But looks can be deceiving. For one thing, passenger growth at the airport (1%) lagged behind the national average (4%). This mirrors Saint Louis’s overall economic performance in the last year, which, while improving, is growing at a slower rate than much of the rest of the country. Look back further than last year and the situation is worse. STL’s traffic is still 12% lower than it was just before the recession. In fact, there were fewer passengers and flights from STL in 2015 than there were in 2010, after the recession had ended.

The only category where the airport is has had success is in adding non-stop destinations, which increased from 55 to 60 in the last five years. But even here, improvement isn't necessarily as impressive as it first appears. Most of the added destinations are seasonal options, bound for resort destinations in the Caribbean. STL flies to fewer national, year-round destinations than it did five years ago.

Why is STL having such a difficult attracting more flights and more passengers? The culprit may be a slow Saint Louis economy, which airport managers have little control over. However, the airport is still dealing with a hangover from the new (and ultimately unneeded) runway it built in the early 2000s. That has made the airport more expensive, and therefore less attractive for additional airline service. For example, low-cost airline Allegiant recently chose to use Mid-America Regional Airport for new flights to Florida.

While it’s easy to blame things outside the airport’s control, STL’s leadership can make the best of a difficult situation. That means resisting the impulse, so prevalent in civic affairs, to try spending their way to health with lavish improvement projects. Providing efficient and plentiful air service is better than less service and more luggage shops. Bringing in more freight traffic may allow the airport to use extra room it thought it would need for the TWA hub. If STL leadership can implement a cost-effective, customer-oriented strategy, it will help not just the airport, but the entire Saint Louis region.

The post Lambert-Saint Louis International Airport, Still Taxiing appeared first on Show-Me Institute.

And taxicab commissioners aren’t the only ones. Last week, the Post-Dispatch reported that scores of current and former officials get free parking at Lambert, including former airport commissioners, elected officials, police brass, and industry representatives. According to Lambert Director Rhonda Hamm-Niebruegge, the free parking is a “courtesy.” However, the selective nature of this courtesy leaves open a number of questions. For instance, why honor the mayors of only three Saint Louis County cities? Why give a courtesy to one specific partner from an area law firm? Why do many taxicab commissioners receive free parking? Perhaps there are reasonable answers to these questions (among others), but left unexplained it looks just like another unjustified perk for political insiders.

To its credit, STL officials are planning on phasing out the free parking passes. But parking privilege is not just confined to Saint Louis’s airport. Last year, a city-commissioned parking study (performed to decide where new parking meters should go) found that the city allows any individual employed by the city or county, regardless of their position, to park for free at any metered spot. The city has no comprehensive list of authorized outstanding permits or rules determining which departments and which vehicles are eligible for permits. The study’s authors recommended limiting such permits to positions that require quick access to vehicles (like police officers or emergency response vehicles). Unfortunately, while the city is already well into the process of installing new meters to charge residents, the employee on-street parking policy has not been revised or even reviewed.

Most people understand that free parking is not a right. But it should not be a privilege either, handed out on an ad-hoc basis to entrenched civic insiders. 

By the way, the one member of the Taxicab Commission who does not enjoy free airport parking is Chris Sommers. He is also the only member of the Commission who vocally supports ridesharing in Saint Louis. Go figure. 

The post Parking Is a Privilege in Saint Louis City appeared first on Show-Me Institute.

Four years ago, the Show-Me Institute came out strongly against plans to spend upwards of a half-billion dollars to turn Lambert-St. Louis International Airport into an “Aerotropolis.” The plan revolved around the idea that Chinese cargo shipped through Saint Louis could be profitable—but only if the government subsidized it to the hilt. As our readers know, the project died not once but twice that year, and has died each year it has been introduced since.

It’s a good thing it kept dying too, as a story from the St. Louis Post-Dispatch showed last week.

In September 2011, a China Cargo flight carrying 80 tons of manufactured products landed at Lambert and was greeted by dignitaries from across the region. But airport officials said that market disappeared amid a downturn in international cargo. [Emphasis mine]

Imagine if Missouri had committed to the Aerotropolis project and then, poof, the market “disappeared”—which of course assumes it was ever really there. Taxpayers would have been left holding the bag.

