On November 4, Springfield voters will decide on a proposal to increase the city’s hotel tax by three percent. The proceeds from the new tax will help fund a new convention center for the city. A recent report paid for by the Visit Springfield tourism bureau said exactly what Visit Springfield wanted it to say: that a new convention center will generate enormous revenue for the Springfield area. The report claims a new convention center will drive $1.3 billion in new spending over the next 30 years. Exaggerated estimates like this one have been made on behalf of convention centers all around the country for decades, and the historic evidence is clear that Springfield voters should be dubious of such claims.

Between now and November, Springfield residents who visit St. Louis should drive by the largely empty dome attached to St. Louis’s downtown convention center to see how these convention center promises often play out. That dome was a part of a large convention center expansion in the 1990s. The same promises of growth, revenue, and utopia were all made when St. Louis voters approved a similar hotel tax increase back then. Now the dome is mostly empty, and the regional body that manages it is struggling to pay for its upkeep. St. Louis’s local tourism agency thinks the solution is the same thing it always is: further expansion of the convention center. Like a Cold War general in a Kubrick movie or a carpenter with a box full of nails, tourism agencies have the same solution for every problem. Economic recession? Expand the convention center. Economic growth? Enlarge the convention center. Global nuclear war? Definitely gonna need a bigger convention center to commiserate in.

The increased hotel tax isn’t the only public money being used as part of this plan. Other local sales taxes are slated to be used for funding, and state tax dollars are being considered. Tourists, Springfield residents, and possibly all of Missouri will get to pay for this new event space, whether it is actually needed or not.

Haywood Sanders is a researcher and writer with the University of Texas–San Antonio who has studied convention center expansions for decades. He has documented how cities and tourism agencies systematically inflate projections to get these projects approved. Sanders has reviewed the Springfield convention report and noted in an interview with a Springfield News-Leader reporter earlier this year that the report didn’t state how it calculated its room occupancy estimates and ignored underwhelming numbers of comparable convention centers in Overland Park, Kansas, and St. Charles, Missouri. Sanders states that the convention-center industry peaked in the early 2000s and shows no signs of returning to the success it enjoyed back then. With two major convention areas so close by in Branson and Lake of the Ozarks, a new center in Springfield will face intense competition. But I have no doubt that local Springfield convention-center boosters will ignore reality in their quest for tax revenue and city spending.

Visit Springfield wanted a report that claims a convention center will be an economic boon for the city. They got it. As Springfield residents prepare to decide on the hotel tax increase proposal, they should study the work of Heywood Sanders and others to learn about how these claims have been made about many other convention centers in many other cities, and how they usually fail. Springfield voters can also go to St. Louis to see the failures of these promises with their own eyes. Taxpayers should not be on the hook for convention centers whose overstated benefits, such as they are, will largely go to private entities. This is the Show-Me State, and the claims being made by supporters of the convention center for Springfield should be met with a healthy dose of skepticism by voters.

The post Springfield Voters Should Be Skeptical About Convention Center Claims appeared first on Show-Me Institute.

A 2003 Clemson University study by economists Robert Baade and Victor Matheson puts this into stark perspective. They looked at the 1994 World Cup, hosted in the United States, and found something shocking: Instead of the $4 billion economic boost that event advocates promised, host cities actually lost between $5.5 billion and $9.3 billion. Let that sink in. Instead of making money, these cities were left holding the bag for billions in losses.

The report lays out the problem:

1. Stadium Spending is a Black Hole – FIFA demands that host nations build or upgrade multiple stadiums, often at obscene costs. South Korea and Japan spent $4 billion for the 2002 World Cup. Many of those stadiums are underused today, costing millions just to maintain.
2. The Tourists Don’t Come – One of the biggest myths is that these events bring in a wave of free-spending tourists. In reality, regular tourists stay away to avoid inflated prices and congestion. The net impact is often negative.
3. Jobs? What Jobs? – Yes, major events create work—but mostly low-paying, temporary jobs that vanish once the event is over. Meanwhile, businesses that don’t cater to event-goers—restaurants, retail, theaters—often see a drop in revenue.
4. FIFA (or the IOC, or the NFL) Walks Away with the Money – The real winner? The governing body that runs the event. FIFA collects billions in ticket sales and sponsorships, while host cities are stuck with the bill for security, infrastructure, and maintenance.

