The City Foundry, a mixed-use development in Midtown, was granted $19.4 million in subsidies for the first phase of the development years ago. The St. Louis Tax-Increment Financing (TIF) Commission recently voted in favor of an additional $18 million in TIF for phase two of the project. Economic development incentives are meant to create new economic development and activity in the region. Kalbi Taco Shack abandoning one location for another is not a win for the greater St. Louis region. . Shifting existing businesses from one location to another creates new abandoned storefronts, but little to any value for the region.

Unfortunately, this is the outcome we see from economic development incentives all too often. Take Kansas City for example, where the Kansas–Missouri border war saw hundreds of millions of tax dollars forgone and many businesses shift across the border, but hardly any net growth for either state.

Researchers have found that economic development incentives do not increase economic activity in the larger area. One reason for that: Retail relocation does not create substantial (if any) job opportunities or new economic activity. Do these large developments that become the new home for existing businesses give the appearance that something is happening in the region? Sure. But it’s just vegetables moving around the plate; nothing is getting eaten.

The post Is the City Foundry Just Moving Vegetables Around the Plate? appeared first on Show-Me Institute.

But you know who’s doing just fine? Box stores like Walmart and Home Depot and online giants like Amazon. For those massive commercial players, coronavirus evolved into a windfall so great that some of these businesses had to shorten their hours or delay shipping packages.

You know who else is doing just fine? Gun stores, but not because of the goodness of local officials’ hearts. Under Missouri law:

The state, any political subdivision, or any person shall not prohibit or restrict the lawful possession, transfer, sale, transportation, storage, display, or use of firearms or ammunition during an emergency.

Despite attempts to temporarily shut down gun shops around the country, local officials in Missouri largely resigned themselves to applying social distancing guidelines rather uniformly against gun retailers, from Cabela’s to tiny mom and pop gun shops. The purpose of Missouri’s gun law—protecting individuals’ Second Amendment rights—is straightforward. But the effect of the law was to level the playing field between big and small gun retailers, which stands in stark contrast to how local officials treated other small businesses.

Small gun shops could stay open as legally “essential.” But what about small businesses that sold candles, or sporting equipment, or anything else that Walmart and a cadre of other protected operators sold throughout the pandemic? Those small businesses did not get to enjoy the protections of state law, were often deemed “inessential” by local officials and were shut down—in some cases for months.

That’s wrong.

If Walmart can stay open and sell, say, candles, Missouri’s locally owned candle makers should be able to stay open. There is no reason to believe that small businesses can’t undertake rational social distancing and cleaning practices that large retailers have used throughout this pandemic.

How do we know this? Because local gun shops did it. Missouri law should reflect this reality for all small businesses and ensure that Missouri’s entrepreneurs aren’t the victims of disparate treatment by panicked local bureaucrats.

And Missouri should come back into special session and pass a law that makes this clear: If Walmart is essential, all of Walmart’s competitors should legally be, as well. Whether this requires the creation of a brand new statute or can be achieved by expanding the section that already protects gun retailers, it doesn’t matter. What’s important is that legislators act now—before another round of the pandemic hits, and before local businesses can be victimized a second time by inequitable and uneven local public health enforcement.

The post There Oughta Be A Law: If Walmart is Essential, Small Retailers Are Too appeared first on Show-Me Institute.

Drawing on data from the Tax Foundation, Hafer and Wall examine the total tax burden facing businesses, including income, property, sales, and unemployment taxes. They find that the tax burden on a business depends heavily on the type of industry the company is in. Because of different incentives and tax breaks offered to businesses in different industries, the effective tax rates paid by some firms are much higher than what others pay. For example, manufacturers enjoy a relatively hospitable tax environment; retail establishments and distribution centers, not so much.

This uneven distribution of tax burdens might not be harmful if the firms that were taxed the least were those that have the most beneficial effects on the economy. Unfortunately, the opposite seems to be the case. It turns out that the industry Missouri favors (manufacturing) seems to be the one in which low taxes are not related to higher state growth.

It seems (again) as if policymakers are trying to pick winners and losers—and finding out how hard it is to make the right call.