The admission about Aerotropolis was part of a larger article about a lease just signed for a new “Mexico Hub” at Lambert, a story my colleague Joe Miller has already detailed. Lambert’s director, Rhonda Hamm-Niebruegge, says that the airport “is not paying a penny” for the new project, and if true, it’s a very good thing. At a time when its passenger traffic is down, the last thing Lambert should be doing is speculating on real estate, especially given its track record.

However, it’s not clear whether the Mexico Hub developer will try to draw on existing government subsidy programs to advance the project. An airport project at Lambert fully financed by the private sector seems very good; the concern is whether this project is too good to be true. One would hope that state and local officials would be chastened after the Aerotropolis debacle if they’re considering handing out tax incentives, whatever their scale.

I certainly hope the Mexico Hub project can move ahead on its own merits and without taxpayer money. Cargo markets have “disappeared” before, and taxpayers shouldn’t be on the hook if history repeats itself. We’ll keep you posted.

The post Lambert Officials Admit: Market for Cargo “Disappeared” Post-Aerotropolis appeared first on Show-Me Institute.

Yet public money has already gone toward Aerotropolis. Last year, Saint Louis County officials diverted $3 million in gambling tax revenues to support Aerotropolis. At the time, Lambert’s director, Rhonda Hamm-Niebruegge, told the St. Louis County Economic Council that with the gambling money (emphasis mine),

We are ready to go. . . . These funds put the muscle into our argument that St. Louis is the right place to move cargo around the world. We have capacity and we are happily uncongested, unlike most other United States cargo hubs, such as Chicago and New York.

What happened to the money? The St. Louis Post-Dispatch reported that not only did the original funds go unused, but that the airport is now gunning for a new $60 million cargo tax credit.

Last year, St. Louis County established a $3 million fund to subsidize cargo flights, but it has not been used. Airlines, say Hamm-Niebruegge, worry that they would burn through that pot too quickly; having a program worth $7.5 million a year for eight years will give the effort more staying power.

“It’s so critical for us to have a long-term view,” she said.

To summarize:

• In 2012, $3 million in casino taxes “put the muscle into [the airport’s] argument that St. Louis is the right place to move cargo around the world.”
• In 2013, not only was there such a lack of interest in the Saint Louis Aerotropolis project that no private actors drew on the money, but the airport says it needs more money. . . by a factor of 20.

If they have not already done so, policymakers have to ask themselves now: When will the Aerotropolis reality live up to the Aerotropolis rhetoric? Will it ever?

The fact is, Missouri’s economic development projects oftentimes live and die based on the promises supporters make, rather than the results they produce. Aerotropolis is simply a giant, tottering example of this unfortunate state of affairs. Now on its third time before the legislature and after literally years of puffery, it is time for Missouri to close the book on Aerotropolis and, more generally, other “big promise” tax credit projects. There are better ways to promote economic growth in Missouri. This is not it.

The post Part 2: It Is Time To Close The Book On Aerotropolis appeared first on Show-Me Institute.

We’d like to thank Air Cargo News for the opportunity to comment on the substance of Missouri’s proposed “Aerotropolis” legislation, first critiqued in these pages by air cargo expert Michael Webber and since muddled by a response from the director of Lambert–St. Louis International Airport, Rhonda Hamm-Niebruegge.

If the director of the airport did indeed help introduce the bill that has gone before the Missouri legislature, as she asserted, there are serious questions she needs to answer. Contrary to her implication, the Aerotropolis legislation’s original price tag was not $360 million, but $480 million, which included tax credits for the payment of $120 million in interest costs for the building of warehouses.

For somebody who seemed particularly interested in Webber’s rhetorical precision, Hamm-Niebruegge’s obscuration of the original cost of the bill as she introduced it is revealing. She should have been more forthright about the details of her bill.

To her credit, Hamm-Niebruegge admits that warehouses would be fully eligible for $300 million in tax credits, in support of a projected maximum of eight flights per week — a meager result for such a large amount of taxpayer money.

