Let’s forget the last part of that statement, which suggests that the job of adults is to find out where a student’s “heart is and let them follow it.” I might argue that the job of the adult is to steer children into a worthwhile pursuit, understanding that our passions can often lead us astray. Nevertheless, that is not the point I want to make here. The point is, Kehoe is promoting a very specific educational philosophy . . . and it is an educational philosophy that not everyone holds.

Noted professor and philosopher, Mortimer J. Adler, whom William F. Buckley described as “unquestionably the single most prolific educator in America” during the introduction to his 1970 Firing Line appearance, wrote in 1951, “Vocational training is learning for the sake of earning.” On the other hand, Adler also said “School is a place of learning for the sake of learning, not for the sake of earning.” Adler promoted what we call the “liberal” view of schooling. This view, not to be confused with the modern political conception, suggests that the purpose of schooling is to cultivate those skills which are common and necessary for the development of all people. The liberal arts are, according to Adler, “nothing but the skills of learning itself—the skills of reading, writing, speaking, listening, observing, calculating, and measuring.”

Many agree with Adler’s view of the purpose of education:

The aim of education is to cultivate the individual’s capacities for mental growth and moral development; to help him acquire the intellectual and moral virtues required for a good human life, spent publicly in political action or service and privately in noble or honorable use of free time for the creative pursuits of leisure, among which continued learning throughout life is preeminent.

But this view is in contrast with Kehoe’s vision. Learning how to use fabrication tools is itself a useful vocational skill; it is not, however, a universal skill that leads to continuous self-improvement in areas beyond the skill itself. It is vocational, not liberal.

While the lieutenant governor praised the vocational programs in Moberly, the liberal programs do not appear to be going as well. In 2021, little more than one third of students in the Moberly school districts scored proficient or advanced on the state’s language arts exam and fewer than one third did in math. The average ACT score for Moberly students was 18.5, well below state and national averages.

So what do we do about this as a society? We have two very different, competing ideas for what our public schools should be doing. One suggests the purpose, as early as elementary school, is to prepare students for the workforce. The other suggests the purpose of schools is to inculcate those skills and dispositions that lead to a lifetime of learning.

We have two options. We can, as we have done throughout history, allow the ideas to battle it out in the public sphere where the winner takes all by setting the philosophy down in state statutes, standards, and testing regimes that control local public schools. Or we can allow individuals broader access to the schools that align with their vision of a quality education via school choice programs.

School choice programs allow schools that focus on vocational preparation to flourish alongside schools that focus on the liberal arts. These programs allow for minority voices, which may otherwise get shut out in the pugilistic, winner-take-all system, to have an opportunity for the schools they desire.

As someone who tends to subscribe to Adler’s view of education, I wish I could make everyone see the world the way I do. I wish people would realize, as Adler suggests, “Training in the liberal arts is indispensable to making free men out of children. It prepares them for the uses of freedom—the proper employment of free time and the exercise of political power. It prepares them for leisure and for citizenship.” Alas, I don’t have those powers of persuasion. So, in the meantime, I’ll settle for a school choice system that allows such schools to flourish.

The post Is the Purpose of Education to Prepare Students for Jobs? appeared first on Show-Me Institute.

His quip aptly describes a sport popular in Missouri: The one that elected officials play when they use taxpayers’ money to support the growth of selected businesses or industries.

The attempt to single out economic winners through government planning and intervention is a dismal sport that can only end in disappointment and failure. The nutritional value of the object of the hunt may be safely described as zilch. If you eat the uneatable, you will only make yourself sick.

But you wouldn’t know that from the behavior of many of our elected officials of both parties.

Whooping and hollering, they ride to the hounds of corporate welfare—passing out hundreds of millions of dollars every year in targeted tax credits and other subsidies that go mainly to large and deep-pocketed corporations and a supporting cast of lawyers, developers, urban planners, and consultants.

In a recent report, the Mercatus Center at George Mason University identified Missouri as one of nine states that rank as “the corporate welfare kings of America.” According to Mercatus, Missouri has committed to more than $5.2 billion in subsidies to private businesses over the past couple of decades.

So how much good has being a “corporate welfare king” done for the people of Missouri? Has it made our state a magnet for growth and job creation?

Emphatically, not!

Over the last decade and a half, Missouri has lagged every other state in the nation but one in average annual economic growth.

In the 16 years from 1997 through 2013, real gross domestic product in the United States grew at an average annual rate of 2.23 percent. Meanwhile, Missouri grew at an average annual rate of just 1.08 percent—or less than half as fast as the national average. By this measure, Missouri ranked 49th out of the 50 states—just ahead of Michigan at the bottom of the barrel.

There are two things that typically can happen with taxpayer-assisted commercial developments—both bad.

The first is the support of bad ideas that would never get off the ground without the helping hand of government, such as the now-bankrupt and disbanded Mamtek artificial sweetener plant that was supposed to provide 600 jobs in Moberly. The CEO of Mamtek was recently sentenced to a seven-year prison term.