The essay, available at the link below, also explores the different tax burdens faced by companies in the same industry depending on whether they are new or established firms. Hafer and Wall’s findings help explain why our allegedly low-business-tax state has experienced such anemic growth in recent years.

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Maryland Heights-based Schnuck Markets, which operates 100 stores in five states, on Monday will begin testing its first Tally at its store at 6600 Clayton Road in Richmond Heights. The pilot test is expected to last six weeks. A second Tally will appear in coming weeks at Schnucks stores at 1060 Woods Mill Road in Town and Country and at 10233 Manchester Road in Kirkwood.

The race between man and machine is a fixture of popular culture, from John Henry to Yoshimi Battles the Pink Robots. In most stories, robots represent the movement of technology replacing man: of cheaper, stronger, more efficient labor. It’s not surprising then that in most folklore, the machines are depicted as sinister. But that isn’t the case for consumers.

All of this is an effort by producers to provide better, faster and cheaper service, and to that end it is a good thing because it drives down prices for everyone. It should be a wake-up call to activists who think they can affect positive social change merely by increasing the minimum wage—in which only a few benefit at the cost of many. Making labor more expensive not only makes technology more attractive, but it puts smaller businesses who cannot afford the investment in technology at a competitive disadvantage.

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Proponents say the development will raise property values and increase sales tax revenue in Rolla through the construction of a Menards and four smaller retail stores yet to be named. But while new shopping options could be exciting for local residents, the financial impacts might not be.

Missouri law requires any developer asking for TIF to show that the project wouldn’t be undertaken without financial assistance. In the case of the Westside Marketplace proposal, justifications for the subsidies include inadequate street access, an old barn that may be unsanitary, and (here’s the real kicker) a portion of the TIF area being classified as a Special Flood Hazard Area with a 26% chance of flooding in the next 30 years.

Flood risks aside, the location is ideal from a commercial standpoint with Kings Highway steering in plenty of traffic. Still, if the potential for flooding is enough to make the developer reluctant, maybe it should make taxpayers think twice as well.

In addition to depriving the county of tax revenue, subsidizing a Menards that will compete with other home improvement stores is unfair. Stores such as Lowe’s and Meek’s that already operate in Rolla without subsidies will lose business to Menards, and the local community will lose tax revenue from any reallocated spending. This selection of winners and losers shouldn’t fall under government jurisdiction—something the Phelps County Commission should take into account when deciding if this TIF is worth the risks that come with it.

The post Rolla Considers TIF Plan appeared first on Show-Me Institute.

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This February, Doug McMillon – the current CEO – agreed to raise the hourly wage at Wal-Mart to no less than $9 an hour in April and to $10 an hour (or 33 percent above the current federal minimum wage) in early 2016.

How is the sharply elevated internal “minimum wage” working out for the world’s largest retailer and (by a wide margin) the nation’s largest private employer?

So far, not at all well.

In announcing the company’s third-quarter results this Tuesday, McMillon acknowledged that the wage hike had been “by far the biggest driver” in causing a 13.3 percent reduction in corporate earnings over the first nine months of its current fiscal year (ending on Jan. 31, 2016). Higher wages have added $1.2 billion in annual costs in this fiscal year and will add another $1.5 billion in costs next year.

Net income at Wal-Mart hit an all-time high of $17.0 billion in calendar 2012 (fiscal 2013, ending in January 31, 2013). According to Value Line estimates, it will drop to $14.8 billion at the end of this year and to $12.6 billion next year, which would be the lowest annual earnings for Wal-Mart in a decade.

That is no big deal to critics like Robert Reich, who served as Secretary of Labor under President Clinton. Reich pointed to Walmart and McDonald’s in a petition that he launched on MoveOn.org in 2013 urging the biggest employers to increase wages so workers can finally “get a fair share in this economy.” “Your typical employee is now earning $8.25 to $8.80 an hour,” Reich wrote. “They [Walmart and McDonald’s] can easily afford to pay [workers] $15 an hour without causing layoffs or requiring price increases.”

In regarding any profit as proof that a company can afford to pay more to its workers – without doing harm to its customers – that viewpoint disregards the realities of a competitive marketplace.