More importantly, though, Hamm-Niebruegge has failed to explain why the legislation specifies that Missouri would restrict the $300 million in Aerotropolis warehouse subsidies solely to new warehouses located on 100 contiguous acres, in urban redevelopment areas, within the boundaries of the airport, or in areas managed by a port authority. Those strange provisions demand an explanation. Hamm-Niebruegge says that she helped introduce the legislation (original price tag: $480 million); she had the opportunity to explain these preferential carve-outs here, but declined to take it.

We doubt that there is a practical explanation. The 100-acre stipulation and other requirements serve only to limit the individuals that could have access to the tax credits, and it is disheartening that the executive director of an airport would be concerned with making sure that only a few politically powerful individuals and businesses would be eligible for hundreds of millions in state tax money.

Hamm-Niebruegge says that the proposed bill’s provisions “require that investment or export activity take place before the application for tax credits.” This is incomplete. A close reading of the legislation reveals that owners of these newly built warehouses who use two modes of commerce — perhaps road and rail transportation — could qualify for the Aerotropolis tax credits. Owners of the comparable refrigerated warehouses would qualify in this way, as well. There is no requirement in the legislation that those warehouses store any amount of international cargo. Is the purpose of the Aerotropolis tax credit legislation to encourage international trade, or is its purpose to subsidize warehouse construction?

Hamm-Niebruegge optimistically writes that the $300 million in warehouse tax credits could result in millions of square feet of new warehouse space, yet she does not mention the approximately 18 million square feet in developed warehouse space already vacant in the Saint Louis area. Why does the state need to subsidize the construction of more warehouse space if, as market research from CB Richard Ellis has shown, a great deal of space is already available? Again, we are disheartened by the possibility that public officials are in such a rush to subsidize the owners of vacant land that they fail to consider the considerable existing supply of warehouse space.

Proponents of the Aerotropolis subsidies, including Hamm-Niebruegge, point to an eight-page study commissioned by the St. Louis Regional Chamber and Growth Association (RCGA) purporting to show that the $300 million in warehouse construction tax credits would result in economic activity worth billions. We were disappointed, but hardly surprised, that the RCGA study failed to consider the cost of taking $300 million from all Missourians in order to award it to a favored few. Aerotropolis proponents fail to understand that tax credits are not free money. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation.

Let us be clear: The Aerotropolis dream of attracting international trade to a region is by no means a poor one. In fact, increasing trade among countries is one of the best ways to improve economic welfare. However, we are concerned that the dream is being used as an excuse for public subsidy.

If the Aerotropolis dream is viable, as Hamm-Niebruegge states, where are the private investors clamoring to make a substantial positive return? The absence of such investor interest without heavy subsidy reveals that the “big idea” pushed by Hamm-Niebruegge, other public officials, and industry lobbyists is in trouble — with or without this extraordinarily problematic legislation that the director helped introduce.

Patrick Ishmael and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Lambert Director Misrepresents Missouri’s ‘Aerotropolis’ Bill appeared first on Show-Me Institute.

If the director of the airport did indeed help introduce the bill that has gone before the Missouri legislature, as she asserted, there are serious questions she needs to answer. Contrary to her implication, the Aerotropolis legislation’s original price tag was not $360 million, but $480 million, which included tax credits for the payment of $120 million in interest costs for the building of warehouses.

For somebody who seemed particularly interested in Webber’s rhetorical precision, Hamm-Niebruegge’s obscuration of the original cost of the bill as she introduced it is revealing. She should have been more forthright about the details of her bill.

To her credit, Hamm-Niebruegge admits that warehouses would be fully eligible for $300 million in tax credits, in support of a projected maximum of eight flights per week — a meager result for such a large amount of taxpayer money.

More importantly, though, Hamm-Niebruegge has failed to explain why the legislation specifies that Missouri would restrict the $300 million in Aerotropolis warehouse subsidies solely to new warehouses located on 100 contiguous acres, in urban redevelopment areas, within the boundaries of the airport, or in areas managed by a port authority. Those strange provisions demand an explanation. Hamm-Niebruegge says that she helped introduce the legislation (original price tag: $480 million); she had the opportunity to explain these preferential carve-outs here, but declined to take it.