The World Cup is far from the only culprit. Cities and nations have been burned time and again. The 2016 Rio Olympics left Brazil with $13 billion in debt, abandoned venues, and zero lasting benefits. The 2014 Sochi Winter Olympics cost $50 billion, much of it wasted on corruption and vanity projects. The Super Bowl, despite constant hype, has been shown in multiple studies to provide a fraction of its promised economic impact.

Politicians and event boosters always paint the same rosy picture. They promise jobs, economic growth, and global prestige. But the reality, as study after study has shown, is that these mega-events rarely—if ever—pay off.

If a city really wants to strengthen its economy, it should focus on investing in infrastructure, public services, and policies that support small businesses and long-term growth. Chasing after one-time spectacles that benefit global organizations far more than local residents is a mistake.

So the next time you hear about a city bending over backward to host the World Cup, the Olympics, or any other mega event, ask the hard question: Who actually benefits? If history is any guide, it’s probably not the taxpayers.

The post Mega Events Fail to Deliver: World Cup Edition appeared first on Show-Me Institute.

The reality is starkly different, and we shouldn’t be surprised. Historically, the economic benefits of hosting the Olympics have been dubious, and Paris is proving no exception. Despite the €7.5 billion investment, tourism has slumped, with travelers avoiding the city due to expected overcrowding. The author of the Telegraph piece writes:

Judging by the experience of other cities, many of those supposed benefits never materialise and the host is stuck with a series of expensive developments that no one can find a use for. To take just one example, the London Stadium, constructed for the 2012 games, makes a decent ground for West Ham, but it is hard to understand why taxpayer’s cash was needed to build it.

I share this in the hopes that seeing the failed promises of big sporting events overseas will make the argument at home more palatable. These investments just don’t pan out for taxpayers, be they for the Olympic Games, the Royals, Chiefs, or Cardinals. And yes, as my colleague David Stokes wrote 14 years ago, “there is a big difference between hosting an event for which you have to build facilities, like the Olympics, and hosting an event for which you already have the requisite facilities for other purposes.” But the impact, or rather the lack thereof, remains.

Given these challenges, the author suggests a permanent home for the games. Perhaps Greece. Establishing a permanent venue could drastically reduce costs, simplify organization, and minimize corruption.

That may be a viable solution for the Olympics, but for those of us stateside, the lesson needs to be learned. These events, be they Olympics or political conventions, don’t drive meaningful economic activity. They aren’t worth expending public funds on.

The post Sacre Bleu! Sporting Events and Stadia Don’t Drive Economic Development appeared first on Show-Me Institute.

The Populous slide deck (available here) is dedicated to the problems facing Kauffman Stadium, including the infamous Alkali-Silica Reaction (ASR) or “concrete cancer.” The deck indicates that when this appears, it must be replaced. The report also highlights problems facing several parts of the stadium and concludes “the age of the building systems and outdated technology will force replacement of major mechanical, plumbing and electrical systems as their service life expires.”

The final slide lists the renovation cost estimate as $1.072 billion. That is more than the new ballpark cost estimate of $1.005 billion. These estimates suggest that a financially prudent decision would be to build a new park.

But wait . . .

On page 9 of the term sheet the Royals presented to Clay County on September 28, 2023, the cost of a new ballpark in North Kansas City is listed at $1.277 billion. That’s 27 percent higher than the Populous estimate of $1.005 billion. That increase may be due to inflation, which would also affect the cost of repairing the K. We don’t know the projected costs of the plan to build a stadium in the Crossroads district that voters rejected on April 2 because no one will tell us. We also don’t know the cost estimates of building in the East Village.

Unfortunately, there is so much we don’t know about these proposals. The Star reports that the city manager is now in talks with both the Chiefs and the Royals and that a public vote may not be necessary. It would be a shame if the lesson that new stadium proponents learn from the April 2 vote is that the public should be even less informed and involved in how the city spends tax dollars.

The post Documents Give Conflicting Numbers on the Cost of a New Stadium appeared first on Show-Me Institute.

Phase 1: Build the Kansas City Streetcar and make it free to ride.

Phase 2: Spend $25,000 to wrap a streetcar in a Barbie theme:

Kansas City, Missouri, unveiled a Barbie-themed streetcar, dubbed the “Dream Streetcar” earlier this month. The streetcar is decked out in familiar bubblegum-pink wrapping and even rewrites the city’s name as “Kensas City.” A lucky passenger can even choose a seat decked out to resemble characters from the recent Barbie film, like “Stereotypical Barbie, President Barbie, Cowboy Ken, and even Allan.”