Second is wholly unnecessary pump priming at taxpayer expense. In our state, Tax Increment Financing (TIF) is commonly used to “induce” powerful companies and their allies in commercial development to do things they would do anyway, such as opening new stores or building more opulent corporate headquarters.

To cite two recent examples of the abuse of TIFs, Kansas City and the state of Missouri are prepared to pick up $1.6 billion out of the $4.3 billion cost of building a brand-new and super-deluxe corporate campus for the Cerner Corporation. If Cerner needs a corporate pleasure dome, it should pay for it on its own nickel.

Another egregious example of a private development that does not require or deserve public assistance through the grant of what amounts to a tax holiday from the property and sales taxes that apply to other businesses is the Whole Foods Market and high-rise apartment complex that is going up in Saint Louis’ trendy Central West End.

If Missouri wants to stimulate growth and job creation, the first step is to put a stop to corporate welfare, including the $400 million in targeted tax credits earmarked for commercial development that the state hands out on an annual basis. And that dictates the next step, which is to return the money to the people who earned it—through cuts in the state income tax.

Brenda Talent is the CEO at the Show-Me Institute.

The post Riding to the Hounds of Corporate Welfare appeared first on Show-Me Institute.

Winston Churchill chided the British government for inaction at a time of growing peril, saying (in 1936): “So they go on in strange paradox: decided only to be undecided, resolved to be irresolute, adamant for drift.”

I would make the same point about the Missouri Legislature. Once again, at the close of another session, our lawmakers (supposedly a fiercely conservative group) frittered away their time in producing a series of half-measures – with an excess of caution in trying to do the right things and a deficit of courage or common sense in failing to address key issues.

Take the school transfer bill (Senate Bill 493) passed on the second to last day. This bill was supposed to expand school choice. And so it might – in the long term, in setting up a process that would lead to the limited use of public money to support private (non-sectarian) education for some children.

However, if signed into law, the bill will pull a rug – or, to speak more dramatically, a magic carpet to better education – out from under more than 2,000 children in the Saint Louis area.

In revising the 1993 school transfer law, the new bill eliminated language that required unaccredited school districts to provide transferring students with paid bus transportation to schools in higher-performing districts. This means that many (and probably most) of the students who transferred out of the unaccredited Normandy and Riverview Gardens school districts last fall will suddenly be without the public transportation they need to continue their education at distant schools.

Lawmakers overrode Missouri Gov. Jay Nixon’s veto and passed into law the first reduction in our state’s income tax in almost a century. I will give them one cheer for that, and another cheer for refusing to be bull-rushed into accepting billions of dollars in federal subsidies to expand the wasteful and deeply troubled Medicaid program as part of implementation of the much-delayed and ever-changing Affordable Care Act (also known as Obamacare).

But it is impossible to give our lawmakers a third cheer given the gross deficiencies of both the school transfer and the tax cut bills.

For parents of students who transferred out of Normandy and Riverview Gardens last year, SB 493 is a cruel piece of legislation – marking a sudden removal of the freedom to choose a new school for their children.

Though long overdue, the tax cut bill proceeds in baby steps – beginning in 2017 with the first of a series of one-tenth of 1 percent cuts in the tax on personal income, from 6 percent to 5.5 percent in 2022, and with the phasing in of a 25 percent cut in taxes on pass-through income for entrepreneurs and small business owners.

What the legislature totally failed to do, however, was pave the way for deeper, broad-based cuts for all Missourians through the elimination or substantial reduction in targeted tax credits for economic development. That is money (about $400 million a year) that supposedly goes to promising business ventures and commercial developments. But the return on this investment of taxpayer money is not just bad; it is appalling. Again and again, the would-be great success stories (think Mamtek in Moberly and the Citadel in Kansas City) have turned into disappointments.

Instead, our legislators went in the exact opposite direction in approving a flurry of last-minute tax breaks for selected businesses – once again trying to pick winners and losers.

That was a shameful conclusion to another five-month legislative session that did little or nothing to advance the growth and competitiveness of our state. But maybe our representatives did their best, and that is the real tragedy.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Missouri’s Conservatives: Resolved to be Irresolute appeared first on Show-Me Institute.

“The payoffs can be fantastic,” Berger writes, sounding, not surprisingly, like a former film industry public relations employee.

Well, maybe for film producers. The Show-Me Institute has shown that film production jobs have not increased in Missouri since the state began offering its film production tax credit; that Missouri’s film tax credit has subsidized questionable expenditures; and that state taxpayers have helped fund the production of  saccharine films.

Other studies have found film production tax credits lacking when it comes to job creation, and there have even been instances of outright fraud associated with state film tax credit programs.

If that is not enough to sway those who love the idea of taxpayer-funded film production, consider the case of Allen Park, Mich.

Michigan’s film tax credit program inspired the City of Allen Park to spend nearly $40 million to turn an old building into a film production studio; the state kicked in nearly $3 million.

Today, no films have been made, the promised jobs have not been created, and some estimate that the bonds the city sold to support the project will take 28 years to pay off – costing taxpayers $100 million. The city also has experienced a severe downgrade in its credit rating.

