I’ve had numerous conversations with parents of young children in St. Louis County who are trying to figure out where and how to buy a house before their child enters kindergarten. And it matters. A 1,900 square foot home with three bedrooms and two bathrooms built in 1990 will cost $240,000 in Florissant, while a similar home would cost $389,900 in Frontenac. Sure, schools aren’t the only difference between the two communities, but they’re certainly factored into that $150,000 premium.

I don’t think I even need to convince anyone of this point—parents who can will pay more money for the same house to get their kids into a school they want. Parents who don’t have the money to do that are stuck. The idea of celebrities buying a spot at USC shocks us in a way that a family scraping together the money to move to a smaller house because it’s in Webster Groves doesn’t.

The quality of a child’s education shouldn’t be connected to the real estate industry. Every parent, regardless of their background or their neighborhood, should have access to an array of choices when it comes to their child’s education.

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A system that allows parents to exercise school choice only if they move is inefficient at best. That said, parents with means learn the rules quickly and willingly blend their real estate and education decisions together. So, it’s unlikely that Hazelwood has some secret gems in its education portfolio that parents have yet to discover. Hazelwood built schools based on real estate trends that didn’t materialize. Hazelwood property owners are paying for schools with empty seats.

It’s time to break the connection between real estate and education. Parents should be free to choose a school that is a good fit for their child without moving. Schools should appeal to parents for what they offer—and if it works well for enough parents, the seats will be filled.

Luckily, we can shop at the Chesterfield Mall (or what’s left of it) and enjoy the restaurants and entertainment in the city without moving. And both of those activities pale in comparison to a child’s only shot at getting an education.

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However, even many private businesses and residences that are not tax exempt in any legal manner  receive reduced property taxes from the city or state government. The most common of these tax breaks are tax increment financing (TIF) and tax abatements. TIF allows businesses to use the increase in taxes created by their development to help pay for that development. Tax abatement allows a city to reduce or eliminate property taxes for a development. In some cases the property owner agrees to a negotiated level of payments in lieu of taxes (PILOTs) to offset part of the property tax loss (as the Cardinals have), but this is the exception to the rule. TIFs and tax abatements are often used in tandem, as is the case with the Chase Park Plaza.

The vast majority of these selective property tax breaks were designed to encourage development in economically depressed areas; many (including most TIF) require an area to be designated as “blighted” before property there can receive a tax break. However, over time these incentives have become just another tool  city officials use to attract the businesses they want wherever they want, regardless of whether the project is in one of the poorest or wealthiest sections of the city. Blight has been so loosely defined that parcels within Saint Louis City’s most prosperous neighborhoods are regularly deemed “blighted.”

A review of the city’s parcel data shows how pervasive the use of property tax breaks has become. In total, over 9% of the city’s property either receives tax abatements or is in a TIF district (not including government buildings and non-profits that fall within TIF districts). The map below shows all abatements and TIF districts:

Much of the TIF’d area is part of Paul McKee’s Northside Regeneration project, which (whatever the merits of this TIF) does contain many economically depressed properties. However, many valuable properties also receive significant tax breaks, including the Chase Park Plaza, Cortex (which includes IKEA), Ballpark Village, the Renaissance Center, and even a Mercedes dealership on Hampton. Altogether, around 18% of the city’s total assessed value is either in a TIF district or receives tax abatement. Properties in the these areas often pay much less in real property taxes than the city’s official rates would require.

Look for my next post on this issue, which will show the combined effects of government ownership, nonprofits, and tax breaks on Saint Louis City’s real property tax base. 

The post Saint Louis Property Taxes, Part 3: The Tax Breaks appeared first on Show-Me Institute.

Alex Stuckey, a reporter for the St. Louis Post-Dispatch, tweeted:

Officials with St. Louis Public Schools said they need to hold buildings back in case enrollment increases #motransfers #moleg

— Alex Stuckey (@alexdstuckey) March 11, 2015

This was in regards to a portion of the bill that requires districts to sell their vacant school buildings at fair-market value to charter schools. Here is what Brittany and I said in our testimony about the abandoned building provision:

While charter schools continue to grow in Missouri’s urban cities, HB 42 addresses the acquisition of real estate by charter schools from public schools. Overall, these schools are outperforming their traditional public school counterparts. Charter schools are doing well despite receiving less funds than traditional public schools. For example, they do not receive public funds for building expenses. Lack of access to affordable real estate often prohibits charter school expansion and the replication of quality charters. St. Louis and Kansas City Public Schools, however, both have their share of abandoned buildings. As a result, taxpayers are basically funding vacant buildings. Neglected facilities increase the risk of drug and crime incidents in urban communities. Allowing public charter schools to purchase taxpayer-owned real estate at fair-market value could increase educational opportunities while revitalizing blighted neighborhoods.