Oh, and the whole thing cost taxpayers $25,000.

According to records obtained by KCUR, Kansas City’s NPR affiliate, the hefty public spending is due to the fact that the Dream Streetcar is not actually a sponsored ad for the blockbuster Barbie movie that premiered in July. Instead, it’s a project by the Kansas City Streetcar Authority (KCSA) to increase ridership, even though the streetcar is free to ride.

Phase 3: . . . Profit?

I’m of course kidding about “profit” even being a consideration here—this is government after all—but it is off-putting to see precious taxpayer resources being spent so frivolously. Ridership numbers on the streetcar have no bearing on anything except maybe the egos of city officials. Hit the link, too, for quotes from yours truly and Show-Me Institute alumnus Patrick Tuohey, now at the Better Cities Project.

The post Welcome to “Kensas City”: Barbie-Themed Streetcar Wrap Costs Taxpayers $25,000 appeared first on Show-Me Institute.

But boy, is there a lot of spending—some of which might be justified, such as expanding Interstate 70—but the emphasis on expanding government made the speech basically indistinguishable from a speech by a tax-and-spend liberal. The governor didn’t propose a single meaningful change to the state’s failing education system or suggest a single reduction in government. Nothing about further tax cuts. Nothing about anything truly aspirational, reform minded, or geared toward good governance at all.

It’s understandable that the governor would want to pursue some form of legacy initiative or project near the end of his final term. Frankly, redoing I-70 should be plenty. But programs that permanently expand the reach of Missouri’s welfare state—like a universal pre-K program that the Heritage Foundation has eviscerated time and again—run completely against the small government view that many politicians in Missouri had historically given lip service to.

Perhaps in future speeches and press availabilities, the governor will expand upon his State of the State remarks, adding back in some of the reform-minded small government conservatism.  The legislature has been advocating for a variety of these small government reforms, and I thought the governor’s office was in agreement. The governor can, and should, do better.

The post Missouri’s State of the Bloating State appeared first on Show-Me Institute.

The image below outlines the four spending options and how they all change behavior.

Spending your money on yourself is when you economize (reduce expenses) and seek the highest value, as you are both the one losing the money and receiving the product. The exact opposite is spending someone else’s money on someone else. You don’t economize or seek high value because it is neither your money nor do you receive the product; you have very little invested in the decision.

Unfortunately, that’s the scenario that most closely resembles lawmakers spending stimulus money; it’s someone else’s money that they are spending on someone else. Of course, lawmakers are always spending someone else’s money in the form of tax dollars, but stimulus money is even farther removed because it doesn’t just come from their constituents.

This theory doesn’t paint a promising picture for spending the billions of stimulus dollars that Missouri received. Taxpayers do not want billions of dollars being spent in a way that is inefficient and wasteful. Lawmakers will need to be mindful of this incentive structure when deciding both what to spend these one-time funds on and whether to spend some of these funds at all.

The post Milton Friedman’s Theory Casts Doubt on Responsible Stimulus Spending appeared first on Show-Me Institute.

If the numerous initiatives introduced in this plan are privately funded, great! Individuals and businesses are free to invest in these initiatives if they deem them worthwhile investments. However, if this plan calls for public dollars, taxpayers should be wary. What is the plan for funding initiatives like the Brickline Greenway or lofty goals like an “entrepreneurial surge?” There is some mention of “public capital” and “sizable investments” in various organizations, but taxpayers ought to have a clearer explanation, especially if their tax dollars will be diverted to these projects.

Spending taxpayer dollars on vague endeavors is not the solution to St. Louis’s woes. The creators of this plan claim it will help St. Louis’s economy, yet there is no mention of things that research shows have positive effects on a city’s economy, like lowering taxes or lessening regulations. Recent population estimates show a decline in both St. Louis City and County, continuing a trend that’s been going on for years. St. Louis needs real policy reforms to pull the city out of its slump and the STL 2030 Jobs Plan simply doesn’t deliver that.

The post The Plan Without a Plan appeared first on Show-Me Institute.

St. Louis County Executive Sam Page has proposed an $848.5 million county budget for 2021 that includes $4.3 million in pay raises for county employees, a big funding boost for the police department and no job reductions or cuts to services.

The plan called for pulling back spending just 2% from this year’s budget despite a projected 9.5% shortfall in revenue this year from the coronavirus and an abundance of uncertainty about the county’s ability to recover.

