As part of a recent overhaul of the stadium financing package, which includes giving the NFL all the naming rights proceeds for “National Car Rental Field,” the total cost of the stadium went up about $10 million dollars. With NFL uninterested in paying anything (much less more), and state legislators in near revolt over the governor’s plan to unilaterally extend bonds for the stadium, the city is left holding the bag. Its total payments will increase from an estimate $150 million to $160 million:

Ten million dollars is not a small amount for Saint Louis City. That’s the equivalent of the annual salaries of 190 teachers or the cost of 20 brand new buses. It should not be treated like a rounding error.

Worse than the cost escalation is the reaction of stadium backers to the funding reconfiguration. I sat in hearings where city representatives said, in contradiction to dozens of academic studies, that the stadium would be an economic boon for Saint Louis. I heard how the city was supposedly shifting risk to the NFL by using naming rights dollars to pay for the stadium and paying the NFL back with future tax revenue. I heard how the stadium plan would supposedly be a tax benefit to the city.

Now that the naming rights are going to the NFL and the cost of the stadium has gone up, has this prompted stadium backers to rethink their support? Unfortunately, no. Now they simply argue that keeping the tax revenue and giving away the naming rights proceeds was always better for the city all along. And what’s ten million when the Chamber of Commerce thinks the stadium will generate more than $100 million in new taxes?

With this type of non-response to a worsening deal, what reaction can we expect when we find out who will pay for maintenance? Or when someone has to pay to refurbish the Edward Jones Dome? Or if there are cost overruns? Will stadium backers still claim the plan makes financial sense, or that it is too late to turn back?

The post Riverfront Stadium Costs Change, Backers Push Ahead appeared first on Show-Me Institute.

Dick Fleming, the group’s longtime head, is stepping down from the organization he has helmed since 1994, and his replacement will come from a city just a short drive east on I-64: Louisville, Ky., also known as the “Gateway to the South.” Joe Reagan moves to Saint Louis from Louisville’s equivalent of the RCGA, the Greater Louisville Inc., or GLI. Marketed during Reagan’s tenure as “Possibility City,” Louisville will have to find a new chamber head for the first time since 2005. Louisville is already writing the postscript to Reagan’s legacy.

But the fact of the matter is that no man, or government, or organization, or even coalition of organizations, can plan an economy, or at least plan it well. That is an incredibly important point to highlight and probably the fairest thing that can be said as Reagan joins the Saint Louis community; it also is probably one of the most damaging points one can raise about how the RCGA and organizations like it behave.

Our local chamber loves to get the pat on the back for positive economic news and to pump “public-private partnerships,” oftentimes fueled with tax credits, that fail to substantively move the economic needle in the region’s favor. Meddling in the economy, local or national, destroys wealth more often than it creates it, leaving taxpayers with the promise of prosperity but little else. And it is no secret that Saint Louis city has languished for decades under one failed economic plan after another, compounded by the exodus of residents into nearby counties and driven by the continued intransigence of the city’s political class to step away from its cronyistic tendencies. In short, the economic development status quo is not a blueprint for a prosperous future for this region, and has not been for some time.

Which is why I hope that Reagan’s arrival in Saint Louis is not just more of the same. More precisely, I hope that Saint Louis — and Kansas City, and the state of Missouri — at least return to some sense of regional economic normalcy, if not runaway growth in the coming year. That is a Christmas wish of sorts, I suppose, but a wish that the RCGA, GLI, or any similar organization has limited or no power to bring to fruition.

Maybe a New Year’s resolution for the state and the city is in order instead: To simply let the market work. It does not matter if it is Saint Louis’ chamber hawking Aerotropolis, or Moberly’s chamber hawking Mamtek, or a political class increasingly disconnected from the electorate hawking Solyndra. There are no easy, centralized solutions to our economic woes. Acting like there is in Saint Louis only prolongs the municipal pain. Like all taxpayers, Saint Louisans cannot depend on a small group of decision-makers to make their lives better.

Free markets make genuine and sustainable economic growth possible, and if there is going to be a “Possibility City” in this region, let it be more than just another marketing slogan with another cartridge of development silver bullets as its driving force. Reduce taxes and regulation, get out of the way, and let the free market flourish. May RCGA’s new administration regain its faith in that formulation.

