“We have gone from about 80 properties to about 480 properties,” Hulshof explained. “My cup runneth over.”

Like supporters of government-managed economic development programs everywhere, backers of the plan in Charleston think that if the government approves the right plan here, with the right subsidy there, with the right government agency approval soon, that government plans can magically turn a struggling city into a boomtown. As economist Dick Netzer once mocked these eco devo officials, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”

A Chapter 353 plan with mass property tax abatements would not help Charleston. It would, in fact, almost certainly hurt it more. If property taxes are too high for businesses in Charleston (which I doubt, to be honest), then the city, school district, county, etc. should lower the rate for everyone, not give some property owners in downtown Charleston a big tax abatement that will almost certainly force tax increases on everyone else to make up the difference.

There are a multitude of studies that demonstrate the fallacy of believing that government economic development agencies can successfully engineer economic growth through various subsidies. Here is one simple summary from two economists who have looked at the question thoroughly: “The best case is that incentives work about 10% of the time and are simply a waste of money the other 90%.”

There are other economists who wouldn’t even agree they work 10 percent of the time. As one economist said after he reviewed a similar tax-subsidy laden plan for north St. Louis:

Among the most vocal critics of the NorthSide plan was the chair of Washington University’s Department of Economics, Prof. Michele Boldrin, who testified at the trial that the benefits promised by McKee such as new jobs and increases in property value were “dreamy,” “out of thin air,” “unreasonable,” and “completely arbitrary” and further stated that “if an MBA student came up with it, I’d throw him out of my office.”

St. Louis and other cities in Missouri have been using tax incentives as a prop for politicians to claim they are “doing something” for decades. How has it worked out for St. Louis? As author Colin Gordon wrote in him study on that precise question in his book, “Mapping Decline”:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by — and compromised by — the same assumptions and expectations and prejudices that had created the condition in the first place.

If you think the results in Charleston are going to be any different, I have a bridge over the Mississippi to sell you. A Chapter 353 plan for Charleston will allow politicians and planners to claim they are doing something, it will benefit the politically connected and the lucky, and it will empower city government to get more involved in the local economy. All of these things are, by the way, bad things. What a 353 plan won’t do for Charleston is help revitalize the city or grow the economy.

The post A Chapter 353 Tax Abatement Plan is the Last Thing Charleston Needs appeared first on Show-Me Institute.

Festus is not alone in its debate. Nationwide, there have been significant disputes about whether communities should want data centers in their backyards. While data centers can bring investment to a community, there are concerns about electricity, water usage, and sound.

Of the hundreds of citizens participating in the recent Festus hearing, one gentleman’s comments captured my attention. The St. Louis Post-Dispatch reported:

He urged local governments to turn any revenue gain due to the new facility into lower property taxes for the general public. He also said a data center should pay for any increase in utility rates due to the extra energy usage it requires. And, he said, the city should not offer the data center any tax incentives.

I have to wonder—has this gentleman read this article I recently published?

Jokes aside, his comments convey a few key points that I think are important to keep in mind when considering a data center project in a community.

#1: Lower taxes help drive economic growth, so a reliable course of action is to return extra revenue to taxpaying citizens.

New data center revenue ought to be returned to taxpayers through lower tax rates, easing pressure on the entire tax base. Property tax abatements should not be handed out.

#2: Find innovative solutions for electricity needs.

Last year, a major energy omnibus bill, Senate Bill 4, included a provision that protects average ratepayers from “any unjust or unreasonable costs from service to such customers [such as data centers].” This should help shield average ratepayers from rate hikes to meet this new energy demand, but some burden will likely still fall on them.

While it is a state-level solution, Missouri should explore consumer-regulated electricity (CRE), which would allow new data centers and other large customers to be served by separate, independent grids. This idea could be beneficial for both ratepayers and developers. You can read more about CRE here.

#3: Remember what data center developers are prioritizing, and do not hand out subsidies.