Sadly, Allen Park sounds a lot like the City of Moberly, Mo., and its failed development bet with tax credits and local subsidies. The latest news is that the CEO of Mamtek paid himself $30,000 each month with bonds taken on by the city.

State and local officials have better things to do than to fly to Los Angeles to lure film production teams to Missouri with taxpayer dollars. Why not consider Missouri Gov. Jay Nixon’s Tax Credit Review Commission’s recommendations for tax credit reform? The commission recommended that many of  Missouri’s tax credits be capped or eliminated, including the film tax credit.

The post Michigan’s Mamtek: Yet Another Reason Missouri Should Abandon Film Tax Credits appeared first on Show-Me Institute.

Kerr’s testimony follows testimony from Moberly officials on Tuesday. A key point of Kerr’s testimony was that it would be a poor use of time and effort for the DED to double check the claims that every business makes when seeking incentives. Kerr said that if every business seeking incentives is treated as a criminal, fewer businesses will come to Missouri. I think that if a background check would deter a CEO with a history of passing bad checks from applying for tax credits, it might be appropriate.

There are two broad issues that legislators and the general public should consider in light of Mamtek. The first is that government officials (and others) mistakenly believe that with the right subsidy package and safeguards, they can eliminate all or nearly all of the risk associated with using public dollars to subsidize a private business. Any business can fail, due to its own negligence, or due to factors beyond its control. Public financing for a project cannot guarantee success, though it may prop up a business that otherwise would not be profitable without taxpayer money. Furthermore, as we may see in Moberly, no matter how many safeguards are used, the result may be that taxpayers are left holding the bag.

The second issue that may be at the heart of the Mamtek debacle is the fact that people and businesses will strive to get the largest benefit for the least amount of effort. That behavior has been seen in Missouri with gaming the requirements of the Missouri Quality Jobs tax credits and the general tendency of companies trying to access as many subsidy programs with a single project. It also has happened in China, where shoddy construction work on a high-speed train may have resulted in at least 39 deaths, along with corruption charges and the misuse of public funds.

As an outside observer, I don’t know whether any of those involved (Mamtek, the DED, current and former top state officials, etc.) deliberately misled anyone. There are ongoing criminal and civil investigations that may determine that.

However, the testimony that the House committee has heard so far sounds bleak, particularly the state’s investigation of the Mamtek company. The Columbia Daily Tribune posted the House committee information packet on Mamtek, and portions of it are riveting.

For example, one point of contention is whether Mamtek ever had an operating plant in China, as the company claimed in its project summary. The company wrote:

As of December 2009, Mamtek had moved from development into manufacturing and sales. We have completed both an 18-ton pilot production line and a full-scale, fully-functional [sic] 60 ton line (metric tons per annum). Each step and detail in the manufacturing and operational processes have been verified independently by the international patent firm Perkins Cole (page 27 of the House committee packet).

And then, Michael Wise, the patent attorney of Perkins Cole, a company closely affiliated with Mamtek, allegedly told the Moberly Economic Development Corporation that he had seen the plant himself, and that it had been operational for several years (page 43).

But yet, in April 2010, attorney Edward Li, a Chinese trade consultant for the Missouri Department of Agriculture, wrote to state officials to say that construction of a plant in China began in 2008, but was never completed (page 5).

Greg Havener, at the DED, wrote in an email with the subject “RE: BUILD PROJECT RUSH”  that he couldn’t find much information about Mamtek. “There is little on Google, oh well it will be a ‘thin report,’ “ he wrote (page 41). That email was sent on June 3, 2010, days before state incentives for Mamtek were approved.

Oh well, indeed. It is my prediction that while the future of Mamtek is uncertain, and while the financial future of the city of Moberly and its 13,000 residents is uncertain, the future of the DED is not.

In the private sector, if a business makes a $40 million mistake, it suffers dire consequences. For many businesses, that kind of mistake can result in bankruptcy. If no substantive reform is implemented at the DED, its operations will continue as usual. In the past, that has meant tax credits awarded to voided projects, inflated job and investment numbers, and vast amounts of taxpayer dollars going to incredibly inefficient programs.

I hope this episode will lead to major changes at the DED. If a more thorough investigation on each development package leads to fewer development handouts, that is a good thing.

The post Oh Well, It Will Be A Thin Report: The Mamtek Hearings appeared first on Show-Me Institute.

While that is not the worst of all possible outcomes, it
represents a failure of leadership on multiple levels. Missouri Gov.
Jay Nixon should not have called the session. Leaders of the
Missouri House and Senate are equally to blame. They should have
made it clear to the governor that he would be wasting their time –
and, more importantly, taxpayers’ money. In fact, they wrote a
public letter to the governor requesting that he call a special session.