But wait—how is the county going to account for the 9.5 percent shortfall in revenue mentioned in the article? Tax increases, of course:

Page told the council in a four-page letter on Friday that the county needed to “identify additional revenues” to sustain existing programs, including increasing the property tax rate either by a council vote or a ballot initiative.

The county could also see a $10 million annual boost in sales taxes, he wrote, if the state Legislature were to pass legislation allowing the state and its municipalities to begin collecting taxes on sales in the state from out-of-state vendors.

Why raise taxes on citizens already struggling in the midst of an economic calamity instead of looking carefully for cuts? In the Post-Dispatch story, a county official is quoted saying that cuts “generated a whole bunch of bad outcomes. So, ultimately, none of those were accepted.”

It’s possible that some service cuts aren’t feasible and really would harm citizens. But the idea that there’s simply nothing in the budget that can be cut doesn’t pass the smell test. We already know one area where the county misuses gobs of taxpayer money: economic development policy.

One does not need to strain to find examples of the county wasting money in this fashion.

Just a few years ago, in a plan to revitalize part of North County, St. Louis County negotiated a lease for the former Northwest Plaza mall that could cost the county up to $77 million. Serious questions were raised about the negotiation process, which led to ethics hearings. A member of the county council has since called the lease “obscenely long and overpriced,” and the county is now enmeshed in litigation while trying to break the lease.

The county also contributed millions to the farcical, doomed-from-the-start Loop Trolley project, which last December financially imploded after barely a year of operation. And the county regularly subsidizes smaller projects that don’t make headlines. Last year, the county and the City of Hazelwood together spent millions in a scheme to redevelop the decaying St. Louis Outlet Mall. Late last year, St. Louis County doled out more than $4 million to HVAC company Johnstone Supply to help it build a new headquarters in Earth City.

Institute analysts have spent years documenting the problems with these projects, which often lack accountability and oversight, allow government to pick winners and losers, and shift risk from private investors to taxpayers. But most importantly: They simply don’t work, frequently failing to deliver promised benefits.

While those mistakes have already been made and the money already spent, the county is taking the wrong approach here. Why should taxpayers entrust a government that has been a poor steward of their dollars with more money? St. Louis County should work harder and more transparently to find opportunities for budget savings before asking its citizens to pony up additional taxes.

The post St. Louis County Should Find Budget Cuts Before Hiking Taxes appeared first on Show-Me Institute.

Show-Me researchers might argue there is never a good time for government handouts such as this one, but times like these should add even greater scrutiny to government actions. We need to be disciplined about government priorities and reel in needless spending on projects that ought to be privately financed. This deal means that the government will lose out on $5.7 million it could otherwise spend on the needs of Missourians, and maybe more if the stadium garners additional subsidies in the coming years. We can all probably think of a few uses for that money right now.

Sure, the soccer stadium may give us hope for a time when social distancing is a thing of the past, but private endeavors shouldn’t be funded with government incentives. It’s unfair that some developers get tax credits while others pay in full; the government is again picking winners and losers, and this time the owners of the MLS franchise are the winners and taxpayers are the losers. If a project such as this needs government assistance to be built, then maybe it isn’t such a good idea in the first place.

Whether or not you support assistance to the soccer stadium, the question remains: Is this really the time to be carving out special deals for wealthy team ownership when our attention should be focused on so many basic needs?

The post The Absolute Worst Time to Ask for a Stadium Incentive Package appeared first on Show-Me Institute.

According to the study, the assessment is based upon:

. . . data that states submitted to the federal government, [and] ranks each state’s highway system in 13 categories, including traffic fatalities, pavement condition, congestion, spending per mile, administrative costs and more. This edition of the Annual Highway Report uses state-submitted highway data from 2016, the most recent year with complete figures currently available, along with traffic congestion and bridge data from 2017.

The write up specific to Missouri is here, and it is worth reading in its entirety. While some states spent in excess of $200,000 per mile, Missouri maintained a high rating while just spending under $24,000 per mile. This did not come at a cost to pavement condition, where Missouri ranked higher than some of the states that greatly outspent us.

It’s also worth noting that Missouri scored the worst on bridges (40 out of 50). Some good news is that the governor just announced a federal grant of $20 million to address exactly that.

My colleagues and I have written a great deal about the need to increase MODoT revenue and have suggested some possibilities. Advocates of restrained government are right to demand that government spend existing money wisely before seeking more revenue. This report from Reason suggests that MoDOT is being more responsible with taxpayer money than other states.