Now, here is what I find particularly interesting about the notion that St. Louis Public Schools (SLPS) needs to hold on to buildings in case enrollment increases. First, enrollment has been steadily declining since the late 1990s. Since 1999, the district has lost half of its students. The district has had to close many school buildings in that time. According to data from the National Center for Education Statistics, the district had 130 operating schools in 1991, 113 in 1999, and 77 in 2013.

Using the enrollment figures and the number of school buildings, I can compute the number of students per building. Of course, this is an average, and the actual enrollments vary. In 1991, the average enrollment per building was 333, in 1999 it was 396, and in 2013 it was 327. The enrollment today, per building, is less than it was at each of these times. In other words, SLPS buildings are no more crowded today than they ever have been.

The largest enrollment increase in the past 20-plus years was 2,684 in 2013. This was the year after the Imagine Charter Schools closed their doors. Using the average building enrollment figures, this increase is roughly the enrollment of six to eight schools.

Yet, according to information gathered by Abby Fallon, a former Show-Me Institute intern, SLPS has 35 empty schools. The district currently has 25 buildings listed for sale.

It is always nice to save for a rainy day, but saving 30-plus buildings seems a bit much. SLPS must be expecting it to pour new students! In the unlikely event that SLPS had a large influx of students, it might make sense to have a couple of buildings on reserve. Still, this hardly justifies blocking the sale of two dozen other buildings that could be put to good use as a charter school.

Charter schools paying fair-market value seems like a pretty good deal to me. There is even a strong case that charters should have access to these buildings for free. As Doug Thaman of the Missouri Charter Public School Association said, “Why should a charter school use public dollars to buy a public building that’s already been paid for by the public? It’s almost like buying your home twice.”

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You might be thinking, “Well, duh. I would sell them. Cha-ching!” Seems really simple, but the St. Louis Land Reutilization Authority (LRA) does not appear to have that same mindset.

When I met with Michael Allen, founder of the Preservation Research Office (a private historic preservation and architectural research organization) he remarked at how little advertising the LRA does for its properties. Compared to real estate agencies, LRA advertisement is practically non-existent.

Shouldn’t the LRA function in the same way as real estate agents if its goal is to sell property?

According to Janet McAfee Real Estate’s Marketing Director Chuck Roper, the Multiple Listing Service (MLS) is the primary source of real estate listing information for approved brokers in Saint Louis. LRA-owned properties, however, are very rarely listed in the MLS.

Besides the MLS, there are a variety of other ways to make information available about properties. Newspaper and magazine ads, online ads, listings on real estate websites, social media, direct mail…you get the picture. The LRA does none of these things. You could drive by an LRA property that is for sale and have absolutely no idea. Two LRA staff members gave me different replies about whether they post “For Sale” signs. One said they are put up on “selected properties.” But the other simply said, “Nope, we don’t do that.”

With the LRA, the onus is all on you, the potential buyer, to figure out the entire process to purchase a home. You have to know that the LRA exists, what it does, find its list of properties, set up your own inspection of the house, and then begin the application process.

Every year that goes by, the city pays more and more to maintain these properties. They sit vacant, collecting no property tax. With 8,000 vacant properties, the LRA cannot afford to have the attitude that these properties can sell themselves. Any real estate agent will tell you that couldn’t be further from the truth.

The post Real Estate 101 appeared first on Show-Me Institute.

Full Study, Policy Brief, and Supporting Research

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Opponents of the proposal brought up two arguments against urban chickens: First, that chickens would be dirty, noisy, and wild; and second, that chickens would lower property values. Urban chicken supporters answered both objections very well.

Opponents told horror stories about disgusting chickens, but they failed to show that chickens are any worse than the birds that already live in Columbia. If chickens harbor pestilence and filth, then so do all the sparrows and pigeons that fly around unmolested. Chicken supporters pointed out that other pets like dogs can carry disease or leave waste, and Columbia has no trouble regulating dog ownership so that most people are satisfied. No one is asking the city to ban all dogs for sanitation reasons; chickens should be equally tolerable.

The Columbia ordinance prohibits roosters, which should go a long way toward preventing noise disturbances. One Realtor who spoke predicted that wild roosters will find a way into the coops despite the owners’ best intentions. I find it hard to believe a rooster could break into a coop that, by law, is made of sturdy fencing with a wire net on top — unless the rooster had access to power tools.

Then there’s the possibility that escaped chickens will flock in the streets. Again, the opponents haven’t shown that chickens are more likely than other animals to cause problems; owners of any kind of pets can be irresponsible. As one councilman said, chickens aren’t the nuisance — people are. Those people are the exception, and Columbia can deal with them on an individual basis. Urban chicken supporters have lots of ideas for reducing the number of wild chickens: A private organization has offered to teach people how to care for chickens, and it’s volunteered to help place abandoned birds in new homes. One graduate student pointed out that unwanted chickens can be sold on Craigslist.