Just as Missouri Sen. John T. Lamping (R-Dist. 24)
predicted at a public event at the Show-Me Institute on Tues., Oct.
4, the special session has foundered on the vain hope of a grand
compromise between two fundamentally-opposed viewpoints —
with leading figures in the Senate wanting to make major
reductions in Missouri’s sprawling and out-of-control tax credit
programs . . . and House leaders prepared to extend hundreds of
millions of dollars in new tax credits to support a “Midwest China
hub” or “Aerotropolis” at Lambert-St. Louis International Airport.

In Lamping’s analysis, there was never any real possibility
that Aerotropolis subsidies could win legislative approval on a
standalone basis. They were therefore tied to deep cuts in other
programs — including tax credits for low-income housing and
historic buildings, with strong support from special interests of their
own. Hence the deadlock.

What, then, are the lessons learned from this inconclusive
and not-so-special session of the legislature?

While Sen. Lamping may be right about the tactical reasons
for the impasse in the legislature, I would point to a deeper
underlying cause. Simply put, the China hub had a big credibility
problem. No one — even the supporters — seemed to believe the
extravagant promises that were made on its behalf.

St. Louis Regional Chamber and Growth Association (RCGA)
claimed that $360 million in tax credits and other subsidies for
Aerotropolis would create tens of thousands of new jobs and generate
nearly $34 billion in economic activity over a 20-year period — paying
back the original investment in taxpayers’ money more than 100 times
over.

But did anyone believe that? It is a tell-tale sign of weakness that
some of the strongest supporters of Aerotropolis subsidies framed their
arguments almost as if they were buying a ticket for Powerball. While
freely admitting to considerable skepticism about whether “Missouri can
or will pull off the China hub deal,” they insisted that it was worth taking
a shot anyway — given a huge potential payout.

President Barack Obama, it may be noted, has used similar
language in talking about placing “bets” and being prepared to “double
down” in spending on clean energy, electric cars and other politically favored
enterprises or industries.

Sorry, Gov. Nixon and Mr. President, but few taxpayers these days
like the idea of political leaders playing hunches with hundreds of
millions or even billions of tax dollars. To the contrary, more and more
people are inclined to blame excessive government spending and
interference in the marketplace for the sorry state of the economy.

Over the past few years, policy analysts at the Show-Me Institute
have cited numerous instances, in St. Louis, Kansas City and other places
around the state, where targeted tax credits have failed to produce
promised economic results. The list includes failed shopping centers, the
stalled “Ballpark Village” in downtown St. Louis, and other economic
wonders that turned sour. And this is a lengthening list as we have seen
recently with other tax-favored enterprises defaulting on debts in Moberly
(Mamtek) and in Kirksville (Wi-Fi Sensors).

When the legislature reconvenes in January, let us hope that our
lawmakers realize their own limitations when it comes to picking winners
and losers. That is a task best left to the marketplace. The government
may have a role in creating infrastructure that can be used by anyone, but
targeted tax abatements are a form of corporate welfare — favoring one
group of businesses over others.

In 2012, the governor and the legislature should conduct a
thorough reexamination of the state’s 61 different tax credit programs,
with the objective of channeling the savings from those that are
terminated to all Missourians – through permanent reductions in taxation.

Andrew Wilson is a resident fellow and senior writer at the Show-Me
Institute, which promotes market solutions for Missouri Public Policy.

The post The Not-So-Special Session: Lessons Learned From a Public Policy Viewpoint appeared first on Show-Me Institute.

Proponents of the so-called “Aerotropolis” tax credits argued that they would primarily help subsidize warehouse construction and facility construction in order to encourage increased international trade. Don’t get me wrong, I support increased trade. After all, that is one of the best ways to grow an economy.

But, the bulk of the Aerotropolis tax credits didn’t seem to be directed at that admirable goal. My colleagues and I were early and passionate critics of portions of the legislation that didn’t appear to make much sense from a public policy standpoint.

We wondered: Why was the state considering subsidizing warehouse construction in the St. Louis area if more than 18 million square feet of vacant warehouse space was already available? Why did versions of the legislation give the mayor of Saint Louis City and area county executives the power to restrict who could receive hundreds of millions in tax benefits? Why were the construction tax credits in some cases limited to individuals and companies who owned more than 100 acres of land? Where was a substantive cost-benefit analysis?

It didn’t help that proponents of the tax credits cited conflicting, and seemingly overblown, job estimate numbers. Missourians should consider those types of estimates with skepticism. Missouri Gov. Jay Nixon made similar promises last year, when he visited Moberly to announce the creation of more than 600 jobs. The state and local governments promised public support for the development. Unfortunately, in recent weeks we have learned that the jobs have failed to materialize and the city of Moberly may be on the hook for millions in bond payments.

It bears repeating: Tax credits have a poor track record for success.

Frankly, I find it incredible that so much political effort (and taxpayer money) was spent on trying to tack a new form of corporate welfare onto attempts to implement tax credit reform. The legislature is aware that reform is needed; Nixon’s own Tax Credit Review Commission recommended cuts and sunsets to many of Missouri’s tax credit programs. Indeed, several legislators were actually part of that commission. And yet, here we are, having spent more than a month and more than $280,000.