We doubt that there is a practical explanation. The 100-acre stipulation and other requirements serve only to limit the individuals that could have access to the tax credits, and it is disheartening that the executive director of an airport would be concerned with making sure that only a few politically powerful individuals and businesses would be eligible for hundreds of millions in state tax money.

Hamm-Niebruegge says that the proposed bill’s provisions “require that investment or export activity take place before the application for tax credits.” This is incomplete. A close reading of the legislation reveals that owners of these newly built warehouses who use two modes of commerce — perhaps road and rail transportation — could qualify for the Aerotropolis tax credits. Owners of the comparable refrigerated warehouses would qualify in this way, as well. There is no requirement in the legislation that those warehouses store any amount of international cargo. Is the purpose of the Aerotropolis tax credit legislation to encourage international trade, or is its purpose to subsidize warehouse construction?

Hamm-Niebruegge optimistically writes that the $300 million in warehouse tax credits could result in millions of square feet of new warehouse space, yet she does not mention the approximately 18 million square feet in developed warehouse space already vacant in the Saint Louis area. Why does the state need to subsidize the construction of more warehouse space if, as market research from CB Richard Ellis has shown, a great deal of space is already available? Again, we are disheartened by the possibility that public officials are in such a rush to subsidize the owners of vacant land that they fail to consider the considerable existing supply of warehouse space.

Proponents of the Aerotropolis subsidies, including Hamm-Niebruegge, point to an eight-page study commissioned by the St. Louis Regional Chamber and Growth Association (RCGA) purporting to show that the $300 million in warehouse construction tax credits would result in economic activity worth billions. We were disappointed, but hardly surprised, that the RCGA study failed to consider the cost of taking $300 million from all Missourians in order to award it to a favored few. Aerotropolis proponents fail to understand that tax credits are not free money. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation.

Let us be clear: The Aerotropolis dream of attracting international trade to a region is by no means a poor one. In fact, increasing trade among countries is one of the best ways to improve economic welfare. However, we are concerned that the dream is being used as an excuse for public subsidy.

If the Aerotropolis dream is viable, as Hamm-Niebruegge states, where are the private investors clamoring to make a substantial positive return? The absence of such investor interest without heavy subsidy reveals that the “big idea” pushed by Hamm-Niebruegge, other public officials, and industry lobbyists is in trouble — with or without this extraordinarily problematic legislation that the director helped introduce.

Patrick Ishmael and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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The post Lambert Director Misrepresents Missouri’s ‘Aerotropolis’ Bill appeared first on Show-Me Institute.

It began with a flurry of blog posts and some radio gigs, and it grew from there. Late last month, Audrey and I stopped by The McGraw Milhaven Show on The Big 550, KTRS in Saint Louis, and the Mike Ferguson show on 93.9 FM “The Eagle” in Columbia. We talked about how the Aerotropolis proposal would be more of a boondoggle than an investment.

A little more than two weeks ago, Audrey and I both testified about the Aerotropolis proposal before the Missouri Senate Jobs, Economic Development and Local Government Committee. The written version of our testimony is available on our website. You can also watch the video of our testimony here on Show-Me Daily:

Note the part where Sen. Ron Richard said, “I’ve got business people and friends of mine that live in Saint Louis that are begging for something new and creative. So we take a chance.” He has it completely backward. Tax credits aren’t new and creative. Neither is draining more money into Lambert. Aerotropolis is more about subsidizing business as usual than taking a chance.

Audrey and I penned an editorial explaining how Sen. Richard was mistaken. It ran in the Southeast Missourian and the Columbia Missourian this week.

Late last Monday night, lawmakers made many changes to the bill. The amount of tax credits dropped from $480 million to $360 million. We’re still talking about a lot of money, though. State lawmakers combined Aerotropolis with a bill that would otherwise limit tax credits. It’s schizophrenic public policy, and it doesn’t make sense. I’ve called for limiting tax credits for a long time, so I am disappointed that state lawmakers are negating the benefits of limiting tax credits by combining them with a policy that would expand them. It’s like the Dr. Jekyll and Mr. Hyde of tax credit legislation.

