This isn’t that complicated. The new St. Louis city fireman’s pension board was created because the old one was dominated by union interests who made it incredibly generous for firemen and civilian employees of the department. One of those civilian employees received a half-million-dollar (!!!) cash payout upon her retirement, on top of her generous pension. As this recent Post-Dispatch story explains, the union trustees on the new board have implemented draconian changes to the pension funds, things such as cancelling the annual pension board training trip to Key West. Cue the outrage; from the Post story:

Paul Payne, the city’s budget director, said going to an industry conference in South Florida looked less like education than vacation. And he told Kenny Mitchell, a firefighter trustee who wanted to go, just that.

Meeting minutes relay what happened next: “Trustee Mitchell responded to Trustee Payne with a profane remark.”

I’ve been to Key West many times. It is uniquely wonderful for many things. Pension board training is not one of them.

The St. Louis Board of Aldermen just passed, once again, a bill to return the pension plan to the control of the fireman’s union instead of the new city board that runs it for the benefit of both firemen and taxpayers. That means having a pension system that pays fireman what they deserve, but also considers the interests of the taxpayers at the same time. It doesn’t mean pension training trip to Key West, nor does it mean half-million-dollar cash payouts on top of the pensions. What does St. Louis City’s budget director think it means?

The [proposed] move will consolidate pension oversight under a firefighter-run board that spent double what a city-run panel paid for administration last year. And Budget Director Paul Payne says it would be a first step toward taking the pension system back to where it was a decade ago, when years of rubber-stamping benefit increases led to a budget crisis and forced painful cuts.

“Their history,” Payne said of the firefighters, “is not one of saving money.”

Mayor Jones has vetoed the legislation, just as Mayor Krewson vetoed it previously, and as Mayor Slay would likely recommend after having spent considerable time, effort, and political capital during his term making these necessary reforms in the first place. Good for Mayor Jones. Pension funds should be run for the benefit of those government employees promised good benefits in accordance with the overall fiscal health of the city and its taxpayers, not just one of them.

The post Taxpayers Getting Burned appeared first on Show-Me Institute.

Less funny are the continuing efforts by the St. Louis City fireman’s union to return to the extremely generous and biased-against-taxpayers pension system of the past. After years of political fighting, the Slay administration successfully revised the fireman’s pension system in 2012. The new plan put control of the fireman’s pension under a board of city appointees— under the old system, the pension was run by the fire department and the union itself. What was wrong with the old system? Well, nobody was watching out for the taxpayer’s interests, and they are the ones who paid for everything.

Ever since those changes were made, the union has been “never stopping” in its efforts to get the old system back. How generous was the old system? Well, the former director of the fireman’s pension system, Vicky Grass (who was subsequently elected to the board of aldermen), received a cash payout of $579,000 when she retired in 2015, on top of her monthly $4,870 monthly pension. That’s $579,000 in taxpayer dollars! What did Ms. Grass think of the changes to the new system?

“The new system is not as good as the one we had,” Grass said.

Well, I would think not if you were enjoying the benefits of the old system.

But the city and taxpayers are not being exploited by the union now, and firemen are still receiving the fair benefits and pension that we all agree they deserve. How much money has city government been able to save with the pension reform? This article from 2015 documents the savings the city experienced shortly after making the pension changes:

The city pays when there is a shortfall. In 2013, the city pumped $20 million into the system. Pension reforms have since reduced the city’s liability. Paul Payne, the city’s budget director, said the city paid $1 million into the system in 2015. And it’s not expected to pay anything in 2016.

Mayor Krewson vetoed the attempt last year to change the pension system back to the old system, and hopefully Mayor Jones will do the same if it comes to that. Honestly, it should not come to that at all, but this is a classic example of a special interest group carrying outsized influence with elected officials—in this case, members of the board of aldermen the union helped put into office in the first place. Controlling pension costs for public employee unions is a key responsibility of local government. The City of St. Louis deserves credit for the reforms it made, and those reforms need to be kept in place.

The post The Fireman’s Union Never Stops Never Stopping appeared first on Show-Me Institute.

So far, Mayor Slay has mentioned raising the city’s parking fees to fund the expansion. While this suggestion may appeal to transit activists, parking fees won’t be nearly enough to pay for 31 miles of new MetroLink track. The city’s entire parking division collected just over $16 million in revenue last fiscal year. But the City and County dish out more than $120 million a year just to keep MetroLink running. Even if parking division revenues doubled (or tripled, or quadrupled), expanding MetroLink would still be far out of reach.

The math on parking fees is indisputable, and points to the possibility that the city will be counting on the rest of the region to make the MetroLink expansion happen. The city is looking to Saint Louis County taxpayers, and perhaps others around the region and state, to help pay for the expansion. In fact, the expansion likely cannot move forward unless county taxpayers pay more. But much of the north–south route is far from many county residents, and the county already contributes roughly four times [see p. 67] what the city does in terms of transit funding.

What will it take to expand MetroLink? Assuming Metro, Saint Louis’s transit agency, issues 30-year bonds at current interest rates, expanding MetroLink will require roughly $60 million each year (not including increased operating expenses). To come up with that much money, the city would need to increase parking fees, and both the city and the county would need to impose an additional sales tax, likely of 0.5%. Such an increase would put many local sales tax rates far above 10%. While the mayor and rail proponents may not want to mention such large taxes increases, it’s difficult to see how Metrolink expansion can move forward without them.

As the City pushes big transit plans, taxpayers throughout the region should ask themselves if expanding MetroLink is really worth the cost. Despite the unfounded claims of transit activists, MetroLink has failed to spur development, create jobs, or turn our region into a magnet for the “creative class.” Can we really afford another $1.4 billion?

The post Parking Fees Alone Cannot Fund MetroLink Expansion appeared first on Show-Me Institute.