Imagine what could have been accomplished if legislators had spent that much time and effort on accomplishing something substantive. Our state may face a large budget shortfall next fiscal year, and may have to make tough budgetary decisions as federal “budget stabilization” dollars run out. Or, what if the legislature had worked harder on passing more sweeping education reform? School choice continues to be limited to St. Louis City and Kansas City, though certainly students in Columbia and Springfield deserve the ability to choose quality schools just as much as students in urban areas.

Hopefully, the Missouri Legislature will spend less time on corporate welfare during 2012, and more time fixing the state’s worst problems.

Because of cases like  Moberly; the seemingly political provisions of the Aerotropolis legislation; and the general poor performance of tax credits, we will continue to comb through similar proposals. We will continue to argue against legislative proposals that will harm Missouri taxpayers. And, we will work to propose market-based solutions to Missouri’s pressing public policy problems.

The post A Victory for Missouri Taxpayers appeared first on Show-Me Institute.

At the time, there was an incredible amount of blowback, with the deal barely squeaking through the legislature and facing court challenges.

“The whole thing stinks,” said Indiana State Rep. B. Patrick Bauer, then the House Democratic leader. The two companies, he said, “got a heck of an unbelievable deal. We got a bad deal.”

And now, Governing magazine reports that the companies that bought the lease may not be able to make payments related to the deal. The project lost more than $260 million last year.

More astonishingly, Indiana officials say that the terms of the deal mean that if the toll road project defaults or goes into bankruptcy, the companies that bought the toll road could either find new investors, or the toll road would be returned to the state, with Indiana keeping the $3.8 billion.

In this case, it appears that the Indiana government got a pretty good deal.

Compare the case above to the news that developers are asking Saint Louis County to issue $7 million more in debt to finance the NorthPark development. The NorthPark development was also launched in 2006, during the height of the real estate bubble.

From the St. Louis Post-Dispatch:

“The developers are not only seeking to refinance the mortgage, but they’re also upping the size of it by almost 50 percent,” said Brian Tournier, director of research with Ascent Investment Partners in Brentwood, which specializes in bond investments. “And the county, ultimately, will be on the hook.”

As business owners know, the reward for taking on risk is the possibility of making a profit. The risk of failure is why so many of us do not set out to build a better mousetrap, be it Pets.com, Myspace, or Zynga.

What is so shocking about the Indiana toll road case is that it was a situation where government allowed the private sector to take on risk — for a price. If the state really won’t be held financially responsible if the project continues to lose money, then the state managed to shift all of the risk associated with the project to the private companies that invested in it.

In the case of NorthPark, it looks like the county is getting ready to take on more risk. And why, exactly? NorthPark could stand to profit if the development is successful. But if it isn’t, the county could lose. Proponents may point to job or investment increase estimates. But those numbers frequently fail to materialize.

There is no better example of what can go wrong when government takes on risk than that of the fiasco in Harrisburg, Pa. The city took on $125 million in debt to rebuild and expand its incinerator, which it hoped would become a money-maker. Instead, the incinerator project is more than $288 million in debt. The city, bankrupt as a result, has to cancel Christmas (well, its annual Christmas parade).

When you hear elected officials talking breathlessly about taking risks for the promise of money or jobs, think about Harrisburg or Mamtek, right here in Moberly, Mo. Though the jobs and investment numbers promised may be little more than a dream, the risk of failure is real.

I have to say, in light of other failures, this line from Saint Louis County Councilman Steve Stenger (D-Dist. 6) about NorthPark troubles me: “The county knew the risks going in to this development. But that’s a risk that you have to take if you want progress.”

If officials want to get into the business game of taking on big risks with the potential to make big profits, they should get out of government. In business, if you make the wrong choices and fail, you are financially responsible. When government tries to take on the risk of private businesses, taxpayers are on the hook for failure. And sadly, government officials rarely are held accountable for bad bets.

In this case, Missouri can learn from Indiana and Mamtek. A better move is to leave risk and profit to the private sector.

The post Risky Business appeared first on Show-Me Institute.

In what now appears to be standard operating procedure, Missouri Gov. Jay Nixon visited Kirksville to announce the loan and to tout the promised jobs. His office also issued a press release, stating that “with Action Fund loans, high-tech companies like Wi-Fi Sensors can create quality jobs and help jump-start our economy.”

Furthermore, according to the governor’s press release:

The loan will allow Wi-Fi Sensors to expand its operation in Missouri. Under the terms of the loan, the company guarantees the creation of 40 new jobs and new investment of $4,069,000. While guaranteeing a minimum of 40 new jobs, Wi-Fi Sensors representatives believe they may create as many as 100 new jobs through this expansion.

Sadly, the TV station visited the Wi-Fi property on Monday, and found nobody. According to its report, Wi-Fi missed its first payment to the state in November 2010.

This sounds similar to the situation in Moberly. As you’ve read on our blog, the sucralose production company, Mamtek, promised more than 600 jobs and millions in investment to the city. The state promised millions in tax credits, and the city of Moberly backed $39 million in bonds for the projects.