Next, we split up to reach more people. Audrey went back on the McGraw Milhaven Show on The Big 550, KTRS on Wednesday. The audio archive of the interview is available here. Audrey reviewed how the bill has changed, and how it will do even less to encourage international trade. Meanwhile, I spoke to KMOX radio about how it’s a bad deal for taxpayers.

Yesterday morning, I was a guest on the Charlie Brennan Show on KMOX. I had a great time. I talked Aerotropolis with: Rhonda Hamm-Niebruegge, director of Lambert–St. Louis International Airport; Rodney Crim, director of the St. Louis Development Corporation (SLDC); and Steve Johnson, executive vice president of economic development for the St. Louis Regional Chamber and Growth Association (RCGA). An archive of the audio is available online. I argued that, if building cargo warehouses next to the airport is such a good idea, private entrepreneurs will pick up their shovels. They would have broken ground already — they wouldn’t be waiting around for tax credits.

Later that day, the Show-Me Institute’s executive director, Brenda Talent, released an open letter to Missouri Speaker of the House Steven Tilley. She encouraged him to remove the Aerotropolis bill from the current legislative agenda. I wonder: What’s the rush? Why are state legislators frantic to get Aerotropolis enacted in the final days of session? What’s the harm in studying the issue a bit longer?

This morning, I enjoyed talking with Steve Helms on “Morningline,” on KWTO AM 560 in Springfield. We discussed the fact that the Lambert airport is already drowning in debt — to the tune of more than $900 million. Much this is left over from the failed $1.1 billion runway expansion from not too long ago. I wonder: Is draining even more money into the airport the best use of taxpayer dollars? Couldn’t Steve’s listeners in Springfield spend their tax monies on things closer to home?

Even though it’s Friday, we’re not taking a break from our media outreach. KWMU Radio ran a commentary of mine a couple times today, and the St. Louis Business Journal ran an editorial written by Audrey Spalding and me.

I wonder what next week will bring for Aerotropolis. Stay tuned to the Show-Me Institute team — we’ll continue to track the issue and provide up-to-date analysis on what it will mean for Missourians.

The post “Aerotropolis” Roundup appeared first on Show-Me Institute.

I spent some time looking for that study, or any discussion of its results. Finally, about to give up, I emailed the Midwest China Hub Commission to ask whether the study Jones had promised was available.

Here is the response I received:

The study you refer to is still underway but very close to completion. The St. Louis RCGA is spearheading the impact analysis with possible completion and release of findings to come at the end of next month or June. The findings of the analysis will be made public at that time.

So, despite statements from legislators and special interests that subsidizing freight traffic is a good idea for Missouri, no study has been published that backs up those statements.

Right now, state legislators, local politicians, and special interest groups are in a rush to award $480 million in state subsidies that they say would further the China Hub dream. But the legislative session ends in mid-May, so the promised study won’t be done in time for legislators to consider the results before awarding almost half a billion dollars in subsidies.

There’s a lot that I don’t understand about this tangle of subsidies, but this is perhaps the most mystifying. Legislators who say that they want to keep Missouri fiscally responsible are now pushing to award almost half a billion dollars without any formal attempt to weigh the costs and benefits of the proposal.

From Sen. Eric Schmitt:

This is new. This is new investment. This is new economic activity that we just don’t have. When you have zero flights a week and we want to move forward and actually create this kind of international trade hub, which is what it is, that’s activity that we don’t have now.

What evidence is there to substantiate Schmitt’s statements? Has any analysis been done demonstrating that the award of tax credits would result in increased freight traffic to Saint Louis?

From Rhonda Hamm-Niebruegge, director of airports at Lambert-Saint Louis International Airport and Ed Monser, president of Emerson:

[The Aertropolis subsidy bill] has the support of organized labor because of the job impact it would bring to Missouri and support from rural legislators because of the opportunity to export Missouri beef and pork, as well as other agriculture products, to countries not currently buying these commodities.

But what evidence is there to prove that this project and related incentives would result in new jobs? What study has been done that demonstrates that China would import Missouri agricultural products if the state spent $420 million to subsidize the construction and operation of cargo warehouses?

