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The Mayor begins with an assessment of the problem stemming from years of previous city councils failing to spend properly on infrastructure. Then he characterizes his solution thusly:

Over 20 years at approximately $40 million per year, this plan asks everyone in the city to invest through an annual property tax increase on both residential and commercial properties.

If the bond passes on April 4, the city says it will issue 20 different 20-year bonds. The last one will be issued in 2036 and will be paid off in 2055. The GO Bonds commit taxpayers to 40 years of debt, not 20. He also speaks to the cost to taxpayers:

The average residential property owner, with a $140,000 house and a $15,000 car, would see an increase in their property taxes each year for 20 years. That property would see an average of $8 added to their property tax each year. In year 20 that property owner would pay an average of $160 more than they pay today.

Both the Show-Me Institute and the Star have explained that this claim is inaccurate. The City Manager has stated that the cost is closer to $100 a year. The true cost of this bond to the owner of a $140,000 house and $15,000 car would be over $4,100.

The Mayor also refers to a report card that will account for projects and costs, but voters should be wary. If the GO Bond campaign—including this piece by the Mayor—is any indication, the report cards will be designed to present city spending in the best possible light. Remember, this is the same Mayor who refused to have the City’s Water Department audited.

As the Mayor points out, Kansas City is in this situation because important infrastructure and maintenance spending has been neglected. City leaders always find something else they want to fund. Without any significant changes to how City Hall operates—and this measure contains none—why should voters risk increasing their taxes just to see the exact same neglect repeated?

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

Kansas City voters are being asked to consider borrowing $800 million dollars by issuing bonds backed by an increase in property taxes that will last 40 years. The campaign in favor of the proposal has raised hundreds of thousands of dollars from some of the biggest corporations and special interests in Kansas City. The Mayor and members of the City Council have spoken at town hall meetings and on radio and television. And yet serious questions remain.

Show-Me Institute analysts have been skeptical of the city’s GO bond claims for some time. We were the first to point out that the city was proposing 40 years of debt (not 20), the first to expose the city’s misleading tax assumptions, and the first to point out that the city will be able to divert general revenue funds to other unrelated matters.

A policy debate is nothing to fear. For example, on March 20, Councilman Scott Wagner and I discussed the GO bond at the Indian Mound Neighborhood Association. The talk was professional, and I am confident that the room full of attendees were pleased to have both sides represented.

The public only benefits from a government that is transparent and accessible. We reiterate our invitation to the Mayor. If his schedule doesn’t permit the particular time and place offered by KCPT, how about another time and place?  With $800 million at stake, the decision voters make on the GO bond should be an informed one. We can think of no better way to educate Kansas City residents than a debate, and we would welcome an opportunity to join with the Mayor to present two different perspectives on this important issue. 

The post Debating GO Bond Policy appeared first on Show-Me Institute.

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City leaders have been speaking far and wide about the general obligation (GO) bond before voters (Questions 1, 2 and 3). Their presentations focus on what could be done with the money. But often overlooked are two important points: the city’s assumptions about cost, and how the City Council spends money.

At a public meeting in Waldo, Finance Department Director Randy Landes said, “the average impact to the property tax owner . . . is an $8 increase each year.” Other council members have said largely the same thing. A reasonable listener would conclude that the cost is only $8 per year. But that would be incorrect.

As detailed in the Star’s March 11 story, campaign literature understates the cost to taxpayers. The GO bond would saddle taxpayers with 40 years of debt. After the last bond payment was made in 2056, the owner of a $140,000 house and a $15,000 car would have paid $4,152.98. The owner of a $100,000 house and $15,000 car would have paid $3,154.24.

The city reaches their low numbers by doing two questionable things. First, they include in their estimates the existing bonds that will be paid off over the next 20 years. But those levy reductions will happen regardless; including them only serves to confuse the issue. Second, the city assumes that there will be no increases in the property tax. Current city leaders have no idea what subsequent councils will do, but it’s difficult to imagine the levy remaining the same for the next four decades. That assumption is misleading.

