument.

The post North-South MetroLink Line Wasteful, Unnecessary appeared first on Show-Me Institute.

The St. Louis Streetcar project, which did not receive a TIGER grant, has garnered less attention. The plan would have built a 6.9-mile streetcar system from downtown Saint Louis to the Central West End, at a cost of $270 million (likely a low estimate).

You may not have heard much about this project, because Metro never mentions adding streetcars in its Long-Range Transit Plan. Their long-term improvements are focused on expanding MetroLink or adding bus rapid transit, but not adding a streetcar network. Nor was the project part of East-West Gateway’s (the Saint Louis metropolitan planning agency) Regional Transportation Plan when it was released in 2011 (it was added in 2013). City leadership did not discuss the plan until it was suddenly to receive tens of millions of dollars from the ill-fated Amendment 7.

The downtown streetcar is primarily the creation of Partnership for Downtown St. Louis, an organization whose membership is mostly made up of corporate representatives and whose budget comes from property taxes collected from a Community Improvement District (CID) located downtown. They created the plan and lobbied the city to submit the TIGER grant application. Although the process used to create the streetcar plan did not come from city residents, the methods of payment would have. The proposed methods of payment included a Transportation Development District (with accompanying sales and property taxes), Tax Increment Financing, tax credits, and parking fees.

Those new taxes and fees would have been a hard sell for a transportation mode that shadows the MetroLink and does not provide rapid transit. However, Saint Louis residents should be upset that non-elected corporate representatives were promising residents’ local tax dollars in order to get a piece of residents’ federal tax dollars. This episode also should be a warning that local non-governmental organizations have the ability to push forward wasteful civic projects with taxpayer money.

The post Light Rail Never Sleeps: The Saint Louis Edition appeared first on Show-Me Institute.

TIFs keep surfacing because city officials often blindly focus on sales taxes. After all, that’s how cities are primarily funded. Desperate not to be one-upped by border cities and their own giveaways, cities gladly sacrifice property taxes for more sales tax dollars.

The problem is that property taxes pay for schools and many other critical services.

Disturbingly, the quest for precious sales tax dollars often encourages cities to abuse eminent domain as a part of TIF. St. Louis County residents and business owners in Rock Hill, Sunset Hills, Richmond Heights, Manchester, and elsewhere have suffered the pain of having their property taken so that taxpayers can subsidize new developments. Joanne and Arthur Bailey fought for years to be able to keep their home in Hadley Township (in Richmond Heights) against threats of eminent domain. Thankfully, the Baileys won their battle. Many others have not been so lucky.

Even when some officials understand the dangers and try to stop them, TIFs aren’t easy to defeat. County TIF commissions in Saint Louis and Saint Charles County have recently rejected TIF proposals only to see city councils override their decision. That is what happened in Ellisville, and will likely happen in Shrewsbury, because the law allows it.

It is hard to believe that a city of a few thousand can make tax decisions that harm an entire region, but that is exactly what happens. Shrewsbury has 6,600 people, but it will make tax decisions that affect the Saint Louis Community College district, which serves 1.3 million residents. Why continue to allow small cities to impose policies that hurt our larger region, with no way to stop it? It is ludicrous.

Happily, some citizens are finally starting to recognize the harm done by TIF and local government economic planning. The Ellisville City Council passed the TIF despite substantial opposition from the residents. Anti-TIF candidates in the most recent Ellisville mayoral election received more than 70 percent of the vote last year, but the TIF still went through. It remains to be seen whether the opposition in Shrewsbury will be able to mount a major attempt to defeat the latest Kenrick Plaza TIF proposal.

Major TIF changes are sorely needed at the state level. Countywide TIF commissions should have the final say, not city councils, and Missouri needs far stricter limits on what can be taken by eminent domain. Until then, the municipal TIF sprint to the bottom will continue. Next stop: your town.

The post Stokes on KWMU – TIF Hurts Communities appeared first on Show-Me Institute.

You still got a carrot, but it definitely was not what you were expecting. Believe it or not, government-subsidized economic development programs often end up with the same result. It may seem like these new Transit-Oriented Developments will create jobs and attract new investment to the area. And you might see some new stores pop up and think, “Wow, this is progress.”

But what is underneath? In the Saint Louis area, governments provided about $2 billion of economic development incentives for retail development from 1990 to 2007. Over this time, only 5,400 retail jobs were added to the region. You might say, “That is better than no jobs, Kacie, stop being such a Debbie Downer.” But the East-West Gateway Council of Governments released a report that estimates each one of these jobs costing about $370,000 each.

That is insane! If you knew the real cost before these types of projects were put into place, would you still support them?

The post Finally, The Numbers: TOD Problems (Part 3 of 3) 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.