If there were an award for unsubstantiated, overblown commentary, it would go to Rep. Caleb Jones, who told CBS:

It’s going to create demand for all of Missouri and our products and goods. Folks from my district are going to be able to load up cattle and drive it to St. louis and have it in China the next day.

What evidence is there showing that this project and package of incentives will “create demand for all of Missouri”? How do Jones’ constituents know that there’s a market for their cattle in China? Instead, isn’t there a chance the constituents of the 117th district will have to pay roughly $80 each, which is what this bill will cost every Missourian — and then receive no benefit?

The aerotropolis tax credit bill does not have to be passed this year. After all, there’s no firm commitment from China, the legislation contains hidden costs, and no study has been produced demonstrating that this proposal makes financial sense.

What’s the rush?

The post Where’s the Evidence That the China Hub Makes Financial Sense? appeared first on Show-Me Institute.

I’ve been reading current and past news coverage carefully, though, and I can’t seem to find a firm commitment from China or from Chinese flight companies to increase freight traffic to the Saint Louis airport if these tax incentives are authorized.

More troubling, the “aerotropolis” legislation, the bill that details all of the various state subsidies relating to the “China Hub” dream, does not specify that the subsidies are void if there is no commitment from China. (And, actually, I can’t seem to find the word “China” used even once in the legislation itself.)

Yet that potential trade with China is the justification provided by China Hub proponents for the subsidy.

From the St. Louis Post-Dispatch:

“China was losing patience because we were not coming in with anything,” [Steve Stone, an attorney involved with the negotiations,] said.

Then Stone brought up the Aerotropolis package, which would create $60 million in tax breaks for shipping companies that export by air from Missouri, and $420 million in credits to build cargo warehouses and other facilities in certain spots, like the region’s now-closed auto plants or the NorthPark business park east of Lambert. It would lower the cost of flights, and help draw more companies to locate around a cargo hub, Stone said.

“The mood changed,” Stone said. “They see a way here for them to succeed.”

Am I missing something? When I wrote about the great deal of public subsidy slated for warehouse construction, Post-Dispatch reporter Tim Logan pointed out on Twitter that, in fact, there are no agreements, just negotiations.

The Post-Dispatch reports that, according to a letter supplied by that attorney:

[…] a top China Cargo executive sent a letter to Mayor Francis Slay. He called the proposal “truly wise and innovative,” according to a copy supplied by Stone. He also said that without Aerotropolis or something like it, “opening a new air route to St. Louis will be very difficult, or even inconceivable.”

That hardly sounds like a commitment. If Missouri is willing to create incentives for this project for a specific duration of time, why isn’t China willing to commit to sending a certain number of flights to Missouri for a specific duration of time?

And, if it is the case that Chinese representatives won’t agree to sending more planes to Missouri without the subsidy, why aren’t they saying so in a clear, verifiable way? Why is an attorney with a vested interest in the project speaking for the Chinese?

Here’s another equivocal statement from Lambert Airport Director Rhonda Hamm-Niebruegge, as reported by Channel 4:

“I think if we really want to build an international cargo hub, if we don’t get this, we could see it not happen,” Hamm-Niebruegge said.

Could? Is there a commitment or not? Is China depending on this bundle of tax credits and incentives or not?

Readers of Show-Me Daily know that I prefer for government to state such claims in writing. Written documents provide some level of transparency and accountability, as opposed to unsubstantiated opining.

As the proposed legislation stands, it will likely cost more than $480 million — which is already close to half a billion dollars — and, as Christine Harbin pointed out, the benefits of the China Hub will be concentrated in the Saint Louis area.

If Missouri legislators are going to continue to push to give out a great deal of taxpayer money, the least they can do is get a real commitment from Chinese representatives, or write  safeguards into the aerotropolis legislation. Is that so much to ask in exchange for about $80 in taxpayer money for every Missourian? Or is it all too tenuous to put in writing?

It isn’t good public policy to subsidize warehouse construction and operation with no real likelihood of increased freight traffic.

The post Wait … Shouldn’t Missouri Have a Firm Commitment From China Before Awarding $480+ Million? appeared first on Show-Me Institute.