Another concern is whether the city will divert these taxes to pet projects. City leaders are quick to point out that the money raised by these bonds is required to go to streets and sidewalks. But that isn’t the case with general fund money that currently funds these needs. Councilman Lucas admitted in the meeting, “If we spend important dollars on this bond obligation, we’re able to free up funds to attack other vital issues.” If the bonds are passed, the city will be able to reallocate general funds to projects other than streets and sidewalks.

A more accountable and transparent approach would be to issue smaller bonds and be very explicit about how bond and general fund money will be spent. Voters could then assess each project before committing to a subsequent bond. On April 4, voters risk funding the same sort of misspending that put Kansas City in the mess we have now.

Also on the ballot is Question 4, a measure to increase the city-wide sales tax by one-eighth of one percent to fund economic development projects on the East Side.

No one can dispute that decades of neglect from City Hall—combined with the past ten years of generous taxpayer subsidies to wealthy developers to build in economically successful parts of town—have devastated Kansas City’s urban core. These subsidies not only help steer development away from the East Side, but they also divert resources from basic services such as public education, libraries, and health services that are vital to these communities.

While supporters of Question 4 are to be congratulated for wanting to address economic injustice, one more tax-funded subsidy will not solve the problem. In fact, one more increase in an already-high sales tax likely will do more harm.

Questions 1 through 4 seek quick fixes to serious financial challenges in Kansas City. Without substantive long-term solutions to the problems that got us here, voters risk spending more to get the same outcome we have in the past.

The post The Unlikely Promises of Questions 1, 2, 3, and 4 appeared first on Show-Me Institute.

The Star piece includes a graphic called, “A comprehensive look at taxpayer impact,” which totals the actual tax that property owners would pay over 20 years if the GO Bond is approved. The Star should be commended for cutting through the financial gobbledygook presented to voters by the city and by bond proponents. The Star writes,

The annual tax increases for the first 20 years for the owner of a $100,000 house total about $1,540. For the owner of a $140,000 house, it’s more than $2,000. It totals about $3,185 for the owner of a $200,000 house.

That is a far cry from the $120/$160/$250 cost claims made on the city’s website. My complaint with the Star piece is that it is incomplete. The tax burden for this GO Bond lasts for 40 years, so the Star’s numbers are half of what they should be. As we wrote last week, the total additional tax paid for a $140,000 home and $15,000 car is $4,152.98 over the life of the bonds. If the Star had calculated the cost for the full 40 years of debt, they would have arrived at our numbers.

The Star’s position is that anything beyond 20 years is speculative—so that is where they stopped. The city could refinance, offer additional non-tax bonds, or the economy could boom. All these things are true, and cast further doubt on the city’s account of an $8 average annual increase that assumed no new increases in the property tax levy for 40 years! In the Star’s defense, they did not claim that the costs were only for 20 years. And in previous stories they made clear that the bond sets up 40 years of debt.

Ultimately, voters will decide whether the costs are worth the benefit, and whether they trust the city to do with the new revenue what they have neglected to do for decades: maintain infrastructure. That the Show-Me Institute and the Star are agreeing on the costs—at least in the first twenty years—is a good thing for transparency and good government.

The post Exposing the GO Bond Campaign Claims appeared first on Show-Me Institute.

In my previous post, I relied on the information made available on the city’s website, but I could not duplicate the city’s claim that the “average annual” cost was only $8 for someone who owned a $140,000 house and a $15,000 car. I incorrectly concluded that the city must be talking about only one of the 20-year bonds. The city’s Deputy Finance Department Director pointed out my errors and provided me their assumptions in the spreadsheet attached here.

In short, the $8 shown in the “Average Annual” column is the average annual increase in city property taxes, not merely the “average annual” impact of the bonds that the website presents The city’s website makes no mention of this, but those increases are cumulative. The city’s own data shows a GO bond tax increase on the $140,000 home/$15,000 car of $13.67 in fiscal year 2018. The following year it will be $26.95, then 39.62 and $52.32 in fiscal years 2020 and 2021. These figures represent the genuine cost of the GO bonds.

