A student at Washington University recently opined in his school newspaper that the university should be paying payments-in-lieu-of-taxes (PILOTs) to the cities around the school where it owns property: University City, Clayton, and the City of St. Louis. A complicated question is what to do when Wash U buys homes or apartment buildings within those cities to house students or visiting faculty, and then those properties are removed from the tax rolls because Wash U is a non-profit. From an article in the Post-Dispatch:

To house some of those people, it has purchased many off-campus single-family homes, duplexes and apartment buildings – 11 in Clayton, 53 in the city and 121 in University City.

It also owns several commercial properties – with one of the largest being its 1991 purchase of the old Clayton Famous-Barr for $17.5 million. All those purchases have an impact: The university’s not-for-profit status removes them from the property tax rolls.

The residents in these buildings need police and fire protection, roads, and other public services. When a property is purchased by a university and comes off the tax rolls but still has residents, the cities continue providing services but no longer receive the property taxes. That puts cities in a bind, especially University City and Clayton, which depend more heavily on property taxes than the City of St. Louis. The Wash U writer documents how many other universities pay PILOTS for local services to their cities, including the second-best university in Southwest Connecticut: Yale.

You know who else has written about this issue? Me. I think larger non-profit organizations, such as Wash U, SLU, many senior citizen homes owned by non-profits, and others could be asked to make partial payments of property taxes to cities. As for the City of St. Louis, I definitely think that should be part of a trade-off for eliminating the earnings tax.

Without ending the earnings tax, I don’t think non-profits should be asked to pay PILOTs to the city. (Non-profits are also exempt from the half-percent payroll tax that for-profit companies pay to the city.) Wash U and SLU doctors, administrators, nurses, etc. pay plenty to the City of St. Louis via the earnings tax. University City and Clayton have no such alternative (nor should they). I think partial PILOTs by larger non-profits are a reasonable way to help fund local services so that the tax burden is not unfairly falling on local residents for services used by the non-profits as well.

The post What Should Washington University Do with All of That Money? appeared first on Show-Me Institute.

It is the best of times because, based on almost any indicator imaginable, it is the best time in human history to be alive. Just look at the decline in poverty over the last 200 years. Harvard professor Steven Pinker says that we’re living in the most peaceful time in the history of our species. The data back him up. When you consider that from the dawn of history through the year 1800 there was almost no improvement on most quality-of-life indicators, or the fact that there is no country on earth today with a shorter life expectancy than the country with the highest life expectancy in 1800, it is difficult not to feel grateful. Smallpox has been eradicated, and polio and guinea worm appear to be next, potentially saving tens of millions of lives every year. The pessimists were wrong. There are more of us, and yet we are richer and healthier than we could have possibly imagined 50 years ago.

It is the worst of times as it seems much of the fabric that has held together the interests and individuals that have made such prosperity possible is rending at the seams. Anti-Semitism appears to be on the rise, progress seems to have stalled on issues where our nation has made great strides, and a new group of our fellow citizens finds itself in crisis. Our nation is over-represented by folks at the bottom of the trunk of the “elephant graph.” Our politics are dreadful. Our universities are being overrun by people who appear to be afraid of ideas that are different than their own. Attachment to societal institutions that have long helped unite people during trying times is growing weaker each year.

It was against this backdrop that I walked into the Sprint Accelerator, a loft-like rehabbed warehouse in Kansas City’s Crossroads District. On this unseasonably hot June morning The Lean Lab, a nonprofit organization that works to develop and incubate educational entrepreneurs, welcomed its 2016 class of fellows to our fair city for four weeks of work on their nascent projects. They invited community members, educators, entrepreneurs, and researchers to listen to their pitches and give whatever advice they could to improve their projects.

Group after group took the stage, and it was hard not to be taken by their optimism. Each outlined the problem they were trying to solve: kids aren’t eating healthy food, and cafeterias waste inordinate amounts of it; foreign language instruction is based too much on memorization and not enough on conversation; crowdfunding platforms are not well designed to help teachers raise money for their classrooms; high school students can’t get unbiased information from colleges about what it is really like to go there; parents aren’t able to have meaningful conversations about what goes on in school every day with their children. They all identified serious problems, and they offered intriguing solutions. Over the course of the next month, each group will prototype and refine their products with a big final pitch at the end of the fellowship in the hopes of winning one of two $25,000 prizes.