Comparing the two maps below shows that significant investments (top map) are clustered in areas where subsidies like tax increment financing (TIF—bottom map) are being granted to developers (primarily the central corridor).

(Note: The active TIF project map reflects only subsidy dollars that have been awarded to date, not the total amount of subsidy authorized. For example, the Northside Regeneration TIF, on which work has not yet begun, is not included in the map.)

So one might ask: Are development subsidies like TIF responsible for these investments? Initially, it might look that way. After all, TIF is designed to spur development.

But although it may sound counterintuitive, overall real-estate investment has likely driven the use of TIF and other incentives in the central corridor. That is, TIF and other taxpayer handouts tend to follow investments, not the other way around.

A recent report on incentives in St. Louis suggests that TIFs get doled out in neighborhoods that are already doing well or are on the rise. If there is a cause–effect relationship between TIF and development, then strong markets appear to attract TIFs.

But for the sake of argument, let’s assume that I and other researchers are wrong, and that TIFs cause strong real estate markets. If that were the case, the city’s current incentive practices would be open to serious questioning. So few incentives are being used in genuinely depressed and blighted neighborhoods, and so many are being handed out in neighborhoods that are already thriving, that it’s hard to imagine any result other than a widening of the gap between wealthy and struggling areas. That is, the city’s current practices would go exactly against the original intent of development subsidies. Can this possibly be the intent of city leaders? I certainly hope not.
 

The post Which Came First: the Investment Chicken or the Incentive Egg? appeared first on Show-Me Institute.

Let everyone else sing the praises of a new book or movie. If he couldn’t make heads or tails of it, he told you so in his own inimitable way. He said it was weirt. Not weird, but weirt.

As a one-word critique, his mispronunciation spoke volumes. Weirt was more than passing strange and more than a little peculiar. If something was weirt, only someone with his head in the clouds, or buried in the sand, would think it worthy of serious consideration.

What else is weirt?

How about plans to spend $2.2 billion in taxpayer money to build a 17-mile extension of the Saint Louis MetroLink light-rail system? That works out to more than $100 million per mile, or about $2,000 per foot.

Despite the colossal expense, it’s a must-do, says Mayor Francis Slay. He calls it “a moral and economic imperative.”

If you believe that, you must also believe that more light rail will help to solve a multitude of urban problems – everything from inner city decay and high unemployment to traffic congestion and air pollution.

In fact, in a sprawling metropolis like Saint Louis, there is little light rail can do to ease, let alone solve, any of those problems.

Since the 1990s, MetroLink has soaked up $3 billion in taxpayer money through capital outlays and operating subsidies. What do we have to show for it?

Very little. MetroLink carries less than one-half of one percent of the area’s commuters. Adding 17 miles to the existing 46 miles of track won’t make much of a difference there.

So here’s a better idea, which people who actually ride on MetroLink – as opposed to the downtown political class – would surely appreciate.

Instead of adding a line, give new cars to all MetroLink riders – to include today’s 44,000 daily riders, plus an estimated 15,000 future riders from the planned expansion.

The local/regional share of the construction cost is $1.1 billion, plenty of money ($18,600 per rider) to buy everyone a new compact. Add the matching federal dollars, and you could give new SUVs to all MetroLink riders.

What else could the St. Louis region do with $1.1 billion. It could:

• pay tuition for more than 27,000 Missouri residents at the University of Missouri at Saint Louis (for their entire degrees)
• triple Bi-State Transit’s fleet of buses and make other major improvements
• send out $500 checks to every man, woman, and child in the metropolitan area.

That is not to say that we should do any of those things; it is just to put the magnitude of the proposed expenditure on MetroLink into a broader perspective.

For Slay and others to advocate spending that much money on an underutilized and largely irrelevant light-rail system is beyond weird; it is truly weirt.

The post Two Thumbs Down for MetroLink Expansion appeared first on Show-Me Institute.

What is clear, though, is that the north–south MetroLink expansion isn’t the panacea advocates claim it is.

It isn’t a solution to automobile dependence. Saint Louis’s low population density and dispersed employment centers make the city a bad fit for light rail. Popular, cost-effective light rail systems require population densities upwards of 20,000 people per square mile, but Saint Louis City has fewer than 5,000 per square mile. And experience with existing MetroLink routes demonstrates our region’s preference for the car. Today, a lower percentage of Saint Louisans use transit than in 1990, before MetroLink even operated. Even more embarrassing, MetroLink has lower ridership today than it did in 2005, the year before the Shrewsbury line opened.

It isn’t a solution to poor transit service, either. Firstly, the proposed north-south line operates along a route already served by numerous bus routes. Secondly, the reason less than 4% of Saint Louisans commute on transit isn’t because they have trouble going from North City to downtown. It’s because the antiquated “hub and spoke” model Metro uses makes travelling from North City to employment centers in Central and West County a multi-transfer odyssey. If regional leaders truly want to improve mobility, they’d do better by advancing bus-rapid-transit (BRT) lines. BRT uses sleek, rail-like vehicles, well-appointed and generously-spaced stations, and exclusive rights-of-way to deliver service comparable to light rail. For just a fifth of the local cost of expanding MetroLink, the region could construct the five BRT lines in its long-range transportation plan.

Nor is MetroLink a cure for anemic urban development. Despite claims of rail advocates, the economic consensus is that light rail is not a catalyst for economic growth. Even putting aside the wildly inflated figures touted by rail advocates, we can see with our own two eyes that MetroLink has failed to spur development in Saint Louis. Far from rejuvenating depressed areas, MetroLink has even failed to prevent decline in areas that seemed to be on the rise in 1994 when the first lines opened, like Union Station and Laclede’s Landing. Nor did it ever bring the fantastically improbable golf course to East Saint Louis.