In 2010, Walmart announced that it would close a store located in both Saint Ann and Bridgeton (two suburbs of Saint Louis), and open another store 2 miles away, located solely in Bridgeton. The move seemed, in part, to be an attempt to capture more than $7 million in public subsidies. Even though the Bridgeton City Council approved the subsidy, the $7 million will come primarily from public schools and other taxing districts.

Of course, the subsidy at fault is TIF, which allows cities like Bridgeton to capture money that would have gone to other taxing entities and use it how the city desires — in this case, to subsidize a Walmart that replaced an existing Walmart. Cities gain sales tax dollars right away, while all the other taxing districts bear the burden of having the tax base of the property held steady — while expenses increase — for the next 23 years. Oftentimes, this results in tax increases on the rest of the community. In Liberty, Mo., earlier this year, the superintendent and school board were forced to campaign (unsuccessfully) for a tax increase that they said was necessary due to the harms that heavy use of TIF caused in that community.

TIF allows local government to reimburse developers for some of the project’s costs. With TIF, if a property generates $50,000 in property taxes before it is developed but generates $75,000 after being constructed, the developer gets to keep the $25,000 difference to pay for certain development costs. Fifty percent of sales and other taxes can be diverted as well.

In theory, TIF encourages developers to undertake projects in areas in dire need of economic growth. In reality, TIF is used to subsidize politically-connected developers, to help cities lure chosen businesses from other cities, and to fund an entire cottage industry of urban planners, lawyers, and bankers. There is so little accountability that even if the TIF commissions that are supposed to govern the process reject a proposal, a city can override that determination and go ahead with the project. That is exactly what happened with the Bridgeton Walmart.

TIF has had numerous negative economic effects in Missouri, and in particular in the Saint Louis area. TIF has increased government involvement in the economy, sparked abuse of eminent domain, shrunk the tax base, and made subsidies a permanent fixture of development. Furthermore, TIF has failed at its main purpose: economic growth. The East-West Gateway Council of Governments (the major government planning organization in Saint Louis) concluded that TIFs and other incentives have created jobs at the rate of one retail job for every $370,000 in taxpayer subsidies. That is not a road to growth — it is a road to ruin.

It is a fact that the use of TIF is often accompanied by the abuse of eminent domain. With Enhanced Enterprise Zones (EEZ), the threat of eminent domain abuse may be small, but with TIF, it is very real. Many — if not most — of the examples of eminent domain abuse in Missouri have involved TIF. This includes instances in Sunset Hills, Arnold, Sugar Creek, Rock Hill, and more.

An Iowa study of TIF usage concluded that, “On net . . . there is no evidence of economy-wide benefits, fiscal benefits, or population gains.” Another study from Illinois found that economic growth in cities that did not use TIF was stronger than in cities that did, because TIF subsidies caused an inefficient allocation of resources.

A recent study by Washburn University Professor Paul Byrne for the Show-Me Institute documents how TIF is used in Missouri. Byrne shows that the ability of cities to implement a TIF unilaterally leads to cities making decisions that benefit the city, at the expense of other public agencies. Cities that are authorized to enact sales taxes might push for TIF projects that will generate new sales tax dollars without caring about the property tax dollars that the local school district will have to do without. As a result, public tax dollars can end up funding economically inefficient projects. This is what has happened in the large urban areas of the state, and what will happen in Columbia and Boone County if the use of local tax incentives keeps increasing.

The dirty little secret that Regional Economic Development, Inc. (REDI), the local media, and Columbia city officials do not want you to know is that EEZ, Tax Increment Financing (TIF), Community Improvement Districts (CID), and other subsidies do not work. They do not succeed in growing the local economy. As a famous Swedish economist once said, “It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.”

The Columbia supporters of increased use of incentives within the city say that other cities have used these tools with great success (for example, an editorial in the Columbia Daily Tribune, Aug. 13, 2009). In this, they are completely wrong. The City of Saint Louis has been using urban redevelopment tools such as TIF and many others for half a century. How has it worked out? Mapping Decline, a 2008 book by Colin Gordon, documents the decline of the city of Saint Louis. The book’s research is exhaustive. The dominant theme is the use of urban renewal tools and tax subsidies — and their absolute, total failure. From the conclusion:

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

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

Missouri should dramatically tighten its TIF laws. At a minimum, TIF should be decided at the county level, and the ability of cities to override rejections from TIF commissions should be eliminated. I hope that Columbia can lead the way to a new realization for our state, where economic development works for everyone when governments do not play favorites and businesses succeed or fail on their own merits.

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

The post Tax Increment Financing and Columbia, Missouri appeared first on Show-Me Institute.