For one thing, Wal-Mart competes with other public companies in striving to maximize returns to shareholders. To say that Wal-Mart has been getting hammered in this regard is something of an understatement.

Wal-Mart’s shares have lost a third of their value since the beginning of this year – falling from a high of $90 a share in January to $60 at the close of business on Nov. 17. Meanwhile, its biggest rivals have done substantially better. Costco has climbed from $140 a share to $159, and Amazon.com has more than doubled in price.

In July, Amazon passed Wal-Mart to become the most highly valued company in the retail sector and it has shot further and further ahead since then. It now has a total market capitalization of $308 billion, compared with $195 billion for Wal-Mart.

Wal-Mart lags far behind both Amazon and Costco in productivity – measured in sales per employee, with Wal-Mart at $219,000, Costco at $565,000, and Amazon at $578,000. It is clear that Wal-Mart is intent on closing the gap by slowing the growth of bricks-and-mortar stores while putting much greater emphasis on e-commerce. As McMillon put it in his presentation on Tuesday:

We will be the first to deliver a seamless shopping experience at scale. No matter how you choose to shop with us – through your mobile device, in a store or a combination – it will be fast and easy. Online retailers are testing physical store experience because they recognize the same customer desire that we do. There’s a race to do this right.

But consider the impact on total employment at Wal-Mart if the company were to close the productivity gap between itself and Amazon by 25 percent over the next three years while also achieving its stated objective of growing annual sales from about $485 billion to $530 billion or more.

In this situation, Wal-Mart would need a global workforce of 1.7 million associates, compared to the 2.2 million it has now – a loss of approximately 500,000 jobs. That would entail a loss of about 320,000 associates out of the U.S. workforce of 1.4 million associates.

While those numbers are speculative, they clearly point to the conclusion that Wal-Mart will no longer be the great job-creation machine that it was years past, which is something that self-declared champions of working class should be thinking about in agitating for higher wages. Paying higher wages has made the company more focused on achieving higher levels of productivity.

At the same time the company may water down if not abandon its historic commitment to serving less affluent shoppers with rock-bottom prices across a vast array of merchandise. The late founder Sam Walton said his dream was “to serve the under-served.” That is less of a priority today. “Globally, we know growth will come from middle- and upper-income households in years ahead,” McMillon stated at an analysts’ meeting in October.

The post Killing the Golden Goose: How Walmart’s Left-Wing Critics Destroy Job Creation appeared first on Show-Me Institute.

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Even if Kansas City builds a new terminal and begins to perform as well as peer airports in raising retail revenues, conservative policy analyst Joseph Miller calculated the airport should only expect another $1 million or $1.5 million per year in extra funds.

Hardly much to offset the cost of building a new facility, he said.

“Remember that debt service for a $1.2 billion new terminal is likely to be close to $70 million a year,” said Miller of the Show-Me Institute, a free-market think tank based in St. Louis. “In terms of making a new airport affordable, retail sales are not a well-thought-out argument.”

It seems that the Kansas City Aviation Department and other supporters of the proposed $1.2 billion new terminal plan for Kansas City International Airport are still arguing that increased retail sales at the airport is a valid reason for opting for a new terminal. In reality, the amount of revenue that retail would bring to the airport is minimal and dwarfed by the cost of the new terminal plan.

First, let’s be clear about what retail we are discussing. Concessions at airports are usually defined as either food service or retail (e.g., Kansas City trinkets, Dan Brown’s latest mass-produced masterpiece, luggage for people who by definition already have luggage). The Star states that retailers at KCI drew $29 million in revenue last year, but only if we include food service. In fact, retail and duty-free shops usually generate less than $7 million a year in total revenue.

But KCI does not get to keep all the revenue from those shops, only a cut. From retail, KCI only received approximately $900,000 in 2013. Combine retail with food sales, and revenue to KCI from all concessions climbs to just less than $3 million per year. When we remember that KCI’s total operating revenue is $104 million in 2013, we see just how miniscule the retail source of revenue is.