Lastly, the actions of the biggest data center customers have made their priorities clear.

Money does not seem to be a big factor for these enormous developers. They instead seem focused on energy availability, speed to operation, and long-term stability. A clear example of this is Microsoft pouring an enormous amount of money into restarting Three Mile Island for its data centers.

Instead of handing out subsidies, a municipality could evaluate its own permitting rules. Reducing red tape could both accelerate speed to operation and signal that the community is a dependable, long-term location.

Festus will certainly not be the last community to have a heated debate about data center development. Keeping these key principles in mind, however, may help communities have productive debates on this topic.

The post The Data Center Debate Continues in Festus appeared first on Show-Me Institute.

But a recent news story gave another twist to the idea of cities as romantic partners.

The St. Louis Post-Dispatch reported that NorthPoint Development called off a $120 million apartment complex of over 300 units and will soon sell the site. Why? Because the city was constantly making additional demands. What started as a yes was becoming a maybe. NorthPoint backed out.

The Post-Dispatch quoted St. Louis Development Corp. Executive Director Otis Williams as saying, “if we just stuck to whatever we said we wanted to do,” the project would have continued.

Alderman Michael Browning alleged the city wasn’t “good-faith negotiators. With all of the unpredictable things in development, the city does not need to be the thing that constantly changes.”

Yes, the city needs to be consistent. But that does not mean the city should crank the subsidy spigot to full blast.

The story notes the number of projects receiving subsidies from the St. Louis Land Clearance for Redevelopment Authority (LCRA) has dropped since 2018. The chairman of the LCRA, Matt McBride, argued that because there are so few developers wanting to work with the city, “we need to be encouraging of those who are taking the risks to do so.” I suspect by “encourage” he means, “subsidize.” The folks who hand out subsidies always want more to hand out.

Perhaps there is another way. Perhaps, instead of overregulating the market, instead of demanding ever increasing concessions, instead of imposing costly application, permitting, and approval stages, the city just got out of the way of those who want to build in St. Louis?

City leaders should work to address barriers to development rather than leaving them in place and cutting checks to offset them. They’ve already shown a willingness to do so with liquor regulations and parking mandates.

Unfortunately, Megan Green, president of the board of aldermen, wants to further increase the city’s demands of developers regarding affordable housing and community benefits. But that will just increase the costs for developers and, in turn, increase the amount of taxpayer subsidies. “St. Louis,” she says, “has been a cheap date for way too long, and we should not be a cheap date.”

It calls to mind the bawdy punchline: ‘We’ve already established that, madam. Now we’re just haggling over the price.”

Unfortunately, taxpayers are picking up the tab for these dalliances. Instead of seeking more expensive dates, St. Louis should make itself a more attractive partner by ditching its baggage and focusing on stable, long-term relationships.

The post St. Louis Needs to Stop Dating and Settle Down appeared first on Show-Me Institute.

And we will admit, it can make us sound like hand-wringing naysayers, always seeing the glass as half empty. (In our defense, we have each spent two decades trying to successfully launch a combined six children into the world. Saying no is a big part of that. Honestly, we are both fun at parties.)

But isn’t securing population and economic growth a basic function of government?

No, it isn’t. A well-run government should not care about growing either its population or its economy.

According to the ideas of Charles Tiebout, cities (and other local governments) compete with each other for residents based on the services the governments offer and the taxes they impose. Cities that provide quality public services at reasonable tax rates will naturally grow, as more people choose to move into those communities. That increased demand will increase housing prices which, combined with zoning rules, generally prevents the city from growing more than its residents want to. Cities that provide poor services at high taxes will see population decline, for obvious reasons.

The forced need for growth—from a government point of view—only becomes necessary when the books are out of balance. Government leaders often push important financial obligations out into the future—hoping to pay tomorrow for what they purchase today. Those ballooning debts on the horizon make them susceptible to all the journeyman consultants and their economic impact chicanery that only makes the situation worse.