And MetroLink will not solve historic segregation or achieve the nebulous goal of “connectedness.” There simply is no evidence, save the endless, unfounded repetition of rail advocates, that light rail is a solution to economic, social, or racial segregation. (Just think: how might riding a train downtown, where so few jobs exist, make life better for an average North City resident?) And if “connectedness” means residents and visitors have the ability to travel from North or South County to downtown, then we’ve achieved it, as these areas are already connected by bus and bikes routes, streets, and sidewalks. No, these areas are not connected by rail—but if the argument is that we need rail because we don’t have rail, then advocates are running in circles.

Soon, the Mayor and rail proponents will stop begging the question and start begging for money. When they do, Saint Louisans should carefully consider what benefits could possibly justify a $2 billion MetroLink expansion, and whether or not it’s just an expensive “remedy” to treat problems for which we already have more sound solutions. 

The post North-South MetroLink Expansion: Snake Oil for Saint Louis appeared first on Show-Me Institute.

First, let’s analyze MetroLink’s effect on public transportation usage. It is true that people (including myself) use the MetroLink; the system handles an average of about 44,000 trips per day. However, MetroLink’s effect on total transit ridership has been modest. Despite the immense expenditures (around $3 billion) and multiple expansions, total bus and rail ridership today is lower than bus ridership alone was in 1991, three years before the MetroLink opened. Even worse, not all MetroLink expansions have even resulted in sustained higher MetroLink ridership. Take the case of latest expansion, from Forest Park to Shrewsbury, which opened in 2006. While the addition initially pushed rail ridership to new heights, ten years later total MetroLink ridership is lower than it was the year before the expansion opened.

The increasing supply of light rail, along with flagging enthusiasm for its use, has meant that in terms of passengers, MetroLink now has the lowest rate of use it has ever had, with only 2.55 riders per vehicle revenue mile.

Next let’s evaluate the MetroLink’s impact on development in Saint Louis. Consider the expectations of MetroLink’s proponents when the initial line opened in 1994. They hoped rail would generate urban renewal, with specific hopes that it would save Saint Louis Centre and bring life (and even a golf course) to East Saint Louis. Far from rejuvenating areas that were down on their luck, the MetroLink failed to prevent decline in areas of its route that appeared on the ascendency in 1994, like Union Station and Laclede’s Landing. Some areas near MetroLink stations have done well, like the Central West End or the Loop, but in these places development seems to be happening near the MetroLink, not radiating from it. With few exceptions, MetroLink platforms remain areas of quiet repose, far from businesses, residences, and crowds. It’s ironic, given the claims of rail advocates, that the true success stories of urban renewal in Saint Louis City are places like Soulard, South Grand, the Grove, and now Cherokee Street, located far away from any MetroLink station.

With regard to increasing transit usage in Saint Louis and spurring urban revitalization, the MetroLink has, to this point, been an expensive disappointment. There is no reason to think any MetroLink expansion will create different results. It’s time for the region to start looking for better, more cost-effective ways to achieve progress toward public transportation and development goals. 

The post Saint Louis Should Learn from MetroLink’s Disappointing Past appeared first on Show-Me Institute.

Assuming other types of public transportation service (such as buses) are unaffected, the addition of a North–South MetroLink line could increase the speed and quantity of public transportation in the Saint Louis region.  Light rail is generally much faster than standard buses, so more rail can mean faster transit and more riders. However, light rail is not the only way to improve public transportation, and Saint Louis needs to consider light rail as just one option among many, perhaps not the most prudent one.

As we’ve discussed many times before, Saint Louis is a dispersed region, both in terms of where people work and where they live. Most residents live and work outside of Saint Louis City, and more people commute into Saint Louis County than Saint Louis City for work. The area in the region with the most employees and the highest payroll is not downtown, but West County. Nevertheless, the North–South MetroLink plan would route riders in and out of downtown Saint Louis, as if the year were 1904. In terms of population density, most of Saint Louis City (and nearly the entire planned route of North-South MetroLink) has less than 5,000 residents per square mile. Cost-effective light rail systems generally have population densities nearing 20,000 people per square mile around stops.

Saint Louis’s existing MetroLink lines already encounter ridership problems, despite serving areas with more employment and population than the proposed North-South line would. After spending more than $2 billion building the current system, a lower percentage of Saint Louisans use transit now than did in 1990. And, despite the hopes of transit activists, the situation is not getting any better. Both MetroLink and MetroBus ridership peaked in 2008, and even as better economic times have come to Saint Louis in the last few years, MetroLink ridership continues to stagnate. The result of this failure to draw more riders is that, accounting for all light rail costs since 1992, the MetroLink has cost Saint Louis nearly $10 for every passenger that has ever stepped on board, with a one-way fare of only $2.50. The bottom line is that the existing MetroLink has, despite the investment, failed to achieve meaningful progress toward promoting transit ridership or generating urban development. There is little reason to believe that an expansion will yield better results.

Fortunately for the region, adding more rail is not the only way to improve public transportation. Saint Louis could, for far less than a billion dollars, improve its poorly managed bus system or implement bus rapid transit, both options made much easier by the incredibly low traffic levels on Saint Louis’s highways and arterial roads.

However Saint Louis officials move forward, they would do best to consider public transportation plans that take the city as it is, and not how transit activists want it to be. If they don't the system will continue to operate as it does today: expansive yet inefficient, expensive yet resource-poor, overbuilt yet under-ridden. 

The post Light Rail a Losing Proposition for Saint Louis appeared first on Show-Me Institute.

allows City residents to take immediate ownership of LRA-owned parcels adjacent to their property for just $125 if the resident agrees to continually maintain the lot. The City will give away the land itself for free. The $125 covers the title transfer and lien, should the new owner fail to maintain his/her new property. After 24 months of regular maintenance, the lien will be lifted and the property granted free and clear to the new owner.