The post Some Good News Regarding Missouri’s Highways appeared first on Show-Me Institute.

The expenditure is questionable when you consider that less than half of one percent of the city’s population currently uses the bike lanes. Even worse, the bike lanes might be introducing a new set of safety risks.  

Drivers have had concerns about the safety of Kansas City’s new parking-protected bike lanes since the pricy installation began, including complaints about limited visibility and dangerous intersections. If 311 complaints about near-misses and crashes weren’t enough, a near-fatal accident seems to have highlighted the problems.

A crash occurred on May 11 along Armour Boulevard after a driver whose view of oncoming traffic was obstructed by the bike lane was struck by another vehicle. Her Chevy Suburban was flipped on its side, and a responding police officer told her family members that they likely would have been planning their daughter’s funeral if not for the size of the vehicle she was driving.

This driver was lucky that she was in such a large vehicle, but what if that had been a smaller car? Or, even worse, what if that had been a cyclist crossing through one of the intersections or into turn lanes? Limited visibility is not just a problem for cars; it poses a major risk to cyclists in certain sections of the lane.

In response to the accident, a spokesperson from Kansas City Public Works stated:

[W]e plan to make sight line adjustments and add vertical delineators as part of the [safety] pilot here in a few weeks. We are still working on timing and date details. Depending on neighborhood feedback and the impacts of the pilot location, we will coordinate with the Parks Department to make those modifications along the corridor.

Really? It is going to take a “few weeks” to install a No Parking sign (“vertical delineator”) at a dangerous intersection in the wake of a serious accident. I probably shouldn’t be surprised, considering that the promised pilot program to investigate and address safety programs along the route has been delayed for months.

Safety improvement plans are all well and good, but shouldn’t a problem as obvious as lack of visibility have been addressed before the city started funneling money into this project? If taxpayer money is going to be put toward infrastructure like this, all elements need to be thoroughly considered in advance, including the safety risks. Will the city address these concerns before they spend money on lane expansion? I hope so.

The post When Will Kansas City Officials Address Bike Lane Safety Concerns? appeared first on Show-Me Institute.

The level of services provided and the types of taxes or fees collected to fund those services differ from city to city. My newest paper, “Breaking Down Expenses and Revenues: Kansas City and St. Louis Compared to Six Other Cities,” updates two previous Show-Me Institute case studies to shed light on the revenue collection and spending habits of St. Louis and Kansas City.

The six comparison cities are Tulsa, Oklahoma City, Omaha, Denver, Louisville, and Indianapolis. Compared to those cities, St. Louis and Kansas City are, respectively, the second and third highest spending cities overall, and the two highest spenders on debt service.

In terms of revenue collection, Kansas City ranks first among the comparison cities in fees per resident; in fact, it collects almost as much in fees per resident as all of the other cities combined. Indianapolis is the only other city with an earnings tax, yet both St. Louis and Kansas City nearly double Indianapolis in earnings tax collected per city resident.

For further discussion of the revenue and expenditure trends of these cities, click the link below to read the entire essay.

The post Breaking Down Expenses and Revenues: Kansas City and St. Louis appeared first on Show-Me Institute.

Nine key organizations, including the St. Louis Economic Development Partnership, St. Louis Regional Chamber and St. Louis Development Corp., claim a role in economic development. They collect and spend some $78 million annually, mostly from businesses and taxpayers.

…Kansas City counts roughly 10 key entities focused on development, and spends $21 million, according to the review. Its organizations include the Unified Government of Wyandotte County/Kansas City, Kansas and Kansas City Area Development Council. Kansas City’s rankings for job growth (91st), wage growth (83rd), and high-tech gross domestic product growth (96th) were better than those of St. Louis.

Note that the combined $99 million spent in Kansas City and St. Louis is just on the staff and overhead of the organizations that offer economic incentives—it does not include the additional hundreds of millions of dollars for the incentives themselves! While Kansas City’s growth barely places us in the top half of the 200 cities studied, St. Louis fares much worse. The Lou ranks 152nd in job growth, 142nd in wage growth, and 99th in high tech GDP growth.

Despite faring slightly better than St. Louis, it appears Kansas City proper isn’t getting much for its efforts. If you look at the news release webpage of the Kansas City Area Development Council—the same folks that put together the still-secret regional bid for Amazon’s second headquarters—you’ll find ten press releases for 2018. Several of them talk about positive developments in the Kansas City “region,” but only one, TrialCard, is actually about new jobs within the borders of Kansas City, Missouri. The announcement projected 225 new jobs.