If we assume that with a new terminal KCI will perform as well in sales/pass as other airports with new terminals, at best, KCI will increase retail sales by $1.5 million and food sales by $2.5 million. Certainly they must have a better argument to build a $1.2 billion terminal.

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“Bass Pro Shops could only have happened in America – the home of the free enterprise system.” Those were the words of Bass Pro founder Johnny Morris in a recent Bloomberg News article.

Bass Pro has become a household name throughout America, synonymous with the great outdoors, and undoubtedly is an exceptional business.

It has completely changed the nature of sporting retail with its Walmart-size stores filled with unimaginable stocks of outdoor equipment, aquariums, wildlife displays and gun libraries.

Morris clearly benefited from a free enterprise system in America. However, one cannot overlook the fact that much of Bass Pro’s success and expansion are due to taxpayer-funded subsidies.

Many of those subsidies are from tax increment financing. TIF districts originally were created to spur economic development in portions of cities deemed economically depressed or blighted. Yet, cities across the country have long used a very loose definition of what constitutes a “blighted” area. The wealthy St. Louis suburb of Des Peres once declared a local shopping mall blighted because it lacked a Nordstrom’s.

Bass Pro has routinely received at least some amount of public assistance with many of its stores. According to the Public Accountability Initiative watchdog group, Bass Pro had received $500 million in taxpayer subsidies as of 2010.

The outdoors megastore sells itself to suburban communities as a destination retail attraction, capable of bringing in customers from hours away and even across state lines. To local leaders, bringing in a store the caliber of Bass Pro seems like a surefire way to increase local property and sales taxes.

However, Bass Pro does not always live up to its promise as an economic kick-starter and job creator. Many of the stores fail to raise the tax revenue that cities imagined, as happened in Mesa, Ariz. Bass Pro projected the Mesa store would produce $5.7 million a year in sales tax revenue for the city; instead, it has only managed an average of $1.7 million in four years.

In Missouri, Independence witnessed a similar result with the TIF it passed for a Bass Pro store.

What city officials fail to realize is that a large, new store does not give people more money to spend on fishing poles or waders.

Often, Bass Pro Shops only consolidates the market of outdoor supplies by killing smaller competitors, which negates the total growth that the development added.

Local leaders across the country are desperate to take credit for creating jobs and bringing a marquee brand to their community. In this desperation, they may dole out overly generous taxpayer subsidies for a few select businesses, which puts local, smaller businesses at an immediate disadvantage.

Big box retailers like Bass Pro often are built in affluent areas that could attract businesses without subsidies. We do not need the government picking winners and losers.

Bass Pro can build its stores on its own, as it did in Columbia, just north of Interstate 70. Instead of conjuring up incentives to bring businesses to their town, local leaders should focus on creating a pro-business atmosphere for all. That means lowering taxes and reducing regulations. If cities create a business-friendly environment, the rest will take care of itself.

Will Reynolds, an Ozark native, is an intern at the Show-Me Institute promoting market solutions for Missouri public policy.

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It is an unfortunate moment, and you can pout all you want, but nothing will bring back that last slice. You might demand from your parents that they institute a rule to punish any child who takes more pizza than anyone else; they will say no, and you will pout some more.

But imposing rules when something does not seem fair to you is not a good reason to institute a rule. It is dangerous to make a decision that affects others based solely on your opinion.

The legislation proposed this week to prevent Missouri retailers from opening on Thanksgiving Day smells like it is based on personal opinion of what is “best” for others. Would some retail employees benefit from it? Absolutely. But there is no way to determine that closing retail stores on Thanksgiving is correct, or good for the state.

Missouri Rep. Jeff Roorda (D-Dist. 113), who proposed the “Thanksgiving Family Protection Act,” said that as retailers have expanded store hours on Thanksgiving, employees have less time to spend with their families. This may be true, but I would like to highlight why that is not a good reason to enact this policy.