The city has no interest in paying to maintain these lots. Why not do whatever it takes to get them off the books and into private hands? This effort is similar to the Kansas City’s Land Bank Side Lot Program, where resident landowners may purchase adjacent vacant lots from the city for prices ranging from as little as $1 for lots under 2,500 square feet, to $.08 per square foot for lots between 6,000 and 6,500 square feet. The program has had some success. The city sold 50 side lots in 2014, 63 in 2015, and 9 so far in 2016.

The comparative strengths of the KC program, according to the Land Bank’s executive director, Ted Anderson, are that it does not require the program management of Mow to Own, and that liability insurance is less of an issue for the city because the buyers own the land outright. Furthermore, selling the land outright means there is less need to oversee the diligence of dozens of different people mowing city land.

The incentive to buy city land will still be affected by the distortionary effect taxes have on behavior. I know of one landowner in Kansas City whose office building, due to street layout, abuts a sizeable greenspace that is otherwise inaccessible. He maintains the space by cutting the grass. He’s aware of the Side Lot program, but he has no interest in assuming the additional property tax, especially when he currently has the option of enjoying the green space without being taxed on it. Saint Louis should expect to see cases like this on occasion, but to the extent that the Mow to Own program can relieve the city of unproductive property, it will be a step in the right direction. 

The post St Louis Rolls Out Mow to Own Program appeared first on Show-Me Institute.

We have made a conscious decision as a community to build the infrastructure to retain, attract and grow tech companies here and support entrepreneurship. It’s one of our strongest economic drivers.

Unfortunately, the data tell a different story.

Recently, the San Diego Economic Development Corporation released a comprehensive report on the national tech sector, where it also ranked cities based on the health of their tech scene. Of the country’s 50 largest metros, Saint Louis ranked an unimpressive 28th, placing it below regional competitors like Indianapolis, Columbus, and Oklahoma City.

One of the most jarring reasons for Saint Louis’s low ranking, given the rhetoric, is the fact that the region has comparatively few software developers. The region has only 8.8 software developers per 10,000 workers, low for a large city. For comparison, San Francisco, Raleigh, and Washington, D.C., each have more than 20 developers per 10,000 workers (San Jose has more than 60). Worse yet, tech jobs actually decreased in Saint Louis from 2010 to 2014 by almost 10%. Average tech employment increased by more than 13% in the country’s largest cities during that same period. It’s hard for the region to be a rising tech hub when it has fewer and fewer software developers.

In terms of the tech sector pipeline, Saint Louis also performed poorly. The region’s residents are much less likely to have math or computer science degrees than are residents in other cities. If it’s harder to find tech talent, it’s harder to attract tech companies. One of the few bright spots for Saint Louis is money. After adjusting for cost of living, tech workers in Saint Louis get paid more than they would in most other large cities. In addition, Saint Louis attracts a decent amount of venture capital given the size of its tech sector.

To sum up, Saint Louis has established tech companies. It has startups and a tech incubator. But that can be said of almost any large American city. Taking a national view, Saint Louis’s tech growth strategy seems downright banal. As Aaron M. Renn from the Manhattan Institute put it:

Civic policy at the local level is dominated by “school solutions” that promote the same characteristics everywhere, often as a way of signaling that a city belongs in the “club.” …most cities try to look exactly the same as other cities that are considered cool, including offering bike lanes, coffee shops, microbreweries, a creative class, a food scene, and a startup culture. Even most cluster analysis seems to produce primarily a collection of the same five basic focus areas in every region (high tech, life sciences, green industry, advanced manufacturing, and logistics).

Simply having a tech scene is a natural result of being a populous region in the 21st century; it shouldn’t be taken as a sign that Saint Louis is about to have an economic transformation. The fact is, despite public support, Saint Louis’s tech scene is not a large player nationally, nor is it a terribly significant driver of the Saint Louis economy. 

The post Saint Louis: Not a Tech City appeared first on Show-Me Institute.

On Tuesday, April 5, Saint Louis voters will decide whether to extend the city’s 1 percent earnings tax for five more years.

Without a doubt, this is a hugely important decision.

In inviting me to talk to you, Ron Zager (co-chairman of the Missouri Progressive Action Group), asked that I begin by presenting both sides of the argument—for and against the earnings tax .

I am happy to do so. It makes for an interesting—and even a startling—contrast.

Supporters cite three principal reasons for extending the earnings tax:

1. It is simple, fair, and easy to collect. Businesses withhold $1 out of every $100 from the paychecks of all of their employees and pay it directly to the city. They also pay a 1 percent tax on their net profits.
2. It brings in a lot of revenue—almost as much as the combined receipts from the city’s property, sales, and utility taxes. It provides a third of the city’s General Revenue Fund, used to support fire, police, courts, streets, parks, recreation, and other day-to-day city services.
3. A large portion of this revenue is like manna from heaven. People who commute into Saint Louis from the surrounding suburbs account for more than half of the city’s annual earnings tax receipts of about $160 million. And why not? The high-earning commuters are significant consumers of city services, swelling the daytime population of the city by about 35 percent.

To sum up the case in favor of retention: The earnings tax is critical to the continued functioning of city and the continued provision of police and other services to a population that includes a high proportion of low-income residents. It is a real lifeline. The city would be in danger of going bankrupt without it.

Opponents have three main reasons of their own for eliminating or phasing out the earnings tax:

1. It encourages people and businesses to move out of the city.
2. It also encourages an ongoing merry-go-round of tax carve-outs and special favors for large and well-known firms. The city does not extend the same benefits to thousands of smaller businesses, which take care of most of the daily needs of people who live in the city, such as the neighborhood grocer, cleaners, pharmacist, or auto repair shop.
3. Though not a regressive tax (applying the same 1 percent to people at all income levels), it is a cruel one. Unlike federal and state income taxes, there is no exemption from the city earning tax for working people at or below the poverty line. The tax hits the first dollar of income even from the lowest-paying jobs. A still greater problem is the narrowing of job opportunities in parts of the city experiencing a rapid out-migration of people and the closure of many small businesses.