People hoping to improve the nation’s education system could learn a lot from these budding entrepreneurs, who by and large were former teachers or had teachers on their teams. Rather than offering platitudes or infeasible plans to completely reshape the education system, they looked to solve clearly articulated, discrete problems that are right in front of them. Rather than be overwhelmed by all of the problems that face our schools and students, they focused on what small thing they could do to make the lives of kids, teachers, and parents better.

I have no idea if these products will ultimately work or not. But, if I’m being honest, I’m no more or less confident than I am about most new education reform ideas I come across. What I am confident about is that creating space for people like these optimistic entrepreneurs to solve problems is the way to maximize the likelihood that new and better schools will emerge and grow. (If you want a longer-form treatment of why I think this is the case, you can check out the introduction to Rick Hess’s and my new volume Educational Entrepreneurship Today.)

I left the building that day invigorated and feeling like my optimism is well founded. I wish all the teams, and entrepreneurial educators all around the country and world, good luck and Godspeed. I can’t wait to see what you develop.

The post The Infectious Optimism of Education Entrepreneurs appeared first on Show-Me Institute.

It is the best of times because, based on almost any indicator imaginable, it is the best time in human history to be alive. Just look at the decline in poverty over the last 200 years. Harvard professor Steven Pinker says that we’re living in the most peaceful time in the history of our species. The data back him up. When you consider that from the dawn of history through the year 1800 there was almost no improvement on most quality-of-life indicators, or the fact that there is no country on earth today with a shorter life expectancy than the country with the highest life expectancy in 1800, it is difficult not to feel grateful. Smallpox has been eradicated, and polio and guinea worm appear to be next, potentially saving tens of millions of lives every year. The pessimists were wrong. There are more of us, and yet we are richer and healthier than we could have possibly imagined 50 years ago.

It is the worst of times as it seems much of the fabric that has held together the interests and individuals that have made such prosperity possible is rending at the seams. Anti-Semitism appears to be on the rise, progress seems to have stalled on issues where our nation has made great strides, and a new group of our fellow citizens finds itself in crisis. Our nation is over-represented by folks at the bottom of the trunk of the “elephant graph.” Our politics are dreadful. Our universities are being overrun by people who appear to be afraid of ideas that are different than their own. Attachment to societal institutions that have long helped unite people during trying times is growing weaker each year.

It was against this backdrop that I walked into the Sprint Accelerator, a loft-like rehabbed warehouse in Kansas City’s Crossroads District. On this unseasonably hot June morning The Lean Lab, a nonprofit organization that works to develop and incubate educational entrepreneurs, welcomed its 2016 class of fellows to our fair city for four weeks of work on their nascent projects. They invited community members, educators, entrepreneurs, and researchers to listen to their pitches and give whatever advice they could to improve their projects.

Group after group took the stage, and it was hard not to be taken by their optimism. Each outlined the problem they were trying to solve: kids aren’t eating healthy food, and cafeterias waste inordinate amounts of it; foreign language instruction is based too much on memorization and not enough on conversation; crowdfunding platforms are not well designed to help teachers raise money for their classrooms; high school students can’t get unbiased information from colleges about what it is really like to go there; parents aren’t able to have meaningful conversations about what goes on in school every day with their children. They all identified serious problems, and they offered intriguing solutions. Over the course of the next month, each group will prototype and refine their products with a big final pitch at the end of the fellowship in the hopes of winning one of two $25,000 prizes.

People hoping to improve the nation’s education system could learn a lot from these budding entrepreneurs, who by and large were former teachers or had teachers on their teams. Rather than offering platitudes or infeasible plans to completely reshape the education system, they looked to solve clearly articulated, discrete problems that are right in front of them. Rather than be overwhelmed by all of the problems that face our schools and students, they focused on what small thing they could do to make the lives of kids, teachers, and parents better.

I have no idea if these products will ultimately work or not. But, if I’m being honest, I’m no more or less confident than I am about most new education reform ideas I come across. What I am confident about is that creating space for people like these optimistic entrepreneurs to solve problems is the way to maximize the likelihood that new and better schools will emerge and grow. (If you want a longer-form treatment of why I think this is the case, you can check out the introduction to Rick Hess’s and my new volume Educational Entrepreneurship Today.)