Instead, cities should understand their role is to play host to economic activity, not engage in it themselves. The folks who referee the kids’ soccer games at which I spent many Saturday mornings are not players in the game. Nobody asks them to make calls in a way that helps a particular team or drives up the combined score. Quite the opposite—we are alarmed by the idea that a referee may act on a team preference.

To turn planning and spending over to local elected leaders risks overreach and overspending. Overreach because elected leaders want to be seen as bold visionaries dreaming of “what could be” in order to capture the imagination of voters. Overspending because, well, concern about risk is greatly reduced when the consequences of failure are so widely and thinly spread.

As Heywood Sanders, a professor at the University of Texas at San Antonio, said at the Kansas City Library in 2015:

Don’t do what everybody else is doing. Okay? Period. There is an old saying that goes along those lines, “don’t think if you’re doing exactly the same thing that everyone else is doing except not quite as big or good or well, that it’s going to be any different.”

Private actors understand this. Why would they invest in a new convention center for Jefferson City or Springfield if they are just going to be the latest in a long line of cities to do so?  How does that make sense or play to either city’s strengths? It doesn’t—so they turn to elected leaders, who are swayed by the possibilities and unencumbered by the risk of investing their own money. Who cares if it works tomorrow—it feels good today!

If a city is to grow, the best our elected leaders can do is to make sure all the obstacles are removed and the rules are clear and evenly enforced. Everything else, including growth and winners and losers, needs to be determined by the players on the field.

The post What’s a City to Do? appeared first on Show-Me Institute.

There’s a long track record of inflated claims around the economic benefits of hosting major sporting events. Economists Robert Baade and Victor Matheson found that the 1994 World Cup resulted not in a $4 billion boost, as advertised, but in a net loss between $5.5 billion and $9.3 billion across host cities. Despite this, city officials—and their usual partners in the Chamber of Commerce and Downtown Council—continue to market the 2026 event as transformational for Kansas City.

A recent Kansas City Star article outlines the Small Business Storefront Vacancy Revitalization initiative, under which the city will offer up to $25,000 per year in rent subsidies to small businesses that occupy empty retail spaces. The goal is to fill downtown with activity and present a more vibrant environment to World Cup visitors.

But if the World Cup were the growth engine it’s advertised to be, wouldn’t businesses already be competing for these spaces?

The need for incentives suggests otherwise. Rather than a natural uptick in demand, the city appears to be staging vitality. Pop-up stores and subsidized art installations may look good for a few days, but they are not a substitute for long-term market viability. Officials point to similar programs in Seattle and San Francisco, yet even there, long-term results remain unclear.

Yes, some storefronts may light up temporarily. But if Kansas City genuinely wants to support small business, better options exist: streamline the permitting process, reduce regulatory barriers, address infrastructure needs, and improve public safety. These are structural reforms that support entrepreneurs regardless of tourist calendars.

Instead, city leaders appear to be following a familiar pattern: promote a high-profile event, rush to spend earmarked funds on short-term optics, and then dodge accountability when outcomes fall short.

If it hasn’t worked so far, why would anyone expect it to work in the future?

The post Kansas City’s World Cup Potemkin Village appeared first on Show-Me Institute.

That truce, however tenuous, is now over. And the legislative safeguards that underpinned it? Those are collapsing too. Missouri’s border war limitations on cross-state tax subsidies are set to expire in August. Earlier this year, legislation was introduced to preserve the truce by eliminating the expiration date entirely. Lawmakers added it to Senate Bill 10, which passed both chambers independently—but couldn’t get reconciled before session’s end. So the bill died, and with it, hopes for ending the economic arms race.

Kansas Governor Laura Kelly indicated last year she was never really serious about the truce. But now Missouri has let the truce expire. And in doing so, our lawmakers joined Kansas in an economic race to the bottom. It’s bad policy. Worse, it’s profoundly unserious governance.