The minuses are really the flip side of the pluses I have just mentioned.

Yes, the earning tax is easy to collect, but it is also easy to avoid. As a business owner, you can avoid the tax on your net profits simply by moving your business to the suburbs—anywhere outside the city. There is no earnings tax in Clayton, here in Frontenac, or anywhere else in Saint Louis County and other surrounding counties and municipalities. If you did move your business, many or even most of your employees who already live in the county would, out of their own self-interest, applaud your decision. And others who live in the city would be given a reason to move to the county.

Yes, the earnings tax pays many big bills for the city. By the same token, it provides a strong incentive for individuals and businesses—who have bills of their own to pay—to relocate in order to avoid the tax.

By collecting more than half of earning tax revenue from commuters, the city is (inadvertently) making a powerful argument for downtown-based law firms and other businesses with a large number of highly paid employees to take flight—for both economic and personal reasons. At one stroke a firm can give many of its officers and employees an instant 1 percent raise while sparing them the bother of a long commute. So what can the city do to prevent such businesses from moving?

If you are the sitting mayor or other high-ranking city official, here’s the answer: Offer big potential flight risks all kinds of tax breaks and other incentives to stay downtown. Find ways to abate property taxes to keep prestigious firms from leaving downtown. Waive the half-percent payroll tax (separate from the earnings tax) for large employers such as Anthem and Wells Fargo. And lobby the state for more handouts.

But of course, given your obsession with preserving earning tax receipts, you do that only for the big guys and you forget all about the little guys who are so numerous (even in decline) that you know little or nothing about them.

A classic example of how this works can be taken from 2011, when Stifel Financial Corp., which has had its corporate headquarters in downtown Saint Louis since 1890, announced plans to buy its downtown office building and expand its workforce in the city by a couple hundred people. Mayor Francis Slay called it “tremendous news for the future of downtown.” He also helped Stifel get some $17 million in public financing for the purchase and renovation of the building.

Why would a large and successful financial firm need help in feathering its own nest? Ron Kruszewski, Stifel’s CEO, said it all: “There’s very little investment going on right now without some incentives.”

That prompted Bill McClellan of the St. Louis Post-Dispatch to comment in one of his columns: “When liberals like me argue for comprehensive health care, critics call us socialists. But when businesspeople demand public money to underwrite their projects, hardly anyone says anything.”

(I’ll take issue with McClellan on one point here: There is at least one institution that has fiercely and consistently opposed all forms of corporate welfare and crony capitalism, whether it is providing public funds for new corporate headquarters, public funds for professional sports stadiums, or any other kind of commercial development. That is the Show-Me Institute.)

To sum up the minuses: the earnings tax is a tax on work and enterprise, and when you tax something, you get less of it. In this case that means fewer jobs and less growth. The earnings tax has also encouraged unfair and unwise favoritism in tax practices—decisions made up on the fly to keep big-name businesses from bolting to the county. It’s time for a long look at Saint Louis city government—how it is financed and, more fundamentally, how it thinks.

Let us take a moment to consider decade-to-decade changes in the relative importance of Saint Louis among major cities in the United States over a long period of time—both before and after the introduction of the earnings tax in 1954.

According to census data, the last time Saint Louis moved upward in the ranks of U.S. cities was in the 1890s. The population grew from 452,000 people at the beginning of the decade to 575,000 in 1900, and Saint Louis moved from being the 5th largest city in the country to the 4th (behind New York, Chicago, and Philadelphia).

Of course, that was just prior to the Saint Louis World’s Fair. In that same amazing year of 1904, Saint Louis also hosted the world’s third modern Olympics—following the 1900 Olympics in Paris and the 1896 Olympics in Athens.

Saint Louis held onto 4th place until the 1920 census, when it was overtaken by Detroit and Cleveland, dropping to 6th. It was passed by Los Angeles in 1930 and Baltimore in 1940, falling to 8th. It remained in that spot in the 1950 census—when the city’s population hit an all-time peak of 857,000.

At that point the city’s population went into a steep decline that continues to this day. Since 1950, its population has dropped from close to 900,000 to a little more than 300,000—discarding almost two-thirds of its human body weight—and Saint Louis has gone from being the 8th-largest city in the country down to the 60th, behind such places as Tulsa, Oklahoma, and Wichita, Kansas.

It would be absurd to place all or even most the blame for this decline on the earnings tax. It would be equally absurd to deny that the earnings tax has made a significant contribution to the depopulation of the city and the growth of surrounding areas.

For one thing, we know that downtown Saint Louis no longer rules the roost as the unchallenged commercial center of the Saint Louis region. Clayton has become a strong second center, and other places around the county are also filled with offices and business enterprises. It is only in Saint Louis City that you find acres and acres of abandoned houses, deserted storefronts, and boarded-up factories.

Here’s a statistic that may surprise you: There are now more people who commute into Saint Louis County . . . both from the city and from Saint Charles and other counties . . . than there are people who commute into the city from the county or other jurisdictions. There are 236,000 people commuting into the county versus 172,000 commuting into the city, according to recent census data.

Somehow, Clayton and other municipalities receiving this great daily influx of commuters have been able to handle it . . . without instituting an earnings tax or having everything from the streets to public safety fall to pieces. Why is it any different for the city of Saint Louis? Why is the city unable to cope without taxing the earnings of people who come there to work?

Let’s turn then to the question of whether it is possible to phase out the earnings tax without throwing the city into bankruptcy and fulfilling the worst predictions.

Bear in mind that the proposal on Tuesday’s ballot in the city calls for phasing out the earnings tax over 10 years—whittling away at a $160 million funding gap that would occur in the year 2026 through spending cuts or revenue enhancements averaging $16 million a year between now and then.