To get to the $8 figure, the city factors in the retirement of other bonds that will be paid off during the life of the GO bond. Those issues are independent of the matter in front of voters on April 4 and ought not be considered. The $8 figure also assumes that the city will not issue any new special or general obligation bonds until the year 2056. How seriously can we take projections based on the assumption that Kansas City won’t issue any more bonds over the next 40 years?

To keep things simple, I calculated the GO bond impact to taxpayers independent of other bonds that would expire or that might be issued. Using the city’s own assumptions on interest and growth in assessed value, the total additional tax paid for a $140,000 home and $15,000 car is $4,152.98 over the life of the bonds. The property tax increase called for in this GO bond will start at $13.68 in FY2018, gradually climb to a peak of $206.13 in FY2037, and then decrease to $7.77 in FY2056.

I wish these assumptions were made available by the city on its website. But now we know: the GO bonds will cost much more than we’re being told. And the way in which the city arrives at its own estimate of the cost to taxpayers is less than transparent.

The post Kansas City’s Questionable GO Bond Assumptions appeared first on Show-Me Institute.

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At a public meeting in Waldo, Finance Department Director Randy Landes said, “the average impact to the property tax owner . . . is an $8 increase each year.” The Mayor and other council members have said largely the same thing. A reasonable listener would conclude that the cost is only $8 per year. But that would be incorrect.

Using the city’s own numbers, the cost of the tax to a person with a $140,000 house and $15,000 car would be $13.68 the first year and would increase every subsequent year until it reached $206.13 in 2037. After that point, the payments each year would gradually decrease. After the last bond payment is made in 2056, this property owner would have paid $4,152.98. The owner of a $100,000 house and $15,000 car would pay $3,154.24.

Why city leaders chose the $8 “average annual increase” figure is puzzling, because that number is largely meaningless. Voters should know the annual cost, not the average annual increase in the cost. The city also reaches this number by doing two questionable things. First, the city includes in its estimates the existing GO bonds that will be paid off over the next 20 years and therefore reduce the overall tax levy. But those reductions will happen regardless of how people vote in April. This is money that taxpayers will no longer have to pay; to use it for purposes of calculating the cost of the GO bonds is taking money that would otherwise be in the taxpayers’ pockets. The city is thereby artificially lowering the cost of the GO bond by including unrelated items.

In order to get to the $8 figure, the Finance Department is also assuming that the city will not issue any more GO bonds for 40 years. This assumption borders on being intentionally misleading. Current city leaders have no idea what subsequent councils will do, but it’s difficult to imagine a scenario in which no new GO bonds are issued over the next four decades.

Another concern with the GO Bond is whether money will go to the stipulated projects, such as streets, sidewalks, and so on. City leaders are quick to point out that the money raised by these bonds is required to go to these purposes. But that isn’t the case with general fund money that currently funds these projects. Councilman Lucas admitted in the meeting, “If we spend important dollars on this bond obligation, we’re able to free up funds to attack other vital issues.” Money is fungible, and that means if the bonds are passed, the city will be able to reallocate general funds to projects that the voters have not vetted.

If city leaders want to be accountable, they should not ask taxpayers to commit to 40 years of increased taxes in a single vote. A more transparent approach would be to issue bonds over a much shorter period and be very explicit about where both bond and general fund money will go. As the period of each bond is completed, voters could assess how prudently their money had been spent before committing to handing over more money in a subsequent vote.

Kansas City desperately needs infrastructure maintenance, and public funds are the proper way to address those needs. But based on the city’s questionable assumptions on the cost of the GO bond and on future spending, voters would be well advised to follow the old adage, buyer beware.

The post Shaky Assumptions, Track Record Warrant Caution on GO Bond appeared first on Show-Me Institute.

Just two weeks ago, Moody’s Investor Services, one of the nation’s premier credit rating services, revised Kansas City’s credit outlook to “negative.”

The negative outlook reflects the growth of the city’s pension obligation and, when coupled with the elevated debt burden, the increase of fixed costs outpacing revenue growth. Continued leveraging of the tax base or unabated expansion of the pension obligation will place downward pressure on the rating.

This comes as Kansas City leaders are asking voters to approve another round of debt, backed by an increase in property taxes, to pay for the sort of maintenance that the city should be paying for with our already-high property, sales and income taxes.