And yet, Mamtek recently failed to make a debt payment, leaving the city on the hook for the money, and had not created the promised jobs.

Missouri senators are planning to investigate Mamtek, according to the Associated Press. Specifically, they want to investigate the DED’s role in the project.

But our state senators shouldn’t assume that Mamtek is an isolated failure. Tax incentives frequently fail to produce the jobs promised, and there have been many state audits and incidents suggesting that all is not right at the DED. Wi-Fi Sensors looks like the latest example.

We don’t have to look too far into the past to see other failures and near failures. Late last year, a company in Cape Girardeau promised 135 new jobs — if the state would kick in about $2 million in tax credits. It turns out that the head of that company was convicted of passing more than $90,000 in bad checks.

Policy Analyst Christine Harbin wondered at the time whether she should spend her time at the Show-Me Institute running tax credit recipients’ names through the Missouri courts database to see if she found any other matches.

Then, of course, earlier this year the DED awarded millions to a company for a development project that the courts had ruled as ineligible.

Don’t even get me started on the state auditor findings that the DED was inflating business creation and investment numbers reported for certain tax credit programs.

Like Chrissy, the Wi-Fi Sensors case has me tempted to go through the governor’s press releases touting job creation to see which projects are currently operational. Sadly, for Missouri taxpayers, the Mamtek and Wi-Fi failures suggest several others may have failed.

The post Just How Many Mamteks Are There? appeared first on Show-Me Institute.

This is no rumor. What makes this story even more depressing is the fact that the reporters at the Mirror were right to ask questions: The development in question made big news recently when it left the city of Moberly on the hook for nearly $40 million in debt. This story is an especially relevant warning, because tax credit supporters have recently been touting absurd job creation and business investment numbers as a sign that the state should create more development subsidies.

During mid-2010, state and local officials raced to close a deal with Mamtek, a company that promised to build a factory that would produce SweetO, an artificial sweetener. According to the Mirror, $7.6 million in Missouri Quality Jobs tax credits and $6.8 million in Missouri BUILD tax credits were promised to the company, as well as $2 million in Community Development Block Grant funds, $800,000 in funding for job training, and $368,000 for job training.  The city of Moberly kicked in, too, providing nearly $40 million in bonds, and $500,000 in grants and services.

The total came to nearly $50 million in promised state and local tax dollars.

As is always the case with these things, a large press conference was held. In July 2010, Missouri Gov. Jay Nixon spoke to a large crowd about the Mamtek deal.

“And SweetO is about to make Missouri’s economy a just a little bit sweeter, too,” Nixon said then. “Because Mamtek will be creating 612 new jobs and investing $46 million in capital.” He repeated: “612 jobs, they’re investing $46 million.”

Understandably, the Mirror was curious about the promises touted. As editor Janet Morales wrote, the Mirror wondered about the employment numbers and asked whether it might make more sense to use an existing vacant facility instead of building a new one.

But answers were less than forthcoming. Morales wrote that Mamtek wouldn’t answer her question, and directed her to the local Chamber of Commerce. Morales writes that the “[executive director of the chamber] told me not to ask questions or Moberly could lose the Mamtek company.

In the fall, Morales writes that she was informed that area merchants had been told about the Mirror‘s “investigation,” and that they were warned not to advertise with the Mirror. Seeing that businesses were no longer interested in subscribing to the Mirror and that the paper would soon close, the Mirror decided that it might as well investigate the Mamtek deal in its last month.

Some of the Mirror’s unanswered questions and concerns sound strikingly familiar to our questions regarding the Aerotropolis subsidies. Why were there conflicting job estimates? Where were the supporting documents? Why was there such a rush to get the deal approved? Proponents said that their Chinese business interests were involved, but the Mirror was unable to locate them, or anyone who was familiar with Mamtek’s operations in China.

As I already noted, this story does not have a happy ending. The Mirror is gone, though it still hosts the Mamtek story on its homepage. A nearby paper, the Marshall Democrat-News, covered the Mirror‘s closure, noting that Marshall had also considered the Mamtek deal, but considered the public support requested for the project too great. The executive director of the Marshall-Saline Development Corporation told the Democrat-News that “…Moberly offered them $15 million and took (Mamtek) off the market. That was part of the deal. I wouldn’t do that. I wouldn’t ask the city to do that.” He added “I’m not sure it’s legal.”

It now appears that the city of Moberly is on the hook for the nearly $40 million in bonds it issued for the project. And, sadly, it appears that state and local officials have not heeded the Mamtek warning. There is still an effort to expand tax incentive deals in Missouri.

Some critics of the Show-Me Institute have dismissed our concerns about the Aerotropolis tax credits because, sometimes, tax credit deals and public partnerships “work.” Well, a broken clock is right twice a day. There will always be successes. The question is, what level of failure are we willing to pay for in order to attain those successes? Sometimes, in public policy matters, failure is a rarity. But it has been well-documented that tax incentive deals frequently do not deliver the results that were promised.

So, I wonder, how many Mamtek-type failures are tax incentive proponents willing to trade for the chance of success?