Is $16 million a year too tall a mountain to climb? Somehow, in the city’s desperate efforts in recent months to persuade the Rams and the NFL to keep the team in Saint Louis, the city funneled $16 million through the Saint Louis Convention & Visitors Center Commission to pay legal fees and other expenses in what turned out to be a losing effort.

Before that, Mayor Slay and Missouri Gov. Jay Nixon were prepared to raise about $400 million to pay for a large portion of the cost of building a new downtown stadium for the Rams. That alone would have equaled the revenues from the earnings tax over a two-and-a-half-year period.

If almost any large business you can imagine were to lose customers year after year—eventually losing more than half of its business base—you would expect it to downsize drastically, if not go out of business.

Why is it—despite the steady, continuing loss in population—that the city’s budget continues to grow, if only slowly, from one year to the next, with few if any large reductions in its workforce?

Faced with such questions, city officials typically shift the focus to public safety, saying they need more rather than fewer police and firemen. Public safety accounts for a little over half of general funds expenditures. Why, then, is it so hard to trim the other expenditures that make up about 45 percent of the budget?

There are other ways that the city can either cut expenditures or raise revenues besides the shock of instituting sudden and drastic increases in property or sales taxes. It could raise hefty sums of money by privatizing assets such as the airport or the water system.

It could also make a serious effort to raise some revenue from its large nonprofit institutions. As Post-Dispatch business columnist David Nicklaus pointed out in a recent article:

These universities and hospitals depend on city service but don’t pay property taxes. Boston and other cities have negotiated payments from their big nonprofits; Saint Louis could try to do the same. Eliminating the 1 percent earnings tax should make it easier for these institutions to attract and retain employees; wouldn’t they pay something to make the tax go away?

But none of those things is going to happen without a fundamental change in thinking on the part of city officials who have come to look upon the earnings tax as the sine qua non of Saint Louis city governance.

Following the last election, when voters re-approved the earnings tax, city officials heaved a sigh of relief, agreed that the tax did indeed put the city at a competitive disadvantage, and promised to study alternatives. That was five years ago. And since then they have done nothing.

Maybe if the vote is closer this time, they will begin to think differently. But maybe not. Maybe they will just go on hoping for miracles while continuing to pursue policies that have contributed the city’s decline and fall from the heights it once occupied as a great American city.

The post The Saint Louis City Earnings Tax: Lifeline or Noose? appeared first on Show-Me Institute.

The Edward Jones Dome in downtown Saint Louis is another story. Praised as state-of-the-art when it opened in 1995, the 100 percent publicly financed dome is on the verge of abandonment several months shy of its 21st birthday.

The future of the St. Louis Rams – the dome’s current occupants – will be decided in the next couple of days as the NFL owners club considers two competing plans for new stadiums in the Los Angeles area – one of them put forward by Stan Kroenke, the owner of the Rams, who wants out of Saint Louis.

Whatever happens, the Saint Louis dome’s playing days as a football stadium are probably over. It stands as a monument to wishful thinking – a telling example of the fallacy that public officials can accelerate a city’s growth or reverse its decline by “investing” large sums of money in a giant sports complex.

When the dome was first proposed and developed, its backers – including two Saint Louis mayors, business and civic leaders from the city and county, Missouri legislators, and the editorial board of the St. Louis Post-Dispatch – described the project as a much-needed shot in the arm for downtown Saint Louis. They claimed it would create thousands of jobs, generate hundreds of millions of dollars in new business activity, and more than pay for itself through the additional tax revenues it would create for St. Louis City and County and the state of Missouri.

In a 1993 editorial, the Post predicted a “downtown resurgence” and only worried that the riverfront might become “a gridlock of automobiles overlooked by a garish strip replete with pulsating electric signs and the amplified voices of barkers luring people aboard (casino) boats.”

Today the St. Louis riverfront is emptier than ever.  Over the last two decades, the city has continued to lose both population and jobs, while St. Louis County and the state as a whole have also experienced subpar economic growth. There is no sign of any dome-centered economic growth.

The Edward Jones Dome was desperation’s child.  In 1988, after the St. Louis Football Cardinals took flight for Phoenix, Arizona, leading figures in the city became serious about building the new stadium that the departing owner Bill Bidwill (not wanting to share space with the baseball Cardinals) had craved.  Enlisting the help of Saint Louis County and the state of Missouri as partners, they gambled on building a stadium entirely on spec – not knowing when, or even if, they would be able to attract another NFL franchise to replace the Cardinals.

Surely, the thinking went, a metro area of our size (two and half million people) and with our willingness to open the public purse strings, should have no trouble attracting one of two NFL expansion franchises then coming up for grabs.

That was a big mistake. In late 1993, the NFL awarded the new franchises to Charlotte, North Carolina (with the now #1 seeded Panthers in this year’s NFL playoff), and to Jacksonville, Florida.

Thus, there was great joy in Mudville when Georgia Frontiere, the widow of longtime L.A. Rams owner Carroll Rosenbloom, elected to move the Rams franchise from an aging stadium in Anaheim to a new one in her old hometown of St. Louis.  As the dome was nearing completion, she saved political and civic leaders from the embarrassment of having a football stadium but no team.

Corralling the Rams was hailed as a great victory for the city and state – but was it a good deal for taxpayers?

Plainly it was not.  The Rams shared no part of the cost of building the dome, yet they have paid an annual rent of $250,000, or just 1 percent of the $24 million that the city, county, and state have paid to service the debt on its construction . . . and will continue to pay ($12 million from the state and $6 million each from the city and county) for another five years. That means taxpayers are still on the hook for another $120 million – money that would otherwise be available for public services ranging from fire and police protection to education, roads, and infrastructure.