It’s clear that chickens are no more of a nuisance than dogs or cats. However, some Columbia residents — namely, Realtors — say that chickens are uniquely harmful because people think of them as farm animals. They claim that the chicken ordinance will lower property values, and that chickens next door to homes on the market could quash sales. These Realtors overlook the fact that the ordinance doesn’t override neighborhood associations’ covenants or landlords’ policies, which can exclude chickens. Chickens are not about to move into a community of mansions and destroy the value of the surrounding estates. And, as several commenters indicated, some people would actually prefer to buy a house in a city that allows chickens.

The only time chicken enthusiasts lost me was when they appealed to “sustainability” and “food security.” I can’t imagine how building a chicken coop could be fun, either. But whether I agree with the chicken owners’ ideology is not the point. People should be free to pursue their ideals and passions so long as they aren’t hurting anyone else. Chicken raising meets that criterion.

The post Urban Chicken Victory in Columbia appeared first on Show-Me Institute.

The Gentry’s landing apartment complex. The fence in the foreground surrounds a supporting cable for a crane that’s being used for new construction across the street.

It might sound absurd, but something very similar is happening right now in Saint Louis. The story demonstrates just how ripe for abuse Missouri’s eminent domain laws have become. And there’s little reason to think the eminent domain bill the state legislature passed in May will prevent such abuses in the future, because the “blight” loophole being used by the city was not closed by the legislation.

When you think “urban blight,” you probably don’t think of the downtown Radisson. The Radisson is one of three skyscrapers built on land leased from Florida real estate developers John and Joe Seravalli. The other two are apartment buildings: the Mansion House and Gentry’s Landing. The owners of the buildings pay rent for the use of the land under leases that last for decades.

A view of the Mansion House apartment as seen from the “blighted” courtyard that lies between the Mansion House and Gentry’s Landing.

Gentry’s Landing is owned by Integrity Real Estate, headed by Peter McCann. For years, McCann has expressed interest in purchasing the land under his building from the Seravallis in preparation for building renovations, but they have not been able to agree on a price. In 2001, McCann began hinting that if he didn’t get a “reasonable” price, he might ask the city government to condemn the land and turn it over to him for redevelopment. Those threats became more overt in 2005, with warnings that he would have “no choice” but to pursue condemnation of the land if a deal was not reached. When the Saravallis continued to refuse McCann’s terms, McCann made good on his threat. On April 28, 2006, the city of Saint Louis notified the Seravallis that they would have to sell or have their land seized using eminent domain.

The neighborhood in question does show some signs of neglect. The city declared the area to be blighted back in 1989. Today, retail space along the street includes a payday loan shop and a couple of vacancies. The Gentry’s Landing apartment building is beginning to show signs of age. But it’s not obvious why the blame for those problems should fall on the Seravallis, who only own the land underneath the complex, rather than McCann, who owns and operates the facility itself.

The lobby of the “blighted” downtown Radisson hotel, on the same block as Gentry’s Landing.

The Seravallis contend that the reason is politics: that McCann and the city are conspiring to take their land for below its fair market value. They have filed suit against the plan, asking why, after 17 years of inaction, the city has suddenly become interested in redeveloping the neighborhood.

The story illustrates how precarious property rights have become in Missouri. Property rights should not depend on whether you have connections in city hall. The eminent domain legislation passed in May is unlikely to solve the problem. The legislation does require that blight determinations not be “arbitrary or capricious or induced by fraud, collusion, or bad faith.” But it’s difficult to prove bad faith in court, and judges have historically been reluctant to second-guess the decisions of legislative bodies. Such vague rules are unlikely to be much of a deterrent.

Some retail stores down the street from Gentry’s Landing.

More importantly, the legislation did not close the “blight” loophole, which has become one of the most common justifications for the use of eminent domain in Missouri. The legislation sets a 5-year time limit on blight designations, but it allows city legislative bodies to renew the blight designation indefinitely. And the legislation does not tighten the definition of blight, leaving city officials with wide latitude in defining the term.

The power of eminent domain has traditionally been used for public uses like roads, police stations, and hospitals. The Seravallis’ battle with the city of St. Louis illustrates how far we’ve strayed from that ideal. Although the proposed redevelopment might result in increased tax revenue for the city, the primary beneficiary is clearly a private real estate developer. And any incresed tax revenue would come at the cost of weakening property rights for everyone.

The Seravallis are successful commercial real estate developers who can afford to hire the best legal talent to defend their rights in court. They may ultimately prevail. But the battle will take years and cost tens of thousands of dollars in legal fees. Few homeowners could afford to mount that kind of legal defense. If property rights in Missouri aren’t strengthened, the big losers won’t be wealthy businessmen like the Saravallis, but ordinary homeowners who won’t have a prayer of standing up to unjust seizures of their land.

Timothy B. Lee is a policy analyst at the Show-Me Institute.

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