The problem is that city leaders keep throwing money at things like subsidies for downtown development and large consulting contracts instead of dedicating funds to basic services. Frequent borrowing and an increasing debt load mean lower credit ratings and higher borrowing costs—the city seems locked in a payday loan–like cycle. Moody’s seems to recognize this even if policymakers don’t, and citizens may have to take matters into their own hands if this cycle is to be broken.

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The GO Bond Bait and Switch

The GO Bonds Will Cost You Much More Than You’re Being Told

The GO Bond Doesn’t Risk Your Home – Just Your Wallet 

Taxpayer’s General Obligation Bond Gamble 

The post The KC GO Bonds: Where Will the Money Go? appeared first on Show-Me Institute.

Despite the need, there is concern that political leaders will fall back on old practices of moving money around. Fearing this, a neighbor of mine in south Kansas City wrote some members of the City Council with a very salient concern:

What becomes of the existing general fund budget allocated to Public Works for street preservation and sidewalk repair? Does it continue to be used for street preservation or is it siphoned off to another area?

According to Kansas City’s Comprehensive Annual Financial Report (CAFR) for fiscal year 2015, the budget for the Public Works Department was almost $183 million. (The budget was $187 million in FY 2014 and $212 million in FY2012.) The Council is free to allocate the general fund as they see fit. It is, after all, what we elect them to do. The response my neighbor received was not promising:

The City’s Public Works Department confirms that the funding policy for Public Works street maintenance is set by ordinance. GO Bonds will dramatically expand revenue available for street reconstruction, maintenance, and repair. By law, GO Bond proceeds can only be used for GO Bond projects and cannot be diverted.

This answer plays right into my neighbor’s worry. Yes, the GO Bond proceeds may be restricted to public works projects. The concern is that the addition of new money from the GO bond will simply allow the Council to redirect discretionary spending from the general fun elsewhere. For example, imagine telling your child that any proceeds from her summer job will be dedicated to her college fund—then reducing your own contribution to the fund by the amount that she contributes to it. She may agree to make an additional contribution, but it won’t have the impact she is expecting. Similarly, voters may approve Question 1 giving $600 million in bonds for street and sidewalk repairs, only to find that the totality of money spent on street and sidewalk repairs does not increase by $600 million.

The fear is compounded by the Mayor’s refusal to commit to specific projects and timelines. He tells us that he doesn’t know what the city will be faced with in 20 years, yet he is fine with asking voters to commit to raising their taxes for 40 years. And as stated above, the reason Kansas City faces this problem in the first place is that previous councils did not fund needed maintenance.

The ballot questions at hand ask voters to ignore decades of experience with politicians’ bait and switch.

Kansas Citians would be wise to demand more explicit and binding commitments from City Hall, and smaller, shorter-term bonds. That way they have more opportunities to hold politicians accountable.

The post The GO Bond Bait and Switch appeared first on Show-Me Institute.

This year’s campaign is dubbed Progress KC. So far, the biggest contributors include Burns & McDonnell, JE Dunn, Mark One Electric, and several development and law firms.

Supporters are counting on the Heavy Constructors to help fund the campaign. That group, whose members stand to benefit from the infrastructure jobs, won’t officially decide until later this month.

It was nice to see the Star make a point of mentioning that financial backers of the 40-year property tax increase such as Burns & McDonnell, JE Dunn, and the Heavy Constructors have a bottom-line interest in the matter. They will likely get a lot of the money that they are asking taxpayers part with. But at least two of the biggest donors have something else in common.

Both Burns & McDonnell and JE Dunn do not pay the full property tax on their respective headquarters buildings. Or rather, thanks to Kansas City’s generous tax subsidy programs such as tax increment financing (TIF), much of their property, sales, and earnings taxes are returned to them to offset the costs of their impressive corporate pleasure domes. Readers of The Pitch may recall that Burns & McDonnell contributed heavily to convince voters to keep the earnings tax, and then lobbied the city to have a portion of its own earnings tax returned to it to build that same headquarters.