The post The Moberly Mirror: Pressured For Asking Too Many Questions About Tax Handouts appeared first on Show-Me Institute.

A company that promised 600 jobs and drew Gov. Jay Nixon to Moberly to announce $17.6 million in state aid is in financial trouble and could potentially stick the city with payments on a $39 million bond deal.

Mamtek International Ltd., a company with Chinese and American ownership, planned to make sucralose, a zero-calorie sweetener at the facility. The $65 million deal, ballyhooed at the start by former Gov. Bob Holden, chairman of the Midwest U.S.-China Association, was put together in 73 days last year and was supposed to include $8 million in private investment.

Moberly issued $39 million in bonds to build the Mamtek factory, buy and install the equipment and take care of other items necessary for the company to begin production. It was supposed to have put 116 people to work — perhaps as early as late last year, according to early reports — and double that employment within 18 months.

China Law Blog is a website operated by Harris & Moure, pllc, a law firm based out of Seattle, Wash., with a China law practice. China Law Blog’s Dan Harris highlighted Mamtek’s troubles on Thursday, telling readers that “[m]any many months ago, I got a quasi-anonymous email from someone in Moberly, Missouri” regarding the Mamtek project. After a series of back-and-forth emails with the tipster, Harris determined “that the odds were that this deal would prove disastrous.”

As it turned out, the deal did prove disastrous. So what happened? According to Harris (Emphasis mine):

First, it appears that got overly excited about the possibility of getting Chinese money. It appears it fell prey to the classic “China is rich. We want money. Therefore this is a good deal” syndrome. Second, it appears nobody conducted adequate due diligence. Were the very valid suspicions of my e-mailer ever checked out? I doubt it. I have no idea if my e-mailer ever raised her/his suspicions with City Hall, but having dealt with governments, I can only imagine how they were treated. Can you say groupthink? Third, the deal was rushed. The Columbia paper noted how it all went through in “73 days, far less than the six months or more usually needed to conclude such a deal.” Rushing a deal does not mean it will fail, but it certainly increases the chances.

Governments are responsible to the people for the public money they spend and the public credit they extend. Especially in a down economy, governments will oftentimes risk a little — or more likely, a lot — of both to get the “jobs, jobs, jobs” flowing. The problem, of course, is that governments have a terrible track record of picking economic winners and losers. Unfortunately for the city of Moberly, that’s a lesson residents now know all too well.

The post China Law Blog on Mamtek: “[T]here are some lessons to be learned” appeared first on Show-Me Institute.

Well, let’s not rush to do something drastic just because Kansas is set to award $47 million to a company.

Tax credits are especially bad public policy because they frequently fail. Just this week, a company in Moberly made news because it looks like the company will default on $39 million in city-backed bonds. You may remember the company, Mamtek, because politicians promised the company would create 600 jobs, the state was set to award millions in tax credits to the company, and because Missouri Gov. Jay Nixon traveled to Moberly to announce the job creation.

Unfortunately, after a newspaper was pressured to close because it was asking too many questions about the tax incentive deals, Mamtek appears to have failed. Clearly, the promise of tax credits isn’t a guarantee of investment and job creation.

If Missouri legislators are so eager to copy Kansas’ policy of awarding tax credits, they might want to look at Michigan. More than $33 billion in tax incentives each year are awarded in Michigan, and yet the state has a dismal job rate and incredibly depressed economy. Just last year, Michigan announced the creation of more than $1 billion in tax credits alone.

Certainly, if tax credits resulted in tremendous economic growth and job creation, Michigan would be on the right track. It is not. In fact, the Mackinac Center for Public Policy, a research institute in Michigan, surveyed Michigan tax credits over a 10-year period and found that in more than 90 percent of cases, tax credits failed to deliver on promises.

It has been shown again and again: Tax credits fail frequently, and in many cases, taxpayers are stuck with the tab.

Remember Liberty Mutual? The company is still eligible to receive “Quality Jobs” tax credits from Missouri, despite the fact that it issued pink slips to many of its employees this year. Those employees were told that they could apply for lower-paying jobs at the company.

Furthermore, the argument that tax credits are just a way of returning one company’s tax dollars to it is incorrect. Tax credits are transferable, meaning that they can be sold. What this means is that a company can receive an enormous tax credit, of say $10 million, even if the company’s tax bill is only $100,000. The company can sell the remainder of the credit to someone else, and use the cash.

Transferable tax credits mean that the taxes that you and I pay subsidize tax credit projects like the “quality jobs” being created at Liberty Mutual.

Look, I understand legislators’ concern: A company is leaving Missouri for Kansas. But should we panic? Kansas has offered AMC $47 million. AMC says it will bring about 400 employees to the state. That comes out to a subsidy of more than $100,000 for each job brought to Kansas.