I left the building that day invigorated and feeling like my optimism is well founded. I wish all the teams, and entrepreneurial educators all around the country and world, good luck and Godspeed. I can’t wait to see what you develop.

The post The Infectious Optimism of Education Entrepreneurs appeared first on Show-Me Institute.

                However, government bodies are not the only institutions that pay little or no real property tax in the city. Nonprofit groups such as hospitals, schools, and religious institutions are exempt from property taxation by state law. In Saint Louis City, nonprofit groups own almost 15% of the city’s total property and account for more than 7% of the city’s total land valuation, as the map below shows:

The largest parcels owned by nonprofits are cemeteries. However, some of the most valuable nonprofit properties are in the center of the city, where Washington University, BJC Healthcare, and Saint Louis University have campuses. These hospitals and schools (or eds and meds) are some of the largest employers in Saint Louis and have combined property assessments of over $150 million (3.3% of the city’s total). Aside from well-known hospitals and schools, Saint Louis City is also dotted with thousands of nonprofit (and partially government) organizations that are exempt from property taxes. These include arts foundations, museums, clinics, business associations, and even Amtrak. Altogether, property-owning nonprofits, both large and small, remove a sizable and valuable portion of the city’s property tax base.

Look for my next post on this issue, which will explore the effects of tax breaks on Saint Louis City’s real property tax base. 

Note: The Show-Me Institute is also a nonprofit based in Saint Louis City. However, the Institute does not own real property, and therefore it does not receive real property tax exemptions. 

The post Saint Louis Property Taxes, Part 2: The Nonprofits appeared first on Show-Me Institute.

When I asked students at Confluence Academy, a charter school in Saint Louis City, the age-old question, “What are you doing this summer?” most responded with, “Chillin’.”

On the makeshift survey I had passed out to students on the last day of school, they scribbled answers such as “nothing” or “hanging out” in the blank spaces. Where I had asked, “How many hours do you plan to read this summer?” most didn’t bother, not even to write a zero. One student read the question out loud and laughed to herself. Another crinkled the paper into a ball.

“We’re in the neighborhood. We’re seeing them out unsupervised, not really having a whole lot to do,” said Beyond School Director Erin Malone.

Beyond School is one division of Mission: St. Louis, a local nonprofit in the Grove neighborhood. The organization provides fourth to eighth graders with year-round expanded learning opportunities, one of which is an eight-week summer program created to combat summer learning loss. Summer learning loss, or the “summer slide,” occurs when students from low-income communities experience little to no learning outside the academic year.

One study showed that more than half of the achievement gap between low-income and high-income students can be explained by unequal access to summer learning opportunities. Partnering with Adams Elementary, Beyond School provides low-income students with math and reading instruction, as well as access to activities such as cross-fit, improv, and musical lessons. In the fall, Beyond School will begin a new partnership with the charter school South City Prep.

While Mission: St. Louis does not charge Adams Elementary and South City Prep for its services, the partnerships serve as an example of how organizations in the public and private sector can work together to fulfill educational needs in a low-income community.

Rising seventh-grader Christian is one of 22 students currently benefiting from the summer program. I had the opportunity to listen to her read If I Grow Up, a story about the challenges a young man faces as he grows up in the projects.

“The first year I tested our students, every single one of them was behind,” said Malone, a former teacher and reading specialist. “The kids literally just need to read. They need to read books they can understand and that they can have conversations about. That’s kind of just what we do.”

On average, students gain about five months in reading proficiency during their time in the program. This means the student will advance more than 60 percent of a school year within eight weeks. Compared to no gain or sliding backward, this is quite an accomplishment.

College students, retired community members, and even off-duty teachers volunteer as tutors. “It’s a community mentality. It’s not their kids, but our kids,” said Malone, who hopes to eventually expand the program into other schools.

“If you really want to eradicate poverty, this is one of the ways,” she said.

The post Combating the Summer Slide-A Community Effort appeared first on Show-Me Institute.