The post The Gateway City, The ‘Possibility City,’ And Hope For The Future appeared first on Show-Me Institute.

The Aerotropolis bill would give the mayor of St. Louis or the executive officers of nearby counties the power to designate “gateway zones.” While this power sounds innocuous, it has important ramifications.

First, those chief executives would become gatekeepers in the distribution of millions of taxpayer dollars. The Aerotropolis legislation would create $300 million in tax credits that would subsidize warehouse construction. That tax credit money could be awarded only to warehouses built in gateway zones.

Even if motives are pure, the ability to pick what areas could be eligible for hundreds of millions in tax credits would be an incredible power. The legislation does not say anything about monitoring such designations. Nothing in the legislation would prevent one of these chief executives from using such power as an indirect way to acquire campaign contributions or other untoward benefits.

A simple way to stop any such potential abuse of power would be to take the city and county chief executives out of the equation. If the state, despite a lack of substantive empirical evidence that these tax credits will do any economic good, really wants to subsidize warehouse construction, then all vacant land owners should be able to compete equally for the tax credits. There is no need to give special powers to city and county executives.

Second, this legislation would allow city and county executives appoint a three-person board to oversee millions in special tax revenues.

That board could impose a special tax on the warehouses receiving the Aerotropolis subsidies, and then oversee how those tax revenues are spent. Of those special tax revenues, 50 percent would go to the St. Louis airport. But the other 50 percent would be given to a “tax-exempt regional economic development association or associations….” The three-person board would select which associations would receive the money.

This, too, represents increased political power. The chief executives of St. Louis and nearby counties will be in a position to appoint people to determine what agency gets part of those special tax revenues. Nothing will prevent them from appointing individuals who have a vested interest in where those special tax revenues go.

Interestingly, it seems that the St. Louis Regional Chamber and Growth Association (RCGA), the organization that pushed hard for the Aerotropolis tax credits, is a “tax-exempt regional economic development association.” There are others, such as the St. Louis County Economic Council. It appears that these organizations could qualify for the Aerotropolis special tax revenues. Awarding a steady stream of tax revenue to organizations that argued for the legislation that created that tax revenue is exceptionally poor public policy.

There’s a simple answer to all of these problems. Remove the possibility, however remote, of using the Aerotropolis subsidies and tax revenue as a political tool. There doesn’t seem to be a practical reason to include these mechanisms in the Aerotropolis legislation. They do, however, invite corruption into the process. The economic merits of the Aerotropolis tax credits are highly questionable, but if the legislature insists on enacting them, it should not allow that money to be controlled by political figures.

The post The Mayor, the County Executive, and the RCGA All Likely Have Vested Interests in the Aerotropolis Legislation: It Could Enhance Their Power appeared first on Show-Me Institute.

To say that things have not gone according to plan at Lambert-St. Louis International Airport is a considerable understatement. During the 1980s and 90s, Lambert ranked as the nation’s ninth or tenth busiest airport. Today it is no longer among the top 30. Since the year 2000, it has experienced a 60 percent decline in enplanements. Lambert also went from debt-free to being saddled with $877 million in long-term debt when the third runway opened for public use in 2006.

Because of the adverse combination of reduced traffic and heavy debt (now equal to seven times annual revenues), Lambert has been forced to raise its landing fees to more than double or even quadruple those of competing airports, and that, in turn, has caused a number of carriers to vote with their wings in shunning the airport.

The third runway is seldom used. It isn’t needed at today’s traffic levels (less than one third of what the airport’s planners were anticipating), and remaining airlines avoid using it unless forced to do so by bad weather (the two pre-existing runways are too close together to permit simultaneous instrument landings) because it is farther away from passenger terminals. Even the “International” in airport’s formal name has become a misnomer, as St. Louis has the unenviable distinction of being the biggest metropolitan area in the nation with no direct scheduled air service outside of North America.

All of which has led to an improbable question as political and civic leaders in the St. Louis region ponder the future: Can the self-styled “Gateway to the (American) West” reinvent itself a futuristic, airport-centered Gateway to the Far East?