Economic development isn’t war. It’s not supposed to be a battlefield where neighboring states trade artillery in the form of publicly issued bonds and tax abatements. Yet here we are again, watching legislators in Jefferson City and Topeka dress up like Civil War reenactors—reenacting the Border War with new costumes and worse math.

Meanwhile, Missouri public officials continue their own subsidy spree, throwing tax breaks at data centers and entertainment districts while the state is unable to keep the streets repaired or safe. If lawmakers were serious about our state’s economic health, they’d rein in their own giveaways first.

Instead, we’re back to playing an expensive, performative game—one that enriches developers, flatters politicians, and drains public coffers. Legislators in both states want to be seen as “fighting” for jobs, but all they’re doing is trading fire in border skirmishes that make the region poorer.

The original truce was imperfect, but it pointed in the right direction. It said we could grow the region without cannibalizing each other. That we didn’t have to subsidize the illusion of progress. That good policy could also be good politics.

By breaking the truce or letting it expire, politicians on both sides demonstrated they are not interested in sober economic stewardship. They may win a few headlines or ribbon cuttings. But the public—taxpayers, students, local governments—will be left paying the bill.

If this is a reenactment, let’s at least admit it: The weapons are new, but the economic costs are the same.

The post Border War is Back On! appeared first on Show-Me Institute.

Governor Parson said that Missouri would “do everything we can” to keep the teams in Missouri.

This is dangerous. The reason state and municipal leaders welcomed a truce in the economic Border War was not because of the damage it inflicted on others—it was because of the damage it inflicted on their own cities and states. When signing the 2019 truce, Kansas Governor Laura Kelly noted:

In the past decade, folks in Kansas and Missouri had to watch and wonder why economic development forces in each state spent huge sums — together, some $330 million — to pull businesses a few miles across the border, and only to create an illusion of success with practically no economic gain.

Parson agreed, saying, “Sometimes common sense does prevail. Because you don’t have to be a scientist to figure out [the Border War] was a bad deal for both states.”

Just because Governor Kelly is violating her own executive order does not mean it is in anyone else’s benefit to re-arm and ride to the sounds of guns.

The only ones who benefit from such skirmishes are the corporations that pit the two states and their various municipalities against each other. A prime example was Applebee’s, which crossed State Line Road repeatedly, adding no economic benefit to either side, but racking up sweet taxpayer-funded incentives for itself each time.

All that Kansas did the other day was provide the Chiefs and Royals leverage to play the states against each other—potentially increasing the costs to taxpayers in both states. Should the Missouri side present a package that is competitive, the teams will very likely go back to Kansas and ask it to increase its offer. This is how negotiations work. Will Kansas, now that it has gotten its developers, municipal leaders, and residents excited by the prospect of hosting the two teams, be able to say no? Or will it sweeten the deal, just a little bit, to meet this “once in a lifetime” opportunity?

Anyone can see how this quickly becomes a race to the bottom.

Many Kansans are happy to have Jackson County foot the bill—and the hassle—of dealing with the Hunts and the Shermans. Conversely, there are plenty of Missourians who wouldn’t be bothered if Kansas decided to pick up the tab—and the bond risk—of hosting those teams and all their demands of taxpayers. But responding in kind to Governor Kelly’s gambit is not good for Missouri.

The only way to grow an economy is for government at all levels to be good at the basics. Maintain your infrastructure, keep the public safe, protect property rights, and do so as effectively and efficiently as possible. Missouri leaders ought to keep that in mind.

The post The Border War Is Bad Because It Hurts Us appeared first on Show-Me Institute.

The new city motto should be: “Tax subsidies in Creve Coeur, just there for the asking.”

Honestly, the idea that the old Monsanto and Bayer site at Olive and Lindbergh needs tax subsidies is beyond ludicrous. The fact that the local officials in Creve Coeur seem to be enthusiastically supporting this instead of laughing the proposal out of the council chambers shows—once again—how far we have fallen from the idea of a level playing field for everyone.