Armed with a plan to create a nonprofit incubator for startups, Weber approached Saint Louis agencies to turn the former Shepard Elementary School (3450 Wisconsin) into “a kind of entrepreneurial theme park” called The Conflux. According to Weber, “the only way to make [it financially feasible]  . . . is through a combination of city, state, and federal tax credit programs.”

Is this really the only way? What about looking for investors and potential donors, exploring less costly options, or evaluating the demand for his project?

Helping entrepreneurs is indeed a noble pursuit, as they help our economy grow. But I find it inconsistent to be a strong supporter of entrepreneurs, yet act in a way that violates the true spirit of entrepreneurship. What sort of example would this publicly funded “entrepreneurial theme park” be setting for the entrepreneurs The Conflux intends to help?

This is a clear indication that our society continues to become more reliant on government assistance every day. Why else would a man who so ardently supports entrepreneurship insist that his nonprofit can only work if it has government support? Superfluous city, state, and federal government tax credit handouts perpetuate a culture that feels entitled to government aid. Still, there are countless nonprofit organizations that rely on hard-earned donations from individuals and organizations. These nonprofits work tirelessly to raise money to support a cause in which they believe — they do not simply rely on the government to fund their mission.

And most nonprofits would likely agree with Vince Lombardi when he said, “the only place success comes before work is in the dictionary.” But evidently, success also comes before work when you go seeking government subsidies.

The post Where Success Comes Before Work appeared first on Show-Me Institute.

The St. Louis Post-Dispatch recently reported the St. Louis Preservation Board’s denial of a demolition permit to Saint Louis University (SLU) to raze the vacant Pevely Dairy headquarters building at the corner of Chouteau Ave. and South Grand Blvd. (you probably recall the Pevely smokestack). SLU officials intend to build a surgical center at the site, but now claim that the historic building may scuttle their plans if the building is not leveled and removed.

Before moving on to more pressing matters, perhaps a brief review of the tax implications is in order. Saint Louis public records indicate that the two parcels in question (1001 South Grand Blvd. and 3626 Chouteau Ave.) generate approximately $93,000 in annual property tax revenues for the city. See here and here. The future tax status of the properties, however, is uncertain (I called SLU’s controller, Gregory Haney, but he declined to express his opinion or share his knowledge on the subject). If the properties fall under SLU’s non-profit status, then SLU may be tax-exempt (similar to SLU’s 200 North Grand property). On the other hand, if property ownership vests in a for-profit entity, similar to Tenet Health System’s ownership of property underlying Saint Louis University Hospital, then taxes will likely be assessed and collected.

In either case, the city still stands to gain revenues if the surgical center is developed. This would arise from earnings taxes on new jobs created at the facility (although we have advocated for the elimination of the earnings tax and for alternative payments in lieu of taxes from tax-exempt non-profits, this blog post deals with the facts and law as they currently exist). For the sake of example, at 1 percent on taxable earnings, 124 jobs at $75,000 annual salary generates $93,000 in revenues, which compensates for the loss of property tax revenues under the tax-exempt scenario, but provides additional incremental revenues to the city under the alternative scenario. In either case, both the economy and the tax base are increased, which is a good thing.

While the tax implications are interesting, perhaps the more fundamental question is why are preservationists so insistent on saving the aging Pevely headquarters building? The history of progress is replete with tear-downs and rebuilds. Progress necessarily implies creative destruction, replacing old with new. Sometimes you have to let go of the past if you are to embrace the future. The past is but a distant memory. Happiness, prosperity, and success are forward-looking concepts that reside, if at all, in the future. Saint Louis, embrace the future, not the past. The Preservation Board should reconsider its decision.

The post When Progress and Preservation Collide appeared first on Show-Me Institute.

Now watch Salman Khan discuss his online Khan Academy at this year’s Technology Entertainment and Design (TED) conference:

Khan Academy gives students engaging instruction in an expanding number of subjects, right now primarily those in mathematics and economics, befitting Khan’s background as a hedge fund manager. Of course, this makes it easier for self-motivated students to teach themselves linear algebra, but I think the real innovation of Khan Academy is the way in which it can supplement more traditional courses.