In addition, the lease agreement allowed the freeloading tenant to demand major improvements at public expense, and gave the team the right to opt out of the lease ten years early – in 2015 – if the city and state failed in their contractual duty to keep the dome in the top tier of NFL stadiums.

That is the option that Mr. Kroenke deployed at the beginning of last year when he announced his intention of moving to Los Angeles.  For a while, the response from city and state officials was déjà vu all over again.  St. Louis Mayor Francis Slay and Missouri Gov. Jay Nixon joined forces in trying to raise some $400 million in public assistance to go toward the building of a new $1 billion-plus riverfront stadium to keep the Rams in St. Louis.

But now it seems the air has gone out of that spheroid. There seems to be a growing realization (even in St. Louis) that if a team thinks it can make a whole lot more money in one city – with no subsidies – than it can in another – even with copious subsidies – it probably makes sense for all concerned to let the team go where it wants.

The post Deflate-gate in Saint Louis: Air goes out of a plan for a new subsidized football stadium appeared first on Show-Me Institute.

We have made a conscious decision as a community to build the infrastructure to retain, attract and grow tech companies here and support entrepreneurship. It’s one of our strongest economic drivers.

While few would dispute that many great tech companies are starting in, and coming to, Saint Louis, the data show that in terms of companies and jobs, Saint Louis is losing as many as it is gaining.

To see this, we can look at Census Data that tracks Saint Louis City business establishments from 2008 to 2013 (which excludes government employees and self-employed persons). The period starts just before the recession and ends three years into the “recovery.” Over that time, Saint Louis City’s total business establishments rose by 866, or about 10%. That may sound good, but the problem is that over the same period the city’s total paid employees decreased by more than 25,000 (as shown in the chart above). 

The increase in business establishments and decrease in employment seem counterintuitive until one notes that all the city’s net establishment gain came from the smallest businesses (from one to four employees). Total businesses with more than four employees decreased in the city over the period examined.

Contrary to the popular narrative, growth in small companies did not come primarily from tech fields. Instead, the main growth sectors were health services and education (meds and eds):

The Saint Louis economy has performed better in 2015 than in previous years, so it is possible that future data will show greater business and employment growth. However, the latest census data strongly suggest that:

1.       In recent years city has failed to retain or increase medium- and large-sized businesses of nearly every type.

2.       The business and job growth there has been is mostly attributable to health services and education, not tech startups. 

The post Census Data Does Not Reflect Saint Louis City Claims of Business, Tech Company Growth appeared first on Show-Me Institute.

You can read the Court’s decision here. Basically, the Court ruled that the ordinance conflicted with existing state law and thus was invalid.

Mayor Slay has promised to appeal to ruling, but assuming this ruling stands, we are left with the question of how best to help those working families who are struggling to get by on the current minimum wage.

Increasing the minimum wage, either at the local, state, or federal level, is not the way to go. Instead, the state and/or federal government should look to expand the Earned Income Tax Credit (EITC). Economists across the ideological spectrum agree that the EITC is a program that is better targeted to helping the working poor.

The EITC is a better policy than increasing the minimum wage for at least two reasons. First, it is specially targeted toward low-income households. If the minimum wage goes up, a teenager from an upper-middle class family working a minimum-wage job would get the same benefit as a single mother of two. The EITC goes only to members of low-income families who are working. Second, unlike an increase to the minimum wage, the EITC does not increase labor costs for business owners. Thus, an expansion of the EITC would not cause businesses to reduce hours or lay people off.

A lot of people might be upset by the Circuit Court’s ruling yesterday. However, this ruling provides policymakers with an opportunity to enact policies that can better help those who need it. The EITC is one such policy.

The post Saint Louis Minimum Wage Increase Put on Hold appeared first on Show-Me Institute.

In the first four blog posts in this series, we have seen how Saint Louis City’s property tax base is significantly curtailed because much of the city’s land is owned by governments and nonprofits, which pay little or no real property tax. Many other properties also receive special real property tax breaks, like TIF and Chapter 353 abatements, further reducing the number of parcels paying the city’s full property tax rate of $7.5850 per $100 assessed value (plus a $1.64 commercial surcharge). In total, an incredible 40% of the city’s property by value either is tax exempt or receives special tax breaks. The situation is worse downtown, where virtually any recent development has received tax breaks.

This situation has put Saint Louis City in a bind. Most cities rely almost entirely on property taxes and sales taxes to run government. But in Saint Louis, the city is forced to rely on an earnings tax to make up for the weak property tax base. Many economists and even Mayor Slay agree that earnings taxes are damaging to city growth and put Saint Louis at a competitive disadvantage. The mayor promised to look for ways to reduce the city’s reliance on the earnings tax in 2011. However, since that time Saint Louis’s reliance on the earnings tax has grown.

Another effect has been the creation of an unlevel economic playing field, especially for small businesses and depressed neighborhoods. Effective property tax rates vary from neighborhood to neighborhood, from block to block, and from building to building. If a business or development is big (or is setting up where civic leaders would like it to), it is almost certainly going to get a real property tax break. If a resident or a business doesn’t meet either of these criteria, it pays the full property tax rate. The homeowner in Southwest Garden pays full property tax rates, but the condo dweller downtown doesn’t. The laundromat in the Central West End pays full property taxes, but the Chase Park Plaza doesn’t. Fairness aside, the civic leaders are using the tax code to entice certain businesses or favor certain neighborhoods, in the hopes that these municipal champions will create trickle-down development. This prevents the city from charging broadly lower tax rates, which could generate more broad growth from the bottom up.

In the end, a good portion of the city’s property tax base problems are beyond its control. Parks, courthouses, schools, and cemeteries are tax exempt by state law or practicality. But much of the problem is the result of city policy. The city’s land bank, the LRA, has long dragged its feet over selling properties to willing buyers. Other city organs inappropriately own land on which private developments stand, like Busch Stadium. And when the city hands out tax breaks to any large developer that makes the request, even when their development plan is speculative at best, the hole gets deeper. With another vote on the earnings tax coming soon, now would be good time for the city government to stop hollowing out the tax base and reverse the damage already done.