Let’s state a few facts. Keep in mind the proposed development has both residential and commercial components.

This particular area has comparatively low taxes as it is. The Ladue School District has the lowest commercial property tax rate in St. Louis County and one of the lowest residential tax rates (go to page 2 in the 2023 tax book in the link for the data).

The Ladue School District is also one of the top school districts in the state. People want to buy homes or condos or rent apartments there.

The property is not some abandoned, vacant lot. The current owners are paying property taxes now. The idea that Creve Coeur is desperate here—that if they don’t approve this subsidy request some financial disaster will occur—is absurd

Here is the most important part: there is absolutely no evidence that the use of local tax subsidies helps economic growth. None at all. The short-term incentives of part-time politicians looking to “do something” while in office cause a great deal of harm.

If a parcel at the corner of Olive and Lindbergh in Creve Coeur needs tax subsidies (hint—it doesn’t), then any and every spot in our state needs tax subsidies.

Creve Coeur government officials should focus on creating a reasonable zoning and permitting process, modest local regulations where necessary, and maintaining as low a property tax rate as possible. That is all the developer of this location needs or deserves. The fact that local officials appear to be racing to give away the store is equal parts stupid and infuriating.

The post Creve Coeur Engages in Panic Subsidizing appeared first on Show-Me Institute.

In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the St. Louis Marketplace or the Olde Towne Plaza in Ballwin, we can list plenty of private business projects government had no reason to get involved in but did, to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

St. Louis Mayor Tishaura Jones came into office two years ago pledging to make changes to the city’s economic development process. To a small degree, her administration has reduced the subsidies it is giving out to companies, and for that she deserves credit. But they also figured out a way to somehow make a bad process even worse by imposing an “economic justice” imperative on it. So now, instead of listening to development officials fabricate how their corporate welfare led to jobs, growth, and so on, we get the additional pleasure of hearing how tax subsidies lead to more “equity.” Death can’t come fast enough.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, suburban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. Chesterfield officials talk about the Valley TIF there in much the same way, as if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

The self-aggrandizement of the economic development industry would be understandable if the system worked, but it doesn’t. The East-West Gateway Council of Governments (EWG) did a major study of TIF and other subsidies a decade ago and concluded that they created one job for every $370,000 in tax subsidies. That is a terrible return on the subsidy, as EWG stated. Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies. Yet our region continues to pass out tax subsidies like other people’s candy, evidenced by the atrocious decision of the St. Louis County TIF commission to approve $300 million in subsidies for the “blighted” part of Chesterfield just last month.

If we really wanted to help our community grow, residents of the St. Louis-area could get no better gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post St. Louis Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a Catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the Bass Pro Shop in Independence and the Jamestown Development near Springfield, we can list plenty of private business projects government had no reason to get involved in but did to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

Late to the subsidy game but catching up fast, Springfield—having seen how St. Louis and Kansas City have operated their own subsidies and failed by every measure—has decided to follow in their footsteps. The trucking industry has long been important in Southwest Missouri, and there are numerous companies, stations, and stores in Springfield to service the various fleets. But not enough for the City of Springfield’s Department of Economic Vitality (that’s its actual name), which decided to use over $4 million in taxpayer funds (along with other subsidies) to entice an enormous new gas station company, Buc-ee’s, to locate in town.

The head of another local convenience store company, Rapid Robert’s, rightfully took issue with the plan. He didn’t object to the competition, but rather the use of tax subsidies in a field full of local companies that had grown without them. His objections fell on deaf ears, and likely would have been meaningless to the members of the city’s “economic vitality” department. They, like economic development officials everywhere, care nothing about history, propriety, or capitalist theory. They care about getting the forms marked up, the tax money spent, and the deal done so that they can claim credit, add it to their resume, and start searching for the next job.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, exurban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. As if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies.