Well, maybe. A Kansas City Business Journal story at the time suggested those numbers are temporary:

The Kansas City center will get up to the 200-225 employee mark beginning around November, including temporary workers, and drop to between 100 to 150 after about February, (TrialCard VP Scott) Dulitz said. Over time, he said, activity—and the employee count—could increase.

As if to underscore the St. Louis Business Journal’s point about the money spent, the release included:

KCADC was proud to work with a number of regional partners in attracting TrialCard to the region including the State of Missouri, Missouri Partnership, City of Kansas City, Missouri, Economic Development Corporation of Kansas City, Missouri, Clay County Economic Development Council, KCP&L, Spire Energy, Cushman & Wakefield and CBRE.

The problems with Kansas City and St. Louis won’t be solved by lavish economic development incentives. Instead, city leaders need to focus on the basics: infrastructure, public safety, education and the like. There is no shortcut to success—no matter how much you spend.

The post Missouri’s Biggest Cities Spend $100 Million Annually Just to Give Away Money! appeared first on Show-Me Institute.

After all, if government can spend your money, it should be able to account for it.

It’s appropriate for government at all levels to regularly provide expenditure information to the public, and to do so in a format that is easily searchable and accessible. Consistent with this objective, and as we have already done with the state’s spending, we are sharing a “portal” for Greene County, Missouri, using information provided to us by the County, free of charge. We hope this serves as a reasonable example for political subdivisions of what 21st-century governmental transparency can look like.

The post Greene County, Missouri, Spending 2013 to 2017 appeared first on Show-Me Institute.

The post House Bill 2242 and a Statewide Municipal Expenditure Database appeared first on Show-Me Institute.

House Bill 1235 simply adds the following language to Missouri statutes:

No state land or building shall be designated in honor of an individual unless such person has been deceased for more than two years. This section shall not apply if money is donated to a state entity in exchange for the right to name state land or buildings.

If former U.S. Senator Christopher “Kit” Bond wants to give his own money to Missouri to build a bridge, or former Governor Jay Nixon wants to reach into his own pocket to build a state park, that’s fine. But spending taxpayer dollars is different, and rewarding individual politicians for doing their official duties by naming public assets after them—at least  while they’re still alive—seems a questionable practice at best.

In fact, why not extend the same restriction on all political subdivisions. To me, Emanuel Cleaver II Boulevard is just . . . tacky. Shouldn’t  taxpayers  be confident that those who spend their money are not seeking fame and self-aggrandizement? House Bill 1235 helps get us there.

This is a revised version of the original post.

The post What’s in a Name? appeared first on Show-Me Institute.

Why the separation? Austin and I looked at the how various aspects of Missouri’s fiscal policy evolved over the past three decades, and we examined some possible reasons. For example, some people contend that Missouri state government is not demanding enough goods and services; in other words, too little state demand is the cause of slower growth. This view is discredited by the fact that state spending as a fraction of total income has been trending slightly upward. Government spends money less efficiently than the private sector, so the increase in state spending may have been part of the cause of Missouri’s anemic economic growth. In any case, lack of state demand was not the reason for the slow growth because the state’s spending as a percentage of total income has increased.

Another possible explanation is changes in the composition of state spending. In particular, spending on public welfare and health increased while spending on education and roads declined. The increased spending on social services, along with reduced investment in education and infrastructure, could account for the slower economic growth since social services amount to a transfer from one group to another while education and infrastructure are more valuable, productive forms of spending.

Did changes in revenue, particularly taxation, change? Missouri has relied relatively more on federal transfers to fund its spending since 1997. There was the 1993 hike in the corporate income tax rate, but no change in the individual income tax rate. At the state level, the sales tax base has shrunk because of statutory changes. Since we do observe a lower Missouri economic growth rate after the corporate income tax rate was raised from 4 percent to 6.25 percent, the corporate income tax is a candidate that could explain why state growth slowed.