Walter Johnson, a professor of African American Studies at Harvard University recently spoke at the Kansas City library and referred to this sort of practice as “a fundamentally feudal model of corporate citizenship.” Rather than pay taxes to support institutions that are vitally important to the community—such as schools, libraries and the like—these corporations seek to avoid taxes and instead give charitably to the causes they themselves deem worthy. Johnson concludes:

Corporations shouldn’t have to keep their communities afloat through charitable giving. That’s what taxes are for, and that’s why paying them is typically considered a civic obligation, not an act of generosity.

That Kansas City is suffering from years of infrastructure mismanagement is a cold, hard fact. And it won’t surprise anyone to learn that those most eager to enact the tax will profit from its adoption. Yet it is a civic shame that those same corporations calling for an increase in others’ property taxes have spent so much effort trying not to pay their own taxes. Burns & McDonnell and JE Dunn should accept their own civic obligation before passing it on to others.

The post Taxes for Thee, But Not For Me appeared first on Show-Me Institute.

Everyone paying attention to Kansas City politics knows that we’re facing an $800 million bond vote on April 4. Previous blog posts here have made the case that the city’s representation of it as a 20-year bond is inaccurate. Now let’s consider the costs.

Anyone who has borrowed money understands that there is a cost to doing so—interest. This additional cost is a consideration in deciding whether to borrow in the first place.  So how much will it cost Kansas City taxpayers to borrow $800 million over 40 years? According to the city’s Finance Department, when the debt is finally settled in FY2055, taxpayers will have paid out over $1.28 billion. The city’s own spreadsheet is available at the link below.

Kansas City’s own website also offers the following infographic, in which the “average annual” cost to someone who owns a $100,000 house is only $6. 

That seems like a bargain! However, the graphic is incomplete as it only represents the cost of a single 20-year, $40 million bond. The April 4 election would approve 20 such bonds, issued each year until FY 2036. Start stacking these per-bond costs and you’ll get an idea of the cost to taxpayers. After the last 20-year bond is retired in FY2056, the total amount of taxes paid would be $2,400, not $120.

The city’s infographic is telling 5 percent of the story. The timeframe of the debt is 20 times longer than what the graphic shows, and the cost to taxpayers is 20 times greater. Voters need to know this before being asked to hand over more than a billion dollars.

The post The GO Bonds Will Cost You Much More Than You’re Being Told appeared first on Show-Me Institute.

CFRG points to Detroit as a model. According to the Detroit Free Press,  creditors left in the lurch by the city’s 2013 bankruptcy negotiated to take over city owned property to settle debts. General obligation bonds issued in Kansas City tax property to raise the money needed to repay the bond debt. But even in the worst-case scenario, no one is going to be driving up and down Ward Parkway picking out homes to seize.

GO Bonds are backed by the “full faith and credit” of the City. According to a statement from the City (emphasis added):

The security for the bonds is the City’s ability to tax real and personal property, not the property itself. Bondholders have no direct connection to property owners and do not have the right or authority to seize property in lieu of general obligation bond payments. 

In the extremely unlikely event the City did not make its debt payment from property taxes collected, the City could use other legally available funds of the City to make the payment.

The city may use a property tax to raise the funds, but even in the very unlikely event of a city default, creditors would sue to recoup their investment. A judge could then order the city to raise taxes. The City might also try to sell assets to generate the funds. Or, as in Detroit, the city would negotiate to settle the debt by giving creditors city property such as City Hall itself, assuming it isn’t being used as collateral for the convention hotel. Again, this is not the same as creditors taking privately owned property.

That the GO Bonds are necessary in the first place is the result of years of poor policy and financial management. And the bond plan is itself bad policy. Those two items are serious enough considerations without the fanciful notion that creditors will seize individual taxpayer assets.

The post The GO Bond Doesn’t Risk Your Home-Just Your Wallet appeared first on Show-Me Institute.

For a household with a $140,000 home and a $15,000 car, the property tax would average an additional $8 in the first year, rising to an [sic] $160 average additional payment in year 20, the final year of the bond program.

The Kansas City Star described the machinations at City Hall thusly:

The council is trying to craft a plan that can win voter approval to borrow $800 million over the next 20 years to address the city’s huge infrastructure needs.