1. Retail employees are aware of the expectation to work some holidays and weekends when they take the job. We all have aspects to our jobs that we do not love — should we enact legislation to prevent all those things from happening?
2. Some people may actually want to work on Thanksgiving. They may depend on that extra day of income and this bill would take that away from them. (Or, maybe they just want an excuse to avoid Aunt Esther’s squash casserole.)
3. If people did not want to shop on Thanksgiving, stores would be closed. People have demonstrated it as enough of a priority that stores decided to be open. It is not like the Target CEO is walking into people’s dining rooms and forcing them against their will to go shop.

I have worked in retail — I know it is not fun to be stuck at work when my friends or family are all hanging out together. But as Show-Me Institute Policy Analyst David Stokes said, “It’s not the government’s role to tell businesses when they can operate.”

The post Protecting Missouri Families, One Thanksgiving at a Time appeared first on Show-Me Institute.

I will admit that CIDs are a little less noxious than TIFs. But, no matter what grading scale, tax subsidies are not needed in Chesterfield. The market for retail shopping is plenty strong that the city does not need to turn over the taxing authority to private developers. The real issue, however, is that with projects like this, we must acknowledge that we long ago passed the tipping point where basically every major development in Saint Louis and Kansas City is subsidized by the taxpayers. When you are going forward with subsidies for things like outlet malls in one of the nicest parts of the region, the idea of a free market is basically defeated. Once you subsidize outlet malls in wealthy areas, at what possible good or service do you draw the line?

The obvious answer is that there is no line and the use of tax dollars for subsidized, politically-connected developers is just a fact of life now in much of Missouri. That is repulsive.

The post If You Need A Subsidy In Chesterfield, Where Don’t You Need One? appeared first on Show-Me Institute.

Two different groups want to build outlet malls (or something close to it) in Chesterfield. Both want a tax subsidy; one in the form of a Community Improvement District (CID) and one in the form of a Transportation Development District (TDD). Both allow the developer to install an additional sales tax with the shopping area. Whatever the initials, the subsidies are not necessary.

Chesterfield should act like the girl being courted instead of the wallflower. I am not one for recommending that city councils reject projects – I question whether city councils should have a right to do that in the first place. But as long as the two entities are asking for tax subsidies, and as long as the Chesterfield City Council needs to consider these projects in the first place (for zoning reasons, etc.), Chesterfield’s elected officials should refuse both of them until they agree to move forward without a CID or TDD.

The subsidies are a total joke. If there is a market for more shopping in West County, taxpayers do not need to support it. The Chesterfield City Council should hold off until one, or both, of these proposals moves forward without taxpayer assistance.

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It is absolutely NOT a coincidence that this development without TIF is being done in a pool sales tax city. Cities in the sales tax cities gain from development wherever it occurs. Because they share their sales tax collections with the pool – which is then redistributed back based on population – they have no incentive to kick out their own people and give away the store (pun intended) with tax subsidies. A point-of-sale city (which keeps the bulk of its own tax collections) would have given away their first-born mall as soon as the developer mentioned the idea in passing.

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What makes food trucks do this? Wouldn’t they want to park far away from each other? From the perspective of economics, parking together makes sense.

When they locate near each other, businesses experience benefits. Economists call this shopping agglomeration. Consider a shopping mall. Stores in a mall offer customers a broad array of products, and they likely have more foot traffic and higher sales than if they stood alone.

When food trucks park next to each other, they show the same kind of shopping agglomeration. The nuance here is that although each is a food store, the food may not be substitutes. They could, however, be viewed as complements. Quite likely, the benefits of locating near a busy Metro stop where there a lot of pedestrians outweigh the disadvantages of locating near a competitor. Plus, it’s likely that food trucks catch the attention of more customers when they are parked next to each other than a lone truck would. Look at the photo of the food trucks above — they certainly stick out from the background.

Brick-and-mortar restaurants typically oppose the existence of food trucks, but I suspect that they can benefit from agglomeration, too. This is because many of these food products are complimentary goods, not substitutes. Notice how these trucks are located outside of a brick-and-mortar restaurant. A person could buy a sandwich from the Cosi, and a cupcake for dessert from the food truck without having to travel very far. Instead of one stealing business from the other, it’s very likely that both businesses are benefiting from their arrangement. Local government officials should keep this in mind when they are considering policies that restrict mobile food vending.

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