Joined by the Saint Louis Regional Chamber and Growth Association (RCGA), political leaders in St. Louis City and County have appealed to the state of Missouri for assistance in boosting the ailing airport. That is to be expected. What is remarkable, however, is the broad bipartisan support that has emerged at the state level for a hastily conceived plan – described by RCGA and others as “The Big Idea” – aimed at inducing the Chinese government and world air carriers to establish a major air cargo hub at the under-utilized Lambert-St. Louis airport.

The proposed legislation would dole out $360 million of state tax credits for the purpose of creating a “China Hub” or “Aerotropolis” at Lambert. And that in itself is a tell-tale sign of an“investment opportunity” that is an accident waiting to happen. As we have argued in number of commentaries, targeted tax credits are very similar to “earmarks” – narrow public subsidies handed out to powerful special interests. We have shown that several of the likely applicants for Aerotropolis tax credits are warehouse and real estate developers already eligible to receive millions of dollars of state and local tax incentives.

In truth, for all that it has been touted as the “Big Idea,” the Aerotropolis plan seems to consist of little more than a hope and a prayer, accompanied by a good deal of political grandstanding with unrealistic projections of massive job growth and economic stimulus. The RCGA produced an eight-page statement making the claim that $300 million in public incentives for the Aerotropolis – to facilitate the construction of new warehousing space – would pay for itself more than 100 times over in just two decades – leading to $34 billion in private economic activity. Saying little about the methodology that was used, the organization cited a single computer forecasting model to support this extraordinary claim.

Neither the RCGA nor any other organization has produced a detailed feasibility study. No one supporting the Aerotropolis has produced evidence that Chinese authorities and major carriers are contractually or otherwise committed to turning Lambert into a major air cargo hub – provided that the airport is able to meet certain conditions in the provision of additional warehousing space and other facilities. In fact, we have shown that St. Louis already has acres and acres of surplus warehousing space in the immediate vicinity of the airport – enough, according to Michael Webber, an international air cargo consultant, to provide for the projected traffic of eight weekly freighters cited by Aerotropolis supporters.

So where is the evidence that massive tax credits are the magic ingredient needed to turn St. Louis into one of principal caravansaries along the aerial Silk Road of the future – connecting China and other Asian nations to the American Midwest, with onward connections for air cargo to other parts of the world as well?

There is none that we found in months of diligent searching. Instead, proponents rally support by making it sound as though other airports – in Detroit, Chicago, Cincinnati, Indianapolis or other cities – will seize the gold ring for themselves if the city and state fail to take preemptive action. It’s the old argument – Build it and they will come.

At the Show-Me Institute, we have cited numerous instances, both in the St. Louis region and around the state, where targeted tax credits have failed to produce promised economic results. The list includes failed shopping centers, a stalled “Ballpark Village” in downtown St. Louis, and other supposed economic wonders that have turned sour.

Meanwhile, the cost of this misguided corporate welfare has mounted. Over the past 12 years, tax credit redemptions in the state of Missouri have quintupled – growing from $103 million to $522 million per year. Every time our lawmakers pass out more “gifts” to some businesses, they are forced to dig deeper into the pockets of other taxpayers – both businesses and individuals.

That is not fair. And it is not smart public policy either.

More than a decade ago, Lambert-St. Louis International Airport rolled the dice on an ill-advised gamble on future growth that wasn’t there. Let’s hope it’s not about to repeat the same mistake.

Andrew B. Wilson is a fellow and Patrick Ishmael is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri Public Policy.

The post A Starry-Eyed Proposal To Rescue an Airport and Revitalize a Region appeared first on Show-Me Institute.

So, when we received a bundle of studies, draft studies, and progress reports this week from the Midwest China Hub Commission, the first thing I looked for were documents showing that warehouse space was needed.

But those documents show something entirely different.

According to reports commissioned by the China Hub Commission:

[Existing warehouse space] provides a short, medium and long-term solution for warehousing and ground handling needs in respect to this project.