This suggests that what is before voters is a 20-year effort. It isn’t.

The city is suggesting not a single 20-year bond for $800, but a series of twenty 20-year bonds for $40 million each, with the last one being issued in 2036 and paid off over the subsequent 20 years. The first bond would be issued in FY 2017 and the last one in FY2036. Property owners would not finish paying off the final bond until FY 2055.

If City leaders want voter support for a 40-year tax increase, the best way to get it is to make clear to the public exactly what they’re asking for. This is a multi-decade commitment!

The post Bombshell: The GO Bonds Will Last Until 2055 appeared first on Show-Me Institute.

Mayor James resists making commitments on how a proposed $800 million bond issuance will be spent. In a December 16, 2016 radio interview, Mayor James said the following (starts at 17:34):

I don’t know how [the proposal is] a blank check when you can sit and look at the stuff that we’re planning to do. You can’t sit down and specify what’s going to happen in 2029. You can say, “we’re going to be fixing roads and here is a list of road that we’re going to be fixing.”

So there is a list of projects city leaders want to address; they just don’t want to commit to which projects will get first priority (18:10):

We can give them a list; we have the list. The list is available. But to sit around and say we want absolute specificity—that’s not going to happen; it’s an impossibility. And here’s the problem with it, because the same people that are complaining that it’s not specific enough–if we put it in a list and say, “we’re going to do this, it’s going to cost X number of dollars and we’re going to do it in 2018,” and then we have to come up with $50 million for the Buck O’Neil Bridge, then what we’re going to be hearing is, “Oh, the city broke its promise because they said they’re going to fix the road that near my house and they’re spending the money on this bridge.”

Kansas City voters can understand the need to address unforeseen circumstances. But what Mayor James and city leaders seem to want is a fixed, concrete commitment from voters for 20 years of tax revenue without providing a fixed, concrete commitment on how they’ll spend it. The recent debate in the Council about roads, sidewalks and animal shelters is evidence of this. (The companion resolution the Council has offered is nonbinding.) If the goal is to maintain flexibility given an uncertain future, why not ask for smaller, shorter-term tax increases to address the spending needs that can be specified?

Kansas Citians are very aware of how poorly the city has maintained infrastructure; they have reason to be skeptical of city promises of fiscal restraint. After all, the crisis we are in now occurred because leaders did not address immediate needs or make basic infrastructure maintenance paramount—including for the first five-plus years of Mayor James’ tenure. Why should voters now believe that that city leaders will act any more responsibly? Are taxpayers willing to gamble with another $800 million on the city's roulette wheel of debt?

The post Taxpayers’ General Obligation Bond Gamble appeared first on Show-Me Institute.

Lynn Horsley at The Kansas City Star writes,

The city’s finance staff is arguing for more general, flexible language, because anticipating future needs is difficult. Finance Director Randy Landes pointed to a successful $250 million general obligation bond vote in 2004 for just “deferred maintenance and basic capital infrastructure.”

But some council members said voters need more specificity. Mayor Sly James has argued for flexible language but suggested there could be an annual “report card” to assure voters the money is being spent responsibly.

The idea of the city issuing its own report card on the matter should raise eyebrows. But in a recent interview on KCUR, the mayor said the city could publish a list of projects to be addressed by the bond, but he didn’t want to be held to it! Imagine a student asking to issue his own report card on his ability to accomplish vaguely defined tasks!

It shouldn’t be surprising that city leaders aren’t eager to be held to specifics. Remember, these are the same city leaders who:

• Issued an emergency ordinance allocating $10 million toward streetcar expansion. But when the streetcar expansion was defeated, just spent the money elsewhere;
• Dismissed the need for an audit of the water department despite a huge increase in water rates to pay for water and sewer infrastructure improvements;
• Responded internally to a call for information on economic development subsidies with, “Be very careful. Do not divulge anything more than necessary;”
• Repeatedly (and incorrectly) characterized the movement of money from the Aviation Department to the City;
• Issued questionable numbers on downtown and east side development efforts; and then
• Hired a trade association of development financiers to report on the success of the City’s development schemes.