Instead of receiving a lecture at school and working on problems by themselves at home, students using the Khan Academy can watch the lecture at home online and then work through the problems at school, where the teacher can work one on one with any students who are struggling with the material. Khan Academy’s mastery assessment software also makes it easier to identify who those students are and what particular topic they are struggling with, so the teacher can use his time most efficiently.

And it’s all free! Khan started developing these courses for his cousin and discovered that he had a knack for it. Now the Khan Academy is a nonprofit, where he works full time. Even with virtual schooling programs that are developed by for-profit companies, the fact that they can be used by millions of students simultaneously means that the per-pupil costs are extremely low. We need greater experimentation in our school systems to allow more innovations like Khan Academy to spring up and spread across the world.

The post The Education of Tommorow … Today! appeared first on Show-Me Institute.

The plan to contract out the operation of the animal shelter to Stray Rescue has been canceled. The Suburban Journals has the story on the new plan here, which still involves Stray Rescue and many other animal rescue groups. Another plan had been offered by a local vet to operate the shelter as a clinic/shelter on a for-profit basis, as has been done in Kansas City. It is one thing to reject the vet’s plan, which was submitted after the deadline, when another plan involving Stray Rescue was already going forward. It is quite another to continue to disregard the vet’s idea now that plan no. 1 has crashed and burned.

I attended the news conference when the program cancellation was announced last week. I asked a health department official there if the veterinarian’s privatization proposal would be revised. She said she would be willing to talk to him, but (and this is an exact quote) “I am uncomfortable with for-profit groups.” So, in other words, the proposal — no matter how great it may or may not be — is off-limits because the veterinarian has the audacity to possibly earn some type of profit from the care of lost, sick, and abused animals.

This fear is perfectly reasonable of course, given that the for-profit bid for the animal shelter was coordinated by Drexel Burnham Lambert as part of a thinly disguised hostile takeover of the shelter, which would then be cannibalized and sold off piecemeal to enrich the financiers at the expense of the kittens. Oh, wait — you say it was actually proposed by a local vet with a long history of taking care of animals in the city of St. Louis? Well, then maybe the city should reconsider the idea. …

Seriously, only someone who has spent their entire lives working for the government could say something like, “I am uncomfortable with for-profit groups.” I am sure that the director has accomplished many worthy things during her public service, and I am sure she is a fine person, but the knee-jerk opposition to any group that might earn any type of profit is unseemly, albeit not surprising. For too many government employees, P.J. O’Rourke’s words about John Kenneth Galbraith apply:

[…] and, after 97 years of comfort and achievement in a free market society, still believed that a free market society is wrong.

The city should undertake to reconsider new proposals for the animal shelter, and for-profit ideas should be given just as much consideration as any other. Taking care of animals and making a profit are not mutually exclusive.

The post Who’s Afraid of the Big Bad For-Profit Animal Shelter? appeared first on Show-Me Institute.

The company is hoping that proceeds will cover the cost of the new facility’s food, rent, and salaries. Baked goods offered will be day-old bread from nearby St. Louis Bread Co. and Panera outlets, which will cut down on expenses. Any extra profit will be directed toward the charitable cause the chain has chosen to fund via this new venture: training at-risk youths. The company hopes to expand the new “Cares” stores across the country, under the name “Panera Cares Cafe.”

This is not an entirely new model; restaurants in Denver and Salt Lake City, for instance, also feature a “pay what you can” motto. Panera, however, has the advantage of a national distribution network, allowing the chain to use its economies of scale in order to save on costs.

Here’s the part I find most intriguing: The “suggested price” does not include sales tax, because the food customers receive is not technically being sold. This means that if a customer donates the same amount for a particular item that she would have paid at an ordinary Panera, an even larger portion can be devoted to charitable purposes than would otherwise be the case.

In a media environment that emphasizes corporate mismanagement, malfeasance, and negative externalities, St. Louis Bread Co. Cares is a great public relations move. It is also an interesting way for a corporation to give back to a charitable cause. Whether the model is sustainable will be seen over the next few months. At the very least, its initial efforts seem to be working:

[Ron Shaich, who stepped down as Panera CEO last week] converted the restaurant into a non-profit and reopened it Sunday. As it turns out, he says, the location’s revenue was actually up 20% on opening day vs. the previous Sunday.