And:

[Runways, ground handling, and warehouse space are] sufficient to manage and handle wide body air cargo flights from China. A recent on-site visit by a major international logistics firm has provided validation.

In fact, a study commissioned by the St. Louis Regional Chamber & Growth Association (RCGA) estimated that 45 million kilograms of cargo could be shipped to international destinations. Incidentally, that is almost exactly the amount of cargo that could be handled by existing facilities, according to the Midwest China Hub Commission reports.

And yet, as legislators were debating creating $300 million in tax credits to subsidize warehouse or facility construction, the RCGA pushed to publish a report purporting to show that $300 million in construction tax credits would result in more than 27 million square feet of warehouse space being construction, and that 20,000 jobs would be needed to construct and operate that space.

To add insult to injury, KMOV recently reported that the RCGA receives a great deal of taxpayer money, and doesn’t keep track of it very well.

What floors me is that given previous studies commissioned by proponents — including the RCGA itself — that 27 million square feet RCGA estimate is nonsense. And so are the related jobs estimates.

All of this leaves me wondering, what is that $300 million actually for?

After all, based on warehouse space analysis commissioned by China Hub proponents, $300 million for construction subsidies is likely $300 million too much.

The post According to China Hub Reports, Warehouse Space is Sufficient appeared first on Show-Me Institute.

The Aerotropolis bill (as written during the 2011 legislative session — we’re still waiting on updated text for the special session) would give the authority to the mayor of St. Louis or the executive officers of nearby counties the power to designate “gateway zones.” While this power sounds innocuous, it has important ramifications.

First, those chief executives would become gatekeepers in the distribution of millions of taxpayer dollars. The Aerotropolis legislation would create $300 million in tax credits that would subsidize warehouse construction. That tax credit money could only be awarded only to warehouses built in gateway zones.

Even if motives are pure, the ability to determine which areas are eligible for hundreds of millions in tax credits would be an incredible power. The legislation does not say anything about monitoring such designations. Nothing in the legislation would prevent one of these chief executives from using such power as an indirect way to acquire campaign contributions or other untoward benefits.

A simple way to stop any such abuse of power would be to take the city and county chief executives out of the equation. If legislators — despite a lack of substantive empirical evidence that these tax credits will do any economic good — really want to subsidize warehouse construction, at least let all owners of vacant land compete equally for tax credits. There is no need to give special powers to city and county executives to achieve this (questionable) goal.

Second, this legislation would allow city and county executives appoint a three-person board to oversee millions in special tax revenues. That board could impose a special tax on the warehouses receiving the Aerotropolis subsidies, and then would oversee how those tax revenues are spent. Of those special tax revenues, 50 percent would go to the St. Louis airport. But the other 50 percent would be given to a “tax-exempt regional economic development association or associations…” The three-person board would select which association(s) would receive the money.

This, too, represents increased political power. The chief executives of Saint Louis and nearby counties will be in a position  to appoint the people who determine what agency gets part of those special tax revenues. Nothing in the Aerotropolis legislation would prevent them from appointing individuals who have a vested interest in where those special tax revenues go.

Interestingly, it seems that the St. Louis Regional Chamber and Growth Association (RCGA), the organization that pushed hard for the Aerotropolis tax credits, is a “tax-exempt regional economic development association.” There are others, such as the St. Louis County Economic Council. It appears that these organizations could qualify for the Aerotropolis special tax revenues. Awarding a steady stream of tax revenue to organizations that argued for the legislation that created that tax revenue is exceptionally poor public policy.

There’s a simple answer to all of these problems. Remove the possibility, however remote, of using the Aerotropolis subsidies and tax revenue as a political tool. There doesn’t seem to be a practical reason to include these mechanisms in the Aerotropolis legislation. They do, however, invite corruption into the process. The economic merits of the Aerotropolis tax credits are questionable as it is, but if the legislature insists on enacting them, they should not allow that money to be controlled by political figures.

The post The Mayor, the County Executive, and the RCGA All Likely Have Vested Interests in the ‘Aerotropolis’ Legislation: It Could Enhance Their Power appeared first on Show-Me Institute.