Lastly, tax credits redeemed by Missouri state government have increased dramatically over the past 20 years. The concern with state tax credits is the return on this investment compared with the market rate of return. Remember that tax credits are state government funding specific projects while other non–tax credit projects are subject to market forces. This fact leads to the question: What is return on the state tax credit “investment?” If the state frequently offers tax credits to low-return projects, then economic growth will decline. So, we wonder if poor investment performance in the form of expanding tax credit programs might help explain why Missouri has experienced slow economic growth. In her June 2017 report on tax credit programs, Missouri State Auditor Nicole Galloway estimated that “$418 million in fiscal year 2016 redemptions (73 percent of total redemptions) were for programs with benefit/cost ratios less than 1.0, meaning the program returns less to the state than it costs.”

Overall, our research does two things. First, it demonstrates that Missouri economic growth veered into the slow-growth lane about 20 years ago. Second, it identifies factors that could account for the decline in state economic growth. While we don’t have conclusive proof of the cause, we have zeroed in on some possibilities—the growth in state spending, the shift in the composition of spending, the corporate income tax rate hike, and the growth in state tax credits—that could explain why our state is performing so poorly relative to the rest of the country. Until we have analyzed more data from around the country, we can’t allocate blame precisely among the factors we have identified. Nonetheless, at a minimum, shouldn’t Missouri abandon policies (such as tax credits) that have not been shown to produce economic growth?

Growth is ultimately about innovative things that people do. Where innovative people tend to locate does depend on the economic environment in which they operate, and that environment is determined in part by state-level policy. Whatever else Missouri state government has done in the last 20 years, it hasn’t been focused on attracting the kind of people who drive job creation and growth. That needs to change if Missourians are to enjoy an economy that keeps pace with the rest of the country.

The post Why Can’t Missouri’s Economy Keep Up? appeared first on Show-Me Institute.

 To learn more about transportation development districts (TDDs), visit showmeinstitute.org

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Let’s start with some uncontroversial data.

• The hospitality industry constitutes a small fraction of the Saint Louis economy. Less than 4% of the city’s payroll comes from the hotel and restaurant industry.
• Nearly all convention business in Saint Louis could be accommodated by existing hotel and event space. In 2015, only 9 conventions had more than 10,000 attendees. In 2016 that figure rose, modestly, to 11. For 2017, Saint Louis is currently slated to host only 10 events with 10,000 or more guests.
• The Saint Louis Visitors Commission, which runs the convention center, loses some $16 million a year.

Now let’s review convention center history.

• The Saint Louis convention center opened in 1977, underwent a $150 million expansion in the late 1980s, and was flanked by the $280 million Edward Jones Dome in 1995. The expansion and dome were promised to boost hotel “room nights”—a measure used to assess convention center success—to more than 800,000 annually. But in 1999, convention business generated barely over 200,000 room nights. In 2014, annual room nights were just over 425,000.
• Nationally, nearly every convention center expansion or renovation has dramatically underperformed. Washington D.C.’s convention center saw roughly 36% of the room nights that were projected when renovation was undertaken. Austin’s saw 47%; and Portland’s saw 44%.
• While the America’s Center and dome were supposed to be profitable ventures for the city over the long term, the public still owes some $100 million on them, and won’t pay off that debt for at least 5 or so more years.  

In short, empirical evidence suggests that the financial prospects for a major overhaul of the convention center are bleak. Perhaps that’s why no private developers are interested in funding the project. But if the private market indicates that the investment isn’t worthwhile, should taxpayers be saddled with the risk?

Convention-center boosters will object, insisting that a renovation will help the local economy, especially because a high percentage of convention spending comes from out-of-towners. This objection misses the mark in several ways. For one, demand for convention center space has remained flat over the last few decades. Is investing hundreds of millions of public dollars in a buyer’s market the best way to get windfall returns? Secondly, the tax revenue that would pay for a renovation could be used in myriad other ways that would have a much greater impact on the economy, regardless of whether that revenue came from outsiders. If we’re really interested in economic growth, why not spend the money on meaningful infrastructure or use it to provide tax relief to city residents and businesses?

The driving force behind massively expensive convention center renovations—much like sports stadiums, light rail expansions, and other “transformative projects”—appears to be a desire to rebuild the downtown core. But like most transformative projects dangled in front of taxpayers, the prospects for success are low and the costs dispersed; a small and well-connected few are given a sweetheart deal while taxpayers are left on the hook.

For what it’s worth, the economist Heywood Sanders, in his 2014 book, Convention Center Follies, devotes an entire 78-page chapter to the failures of Saint Louis’s convention center. Perhaps that, if anything, is an indication that we should be skeptical of proposals to reinvent the convention center with taxpayer dollars.

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