As Christmas approaches, Springfield residents could get no better Christmas gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post Springfield Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In most instances, the timing of the TIF project would not matter. It would start when passed by the TIF commission and city council and last up to 23 years from that date. But apparently, it really matters here, as the special city council session indicates. Why?

Probably because the work on the project has already begun, and if the work has already begun, there is risk of the property being assessed at a higher value in the looming 2023 reassessment cycle. If it is assessed at a higher value, that limits the size of the tax subsidy available. Don’t get me wrong, it would still be an enormous TIF project, but hey, every few million dollars counts.

Of course, the fact that the work has begun before the TIF proposal is finalized is important, because the justification for this abomination of a TIF project is that the area is “blighted” and that the project would not happen at all “but for” the tax subsidy. It is hard to claim that it would not happen “but for” the subsidy when construction has already started before the subsidy is approved, but this appears to mean nothing to Chesterfield, the St. Louis County TIF Commission, and the various planners and lawyers who are all in on the tax subsidy largesse. (See appendix C of this document for the relevant affidavits.)

There’s another way to interpret construction starting on this project before the money was even approved. The developers were so confident that the TIF commission and the Chesterfield City Council would approve the money that there was simply no need to wait. This attitude, if true, would conform with the broader subsidy culture in our state, where local governments often just rubber stamp tax subsidy requests.

Will the city further contort itself to do the bidding of the developer and get this all approved before 2023 when the reassessment clock will strike midnight? Or will the city protect taxpayers and the other affected taxing jurisdictions, such as the Parkway and Rockwood school districts, by dealing with the reality that the developers used the system to extract taxpayer money for a project that never needed subsidies to begin with?

The post What’s the Rush, Chesterfield? appeared first on Show-Me Institute.

Using tax subsidies for economic development rarely benefits the public. Instead, it lowers the risk and increases the returns for the private investors. Under a capitalist system, the relationship between risk and reward for investors can a wonderful thing, but in recent decades the government has somehow decided the public should get involved in private business dealings with tax subsidies and incentives. Taxpayers in Independence were left holding the bag for the failed Bass Pro tax increment financing (TIF) plan, and most economic development schemes are like an expensive game of musical chairs where the taxpayer is always the one with nowhere to sit.

The Paragon Star development, which includes youth athletic fields, hotels, office space, apartments, restaurants, and more, has already been approved for significant taxpayer subsidies, including a $32 million TIF, another $32 million in transportation bonds, and $5 million in special sales taxes. Now the developers are requesting $6 million in neighborhood improvement district (NID) subsidies. Keeping track of all the TIFs, CIDs, NIDs, and more requires an advanced degree in acronyms.

Subsidizing all of this in the floodplain of the Little Blue River makes it even more absurd. In fact, as of August 28, using TIF in the floodplain in most of Missouri will be illegal. But Lee’s Summit has nothing to fear; Jackson County got itself exempted from that law. It will remain perfectly legal in Jackson County to use tax subsidies to develop in the floodplain, which will raise the height of the water in the next flood—causing more damage than before and requiring public money to rescue or reimburse those harmed. As insane as it is, it all makes perfect sense in the world of the developer-subsidy complex.

I have no illusions that the Lee’s Summit city council will deny the NID and risk the project at this late point. There are eleven current TIFs within the city, whose leaders seems to believe that it must subsidize its way to growth. Numerous economic studies have proven the fallacy of that belief. Prosperous, desirable communities like Lee’s Summit are fully capable of economic growth without tax subsidies. However, part-time city councilmembers are rarely willing or able to fight back against the well-paid phalanx of lawyers, planners, and lobbyists that developers employ in their quest for other people’s tax dollars.

Whether it is a TIF, CID, or NID, the taxpayers are always the ones without a chair when the music stops. I hope the citizens of Lee’s Summit realize this before it is too late.

The post Lee’s Summit Is Generous to a