The Aerotropolis bill would give to the mayor of Saint Louis or the executive officers of nearby counties the authority to designate “gateway zones.” While this power sounds innocuous, it has important ramifications.

First, those chief executives would become gatekeepers in the distribution of millions of taxpayer dollars. The Aerotropolis legislation would create $300 million in tax credits that would subsidize warehouse construction. That tax credit money could only be awarded to warehouses built in gateway zones.

Even if motives are pure, the ability to determine which areas are eligible for hundreds of millions in tax credits would be an incredible power. The legislation does not say anything about monitoring such designations. Nothing in the legislation would prevent one of these chief executives from using such power as an indirect way to acquire campaign contributions or other untoward benefits.

A simple way to stop any such abuse of power would be to take the city and county chief executives out of the equation. If the state — despite a lack of substantive empirical evidence that these tax credits will do any economic good — really wants to subsidize warehouse construction, at least let all vacant land owners compete equally for tax credits. There is no need to give special powers to city and county executives to achieve this (questionable) goal.

Second, this legislation would allow city and county executives to appoint a three-person board to oversee millions in special tax revenues.

That board could impose a special tax on the warehouses receiving the Aerotropolis subsidies, and then would oversee how those tax revenues are spent. Of those special tax revenues, 50 percent would go to the Saint Louis airport. But the other 50 percent would be given to a “tax exempt regional economic development association or associations …” The three-person board would select which associations would receive the money.

This, too, represents increased political power. The chief executives of Saint Louis and nearby counties will be in a position to appoint the people to determine what agency gets part of those special tax revenues. Nothing will prevent them from appointing individuals who have a vested interest in where those special tax revenues go.

Interestingly, it seems that the Saint Louis Regional Chamber and Growth Association (RCGA) — the organization that pushed hard for the Aerotropolis tax credits — is a “tax exempt regional economic development association.” There are others, such as the Saint Louis County Economic Council. It appears that these organizations could qualify for the Aerotropolis special tax revenues. Awarding a steady stream of tax revenue to organizations that argued for the legislation that created that tax revenue is exceptionally poor public policy.

There’s a simple answer to all of these problems. Remove the possibility, however remote, of using the Aerotropolis subsidies and tax revenue as a political tool. There doesn’t seem to be a practical reason to include these mechanisms in the Aerotropolis legislation. They do, however, invite corruption into the process. The economic merits of the Aerotropolis tax credits are questionable as it is, but if the legislature insists on enacting them, they should not allow that money to be controlled by political figures.

The post The Mayor, the County Executive, and the RCGA All Likely Have Vested Interests in the ‘Aerotropolis’ Legislation: It Could Enhance Their Power appeared first on Show-Me Institute.

From Wednesday’s Patch, which seems to be a very pro-“Aerotropolis” publication (emphasis added):

Mike Leblanc, co-chair of the Northwest Chamber’s economic development committee, said if the legislature waits until September to look at the issue, the Chinese may discover Kansas City, MO or Memphis, TN are more serious than St. Louis about establishing a partnership.

Leblanc said establishing the China Hub would create 5,000 jobs in the St. Louis area. He wondered how the legislature would leave the 2011 session without addressing the issue.

“To leave session without addressing this issue and the possible creation of 5,000 jobs is unacceptable to most of the voters in a nonpartisan way,” Leblanc said.

“Possible creation.”

Then, from Thursday’s St. Louis American, which also seems to be a very pro-Aerotropolis publication (emphasis added):

On May 13, the last day of Missouri’s 2011 legislative session, the so-called “Aerotropolis” proposal died when legislators couldn’t resolve their differences on tax credit reforms to a larger economic development bill. Aerotropolis had been bundled as part of that development package.

Advocates of Aerotropolis claim its tax incentives would spur the creation of 23,000 construction jobs and 13,800 new permanent full-time jobs.

It appears that the St. Louis American‘s numbers originate from a St. Louis Regional Chamber & Growth Association (RCGA) study dated April 19, claiming 23,325 construction jobs and 13,844 full-time “operations” jobs would result from the project, or 37,169 jobs total.

Two Saint Louis chambers of commerce, two radically different answers for the job impact of Aerotropolis, one 700 percent greater than the other.