Voter skepticism in Kansas City and around the country is high, and for good reason. There is little trust of political leaders, and the weak promise of a “report card” for the spending is a perfect example of why. Kansas Citians are right to demand a specific list of projects rather than an $800 million blank check for an animal shelter.

The post Kansas City’s $800 Million Animal Shelter? appeared first on Show-Me Institute.

Kansas City’s recent past is full of rosy development projects that did not pan out; KCP&L (Kansas City Power & Light) is chief among them. As a result, the city — and the taxpayers who fund city operations — are on the hook for about $13 million each year. Funds used to support the project are being diverted from other worthy causes.

Aviation Department Administrator Mark VanLoh says: “One common misconception the city must overcome: People think Kansas City will have to raise taxes to pay for a new terminal. It will not.” Maybe, maybe not.

Let’s review airport revenue. Dave Helling wrote in the Kansas City Star about how a new terminal would struggle to raise revenue:

There aren’t a lot of ways airport users could generate that kind of revenue. Ticket sales are already taxed, and air travel here is slumping. The airlines could pay more in rent, but other airports would pounce if the cost at KCI gets too high.

Indeed, VanLoh has admitted in press interviews that airports in Branson, Mo., and Wichita, Kan., are already taking market share from Kansas City because they are paying airlines to land there. Increasing rents or landing fees are not a realistic option.

If the airport is unlikely to be able to generate the revenue needed to support those bonds, can’t we turn to the federal government for help? VanLoh says “no,” telling the Star that large-scale federal participation in the project faces headwinds.

If the city were to issue $1.5 billion in revenue bonds in order to pay for the new terminal, it certainly would require a vote of the people. (Note that the $1.5 billion they are now considering is already a 25 percent increase over where we started, at $1.2 billion.) But what of Kansas City’s 2nd District City Councilman Ed Ford’s assertion in November that the project is “going to happen regardless of whether our citizens want it to happen”?

It turns out that not all bonds require voter approval. These bonds, known as Special Obligation Bonds, are not considered debt in the same way as other bonds and therefore require no public vote. Kansas City uses them all the time, and in fact is preparing to issue some this year to pay for the streetcar. Special Obligation Bonds were created to address a city’s immediate need — say, a broken water main — when it does not have the resources to fix it or the time to seek a vote. Kansas City issued two such bonds in 2012 amounting to $75 million that funded computer upgrades for the city’s revenue collectors, garages, and the refinancing of the ill-fated Citadel Plaza project.

Unlike revenue bonds, which do require a public vote, these bonds are normally secured by property. In this case, the Aviation Department may secure the $1.5 billion debt with the airport itself. While the city may not have to raise taxes, as VanLoh says, it is well within reason that the city will have to cover those bond payments from the general fund just like we cover KCP&L.

Welcome to the Kansas City Power and Flight District.

The post Kansas City’s Power And Flight District appeared first on Show-Me Institute.

PROPOSITION I – Improvements to County Buildings & Facilities
Shall St. Louis County, Missouri, issue general obligation bonds up to the amount of One Hundred Twenty Million Dollars for the purposes of constructing various capital improvements to County buildings and facilities, and making improvements to County safety/security and communication facilities?

Saint Louis County officials don’t have to listen to the ballot box results, because their federal benefactor has come to the rescue. The county is using half of its $40 million of Recovery Zone Economic Development funds to build the new health department building that failed to garner support in 2008. A family court building will also be built, using Built America funds. The federal funds won’t fully finance either of these projects, though, and the rest of the money will have to come from the departments’ operating budgets.

Some may argue that the people only voted down the use of a bond to fund these projects, and did not necessarily disapprove of the projects themselves. This may be true, but using stimulus funds to cover only part of these projects will still create an additional burden to taxpayers. It may be a discount, but these stimulus funds will not provide “free” buildings for Saint Louis County — rather, it’s a way around a failed bond issue.

Here’s the real issue: If local voters are not willing to finance their own projects, why should the federal government subsidize them? The federal government does not have a magical money tree; stimulus funds also come from taxpayers, whether present or future. These are buildings that the Saint Louis County taxpayers decided were not necessary, but officials have found a loophole.

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