The post Saint Louis City Property Tax, Part 5: Problems Ahead appeared first on Show-Me Institute.

Some might see a silver lining in the fact that the minimum wage will “only” go up to $11 instead of $13 or $15 per hour. That lining, unfortunately, is hair-thin; an $11 per hour minimum wage is still likely to have serious, negative consequences for the Saint Louis labor market, hurting the very people it is meant to help. If enacted, the increase will make Saint Louis County even more attractive to businesses compared to the city, because the county will have a much lower minimum wage coupled with the lack of an earnings tax.

The timing of this proposal is significant; it was passed now so that it would be exempt from HB 722, which, if enacted, would bar cities from raising their minimum wages after August 28 of this year. However, even if the minimum wage proposal is enacted before HB 722 goes into effect, there are still legal issues with this bill. Namely, section 67.1571 of Missouri State Statutes states that “No municipality as defined in section 1, paragraph 2, subsection (9) shall establish, mandate or otherwise require a minimum wage that exceeds the state minimum wage.”

Of course, things are never as simple as we might hope with regard to state statutes. A Saint Louis Circuit Court did rule that 67.1571 is invalid on procedural grounds. However, no higher court has ruled on this, so the question of 67.1571’s constitutionality is still open.

Relying on the courts to come to the rescue is no substitute for avoiding bad legislation in the first place. Policymakers should realize that minimum wage increases are not the way to alleviate poverty—but if they don’t,  a court ruling that the increase is invalid would preserve the jobs of many low-wage workers in the city.

The post Saint Louis City Board of Aldermen Passes Saint Louis County Employment Act of 2015 appeared first on Show-Me Institute.

On Thursday, Mayor Slay announced his support for a compromise proposal. This new proposal would raise the minimum wage to $11 per hour by 2020 instead of $15. Like the original proposal, it exempts small businesses, but it also exempts in-home health care workers and nursing home workers whose services are paid for by Medicare and Medicaid.

While $11 an hour is less than $15 an hour, it will still cost jobs. The Congressional Budget Office (CBO) studied the effects of an increase in the federal minimum wage to $9.00 an hour and $10.10 an hour. In both scenarios, the CBO found that increasing the minimum wage would cost jobs. An $11 minimum wage in 2020 is slightly less harmful than a $10.10 minimum wage today and more harmful than what $9.00 an hour is now. That means this proposal will still harm employment. This harm especially would be felt in Saint Louis City, since businesses can hop across the county line to avoid having to pay the higher wage.

Seeking higher wages for low-income workers is a noble sentiment, but government mandates are not the way to go about it. This proposal, while less harmful than before, will still EXTERMINATE jobs and hurt those it means to help.

The post An $11 Minimum Wage Will Still Cost Jobs appeared first on Show-Me Institute.

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

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

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

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

The Metropolitan Taxicab Commission (MTC), that’s who.

The MTC regulates all for-hire vehicle services in the city of Saint Louis, including ridesharing. Problematically, half of its members represent the existing taxi industry, with vested interests in keeping out new competitors and new business models. As we’ve written before, their onerous and outdated taxi regulations are the reason Saint Louis has fallen behind the rest of the nation in getting ridesharing companies to set up in the city. In response to Uber’s petition to allow free rides in Saint Louis on the Fourth, the MTC said they would only allow it if all Uber drivers had gone through the MTC’s background checks (including finger printing) and drug tests. That stipulation effectively scuttles the promotion.

There is some question as to whether the MTC has any legal authority to ban free Uber rides, as the company is not technically offering a paid service. But the commission believes it does have the authority, and it has decided to use it to the detriment of Saint Louis. Moreover, the commission’s decision is in direct opposition to the position of Mayor Slay, who tweeted out on the promotion:

Uber has offered a free trial of its X service for the long holiday weekend. It is a positive gesture that we welcome.

With the MTC now swimming against both the tide of public opinion and the Mayor’s Office (which has hinted that they would not pressure police to enforce the MTC’s decision), it may be time to ask whom exactly this regulatory commission works for, Saint Louis residents or itself? 

The post Taxicab Commission Goes Rogue, Blocks Free Uber Rides on July 4th appeared first on Show-Me Institute.

Scholars and analysts at the Show-Me Institute have written extensively on this topic, arguing that raising the minimum wage is not good policy. That is still the case, since the fundamentals of economic theory have not changed.

Instead of reading another installment from me, I’ll defer to Christina Romer, former chair of President Obama’s Council of Economic Advisers. Here is what she wrote in the New York Times about her former boss’s proposal to raise the federal minimum wage back in early 2013.

There is a belief that the lack of competition fosters a lower wage. Romer writes, “I suspect that few people, including economists, find this argument compelling today. Company towns are a thing of the past.” In the end, “Robust competition is a powerful force to ensure that workers are paid what they contribute to their employer’s bottom line.”

Some see using the minimum wage as an anti-poverty tool. “Most arguments for instituting or raising a minimum wage are based on fairness and redistribution,” she notes. But contrary to this view she rightly observes that “It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families.” Instead, like anyone else committed to really helping the poor, Romer advocates using the existing tax system. The earned-income tax credit “is very well targeted—the subsidy goes only to poor families—and could easily be made more generous.”

“So where does all this leave us?” she asks. Her reply is that “the economics of the minimum wage are complicated and it is far from obvious what an increase would accomplish.”

What Romer believed in 2013 is still true today, and it applies whether one is talking about federal or city minimum wages. Imposing minimum wages is just bad economics and misguided policy that does not help the most needy.

The post Another Go at Raising the Minimum Wage? appeared first on Show-Me Institute.