The RCGA on Friday produced even more recent numbers than those cited by the American, in response to Michael Webber’s piece in Air Cargo News. The difference? The newer analysis, apparently dated April 27, now says that the project will lead to 18,468 construction jobs and 10,941 full-time “operations” jobs, or roughly 29,000 jobs, a reduction of more than 20 percent from the original numbers.

So, now we have three figures for the number of jobs promised, two of them originating from the RCGA.

Perhaps worse? The RCGA repeated their larger April 19 job numbers in their May 2 Monday briefing, after they apparently had new jobs numbers to distribute. Before it released these April 27 numbers to Air Cargo News, had the RCGA made these downwardly revised numbers available to the public? We know that the St. Louis American certainly relied on long-outdated information.

More importantly, are supporters just making up these jobs figures as they go along? None of the proponents seem to be able to keep their job numbers straight.

The post Eco-Devo Mad Libs: So, Are 5,000, 29,000, or 37,000 Jobs Being Saved or Created With “Aerotropolis”? appeared first on Show-Me Institute.

Less excusable are the actions of supposedly wise politicians who lay down billions in tax dollars in the vain hope of hitting it big with a stimulus or economic development bill. We are promised that a dollar in government spending will create more than a dollar in economic growth.

This idea, known as the fiscal multiplier, has never been borne out by evidence. When the actual results of government spending on the economy are examined, they show lackluster or even negative returns. However, that has not stopped proponents of greater government spending from using the multiplier to promote everything from the federal stimulus bill to state and local subsidies for warehouse construction around Lambert–St. Louis International Airport.

The multiplier is based largely on the work of economist John Maynard Keynes, who argued that higher government spending combats people’s propensity to hoard money in a recession and puts unemployed people and resources to work. As the spending ripples across the economy, a dollar in government spending should cause substantially more than a dollar in economic activity.

The Barack Obama administration invoked multiplier theory to promote the $787 billion federal stimulus package. The president’s economic advisers assumed every dollar spent by the stimulus would add $1.50 to gross domestic product (GDP). In a March 2 column for the New York Times Economix blog, University of Chicago economist Casey Mulligan showed that stimulus spending did not boost GDP, and may have caused it to shrink.

Nor has stimulus spending delivered the bounty of jobs that its supporters promised. Obama claimed that the stimulus would prevent unemployment from exceeding 8 percent., yet it hit 10 percent and now remains stubbornly stuck at 9 percent.

Others have taken this idea a step further, claiming a still bigger multiplier effect for specific projects — thinking, just as I did in my youth, that it must be easy to toss the ring around the bottle. When final plans for Ballpark Village were announced in 2006, the Saint Louis Regional Chamber and Growth Association (RCGA) estimated that Phase I of the project would cost $387 million, but generate $273 million annually — paying for itself in a year and a half. Of course, this assumed that everything would go as planned. Almost five years later, construction has not started and the investment has been downgraded to $155 million, with at least $57 million of that coming from various levels of government. Furthermore, Ballpark Village is primarily shuffling existing businesses around instead of attracting or creating new ones. Stifel Financial Corp., the village’s largest future tenant, will move all of seven blocks.

Despite these failures, politicians of every stripe recently trotted out the multiplier to support subsidies for warehouses around Lambert, through “Aerotropolis” legislation. Although the precise equation behind it remains shrouded in oracular mystery, an RCGA study predicts that $300 million in public funding will lead to almost $34 billion in private economic activity over 20 years, suggesting a truly absurd return of more than 10,000 percent. Here, the Keynesian multiplier has itself been multiplied by the central planner’s conceit of being able to pick winners successfully — truly a sucker’s game.

The government cannot create resources from thin air. It must take them from taxpayers through taxation or borrowing. Resources used by the government therefore cannot be used by the private sector. Increasing government spending does not in itself increase the country’s capacity to produce — it just shifts existing production away from goods and services that consumers demand, and toward those demanded by politicians.

The multiplier is a lie, but an attractive one, luring the listener like the familiar siren song of my youth: “Ring the bell, win a prize!”

John Payne is a research assistant with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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