Schoemehl is perhaps the best person to educate Columbia residents about the pitfalls of TIF. In the early 1990s, he supported the first TIF in Saint Louis, which city-backed bonds partially financed. The project was (and is) a failure, and resulted in Saint Louis taxpayers having to help foot the bill.

Schoemehl has also been on the receiving end of TIF. He is the president and CEO of Grand Center Inc. In 2002, Saint Louis agreed to provide TIF to Grand Center, and gave the nonprofit, in the words of St. Louis Post-Dispatch reporter Jake Wagman, “broad and almost unilateral powers.” Wagman wrote that Grand Center had the power to “approve or reject building designs, dispense up to $80 million in tax incentives and acquire land by eminent domain.”

Columbia residents should also be aware of Saint Louis’ more recent adventures with TIF. Saint Louis City politicians approve massive public subsidies for large, unwieldy development projects with alarming regularity (search for “tax increment financing”). Discussions about Ballpark Village, the perpetually changing development that has yet to happen, have entailed large amounts of TIF.

Saint Louis is also home to the NorthSide TIF, one of the biggest TIFs in the country. That development would involve $390 million in TIF, if only a court would rule that the TIF agreement between the developer and the city was legitimate. Today, NorthSide property remains largely vacant.

And, do not forget the East-West Gateway Council of Governments study of the use of development subsidies in the Saint Louis region. That study found that retail jobs subsidized with TIF (and some Transportation Development District subsidies) came at a cost of more than $370,000 in public dollars per job.

As my colleague David Stokes would say, I wish someone had written a book about the decades of development subsidy failures of Saint Louis. Oh wait, historian Coin Gordon did. As Gordon wrote:

In practice, blight is less an objective definition than it is a legal pretext for various forms of commercial tax abatement . . . Redevelopment policies originally intended to address unsafe or insufficient urban housing are now more routinely employed to subsidize the building of suburban shopping malls.

For more on the revisionist TIF history that has been spouted in Columbia, click here.

The post Please, Columbia, Learn From Saint Louis’ TIF Mistakes appeared first on Show-Me Institute.

TIF allows local government to reimburse developers for some of the project’s costs. With TIF, if a property generates $50,000 in property taxes before it is developed but generates $75,000 after being constructed, the developer gets to keep the $25,000 difference to pay for development costs.

In theory, TIF encourages developers to undertake projects in areas in dire need of economic growth. In reality, TIF is used to subsidize politically-connected developers, to help cities lure chosen businesses from other cities, and to fund an entire cottage industry of urban planners, lawyers, and bankers. TIF projects have to pass a “but-for” test (demonstrating they would not happen without the assistance) and meet a series of eligibility tests. But those tests are a sick joke and a rigged game, as I can’t find one TIF proposal (out of several hundred) in the entire state over the past two decades that has failed to pass them.

The Briarcliff development in the Northland received a Super-TIF (a rare plan where the developer keeps all the incremental sales taxes as well as all the property taxes) on top of an existing TIF plan, even though the area is thriving and has no legitimate need for public subsidies.

A Chicago-area study of TIF use found that cities that use TIF grow at a slower rate economically than cities that do not use it. The reason is that, with TIF, developers make business decisions based on the subsidy; not economic best uses. That is exactly what has happened in Independence, where the city has had to step in and help make debt payments for the giant Bass Pro Shop development done with a TIF. That is an example of a TIF where the taxpayers are both directly and indirectly on the hook for the developers.

A recent study by Washburn University Professor Paul Byrne for the Show-Me Institute documents how TIF is used in Missouri. Byrne shows that the ability of cities to implement a TIF unilaterally leads to cities making decisions that benefit the city, at the expense of other public agencies. Cities that are authorized to enact sales taxes might push for TIF projects that will generate new sales tax dollars without caring about the property tax dollars that the local school district will have to do without. As a result, public tax dollars can end up funding economically-inefficient projects.

This, of course, is exactly how TIF has played out in Missouri, particularly in Saint Louis County, over the past two decades. The East-West Gateway Council of Governments found that the Saint Louis region has subsidized retail development at a cost of approximately $370,000 for each job created — and these are mostly low-paid retail sales jobs. TIF leads not to economic development but to regional bankruptcy. A similar study of TIF in Kansas City would likely find the same results.

Missouri should dramatically tighten its TIF laws. Jackson County Executive Mike Sanders deserves credit for successfully fighting for a more equitable Kansas City TIF Commission. However, he should go further and work both to implement a countywide TIF commission with jurisdiction over all TIFs in Jackson County (including within Kansas City) and removal of the state law giving cities the right to override TIF commission denials. If those two changes were accomplished, perhaps Missouri could finally have a reasonable TIF policy.

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

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