Maybe those jobs aren’t worth all of us chipping in more than $100,000 for each one, especially given how frequently tax credits fail to deliver on promises. Instead, we should focus on what does work. Let’s lower tax rates for everyone, instead of just the favored few. Lowering the state income tax or Saint Louis’ and Kansas City’s earning taxes would be a great place to start. Let’s get rid of unnecessary regulations and licenses that do no good, like limitations on taxi cabs, removing barriers to becoming a veterinarian, or by allowing dental therapists to provide dental care to rural and low-income Missourians.

It’s easy to call attention to a single company that moved across state lines because it could get a better deal. But let’s not forget all of the individuals and companies that stay in Missouri because of what this state does have to offer.

The post A Bidding War Where Everyone Loses appeared first on Show-Me Institute.

Day envisions the possibility of a continuous urban corridor between Saint Louis and Kansas City, which would expand past Missouri east through Ohio, and become one of the nation’s primary urban corridors. In this model, a high-quality roadway connects major urban areas to one another, with economic activity naturally springing up around, and supporting, the area between major cities. In order for Missouri to regain its former status as the crossroads for the movement of people and goods across America, it needs to address the long-run congestion and capacity issues along I-70. A multi-level plan is required to best address the long-term projected transportation needs of the future, and to allow for economic growth in the heart of Missouri.

The current Highway 50 south of the Missouri River could be upgraded over time to interstate standards, as it already is near Jefferson City and for parts east of Kansas City. This, as envisioned by Day, would be I-70 South. The current I-70 could largely remain within its current footprint. The most important improvement would be to construct a new I-70 North, including both a highway and railroad tracks for freight and passenger trains. This new highway would allow for economic growth in cities such as Mexico and Moberly, as well as being as excellent train route. A new train route north of the current I-70 would be ideally suited for maximum efficiency, because of the flat and open nature of the land there. Day points out that, with improvements in railway technology, movement of freight by train is much less expensive, and yet safer, than moving freight by trucks, as is common today.

Day identifies two aspects of current plans by the Missouri Department of Transportation (MoDOT) for I-70 that he thinks may limit opportunities for growth. First, any plans to finance the improvement of I-70 by primarily relying on gasoline taxes will face funding difficulty in the future, because technological advances in fuel efficiency and other possible changes will substantially reduce gasoline tax revenues. It could be an even worse idea to move from using gasoline taxes for transportation infrastructure to using sales taxes, because it would move funding even further from a user-pays model of inter-city travel, to a plan where senior citizens who no longer drive would have to pay as much for highways as daily suburban commuters.

Day believes that Missouri needs to meet its future transportation investment demands by increasing our use of user fees and public-private partnerships. The user fees would enable a system in which those who use the road pay for it. Public-private partnerships could, in the long run, allow for the required financing to meet future demands, by bringing the efficiency and resources of the private sector to the public sphere.

Of course, “user fees” is another way of saying “toll roads.” There is nothing to fear from that. Modern electronic tolling has eliminated the need for inconvenient — and sometimes dangerous — toll booths. A three-pronged expansion of I-70, financed privately and funded through tolling, is the preferred method for expanding our highway and our freight capacity.

The other concern, according to Day, is MoDOT’s current focus on truck-only lanes to increase the freight capacity of I-70. Choosing to concentrate on trucking for freight movement ignores the demonstrated advantages in cost and efficiency of freight rail. Modern freight management techniques have substantially reduced delays in train yards, and the engineering advantages of steel-on-steel over rubber-on-asphalt are well-known. Day reports that railroads are capable of moving one ton of freight at the equivalent rate of 400 miles per gallon of fuel.

As another Show-Me Institute scholar, Randal O’Toole, has noted, freight rail has long been the least-subsidized major form of transportation in the United States. MoDOT’s plans for truck-only lanes would continue the subsidy advantages that America has long given the trucking industry. But why should the trucking industry be subsidized over other forms of transport, which may better fit Missouri’s ongoing needs?

Day does not envision a top-down imposition of his urban corridor plan. He intends his case study to start a discussion throughout Missouri, about the best ways Missourians can invest infrastructure dollars to get achieve greater economic growth. If we allow for the possibility of private investment, those infrastructure resources expand significantly. During the past decade, MoDOT has proven itself to be a top-level transportation organization. Day hopes that his ideas will become of part of their conversations, too.

David Stokes is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Private-Sector Investment Could Build Innovative Urban Corridor appeared first on Show-Me Institute.

The state of Missouri awarded Mamtek $7.6 million in Missouri Quality Jobs Program tax credits and $6.8 million in Missouri BUILD program tax credits, [the governor’s] office said Friday. The state also provided $2 million in Community Development Block Grant Industrial Infrastructure Program grant funds; $800,000 in funding for job training; and $368,000 for employment recruitment and referral services.

Wait, I’m confused. Wasn’t this incentive package endorsed by the same person who supported limits on Missouri tax credits in April? Isn’t this the same person who the Associated Press described as “cutter in chief” in May? If cutting such expenditures is a good idea, it’s important to maintain that position with more consistency, especially in the face of political pressure to the contrary.

The post “Doesn’t Anybody Notice This? I Feel Like I’m Taking Crazy Pills!” appeared first on Show-Me Institute.