What’s more, says Shaich, who spent Sunday and Monday at the cafe, one-third of those who ate at the restaurant left more than the suggested retail price.

I patronized the St. Louis Bread Co. location in Clayton when our office was only a few blocks away. Every time I’ve gone there, it has been relatively busy. I imagine that customer base will increase with the redesign, which may help the store increase its charitable impact. I, for one, hope that the model is successful enough to generate money for a worthy cause.

The post For-Profit Restaurant Goes Nonprofit appeared first on Show-Me Institute.

“The nonprofit groups appear to have worked well in other cities of our size, and this was kind of the route that they wanted to explore first,” Hane said.

Kansas City is among the cities where an outside group has taken control, Hane said.

The city deserves credit for its willingness to go with privatization here, but I don’t understand the favoring of a nonprofit over a for-profit model:

A veterinarian with extensive experience with animal welfare groups has proposed an alternative. He wants to run a for-profit operation at the Gasconade shelter – a proposal that runs counter to the city’s wishes.

I am not saying the for-profit idea should trump the nonprofit, just that the choice should be made according to who can best provide the necessary services, rather than whether the operation hopes to earn a profit. (The fact that the vet who wants to run a for-profit shelter was a little late in submitting his proposal should not be a big deal.) After all, the privatized shelter in Kansas City is run by a veterinarian, and is nominally a for-profit enterprise — although I think it operates in more of a gray area. I really doubt the vets who run the shelter are making a large profit doing their amazing work in caring for lost, abused, and neglected animals.

As a dog lover with great memories of Harvey, Casey, Marleigh, and other dogs my family and I have had, I love seeing the city realize that there options exist outside of the government for providing this necessary service. It is also great to see one big  Missouri city learning from another.

The post St. Louis Follows Kansas City by Moving Forward on Privatizing Animal Shelter appeared first on Show-Me Institute.

When I worked at the St. Louis County Council for Councilman (now judge) Kurt Odenwald, he chaired the council’s Revenue and Personnel Committee, which had as its primary role the study of tax exemption issues. You might be surprised to know that there is no hard-and-fast state law governing what gets to be exempt and what doesn’t. While it is obvious that a church or school is exempt, what about a nursing home that sets aside 5 percent of its rooms for charity cases? In cases like that, it is often up to the county in which the facility resides as to whether it is tax exempt. Sometimes, a promise by the applicant to make PILOTs that partially make up for the lost taxes can be an important factor in the county’s decision. I really remember this one example cited in the Post article:

Closer to home, Lutheran Senior Services, a nonprofit, gives Webster Groves $28,000 a year[.]

I remember it so well because when Lutheran Senior Services decided to make the first PILOTs to the city, school district, library district, and county, they didn’t know how to go about doing it, so they just mailed all the checks to Councilman Odenwald’s office. The next day, I had to hand-deliver all these substantial checks to various government officials — who were, not surprisingly, very happy to see me. (The process of making the payments was clarified the next year.)

A very important point in the story is found near the end:

He said cities that have an earnings tax typically don’t have PILOTs. Detroit and Pittsburgh are two exceptions.

I’ll point out that Pittsburgh depends primarily on its property — especially land — taxes, so tax exemption is particularly noticeable there. And I think that generally you always want to do the opposite of what Detroit does. Of course, St. Louis County has no earnings tax, so the PILOTs are more understandable there. (Do you ever notice that nobody ever expresses concerns about city residents who work in the county being free riders in the county? Why does it only come up as a defense of the earnings tax?)

My basic belief is that nonprofits generally receive the same services everyone else does, so I see nothing automatically wrong with them being required to pay some type of property tax. Although the Post article focuses on large nonprofits, I think it is the small nonprofits (the ones without their own security forces) that genuinely use government services like everyone else. But I would only really support these efforts if they entail broadening the property tax base so that the overall rate can be lowered — not as an excuse to raise additional taxes or fix a budget hole. Beyond that, I would only support something like it in St. Louis or Kansas City if the earnings tax is eliminated. But if that were to happen, I think requiring nonprofits to pay some type of property or land tax would be reasonable.

The post Should Nonprofits Pay Property Taxes? appeared first on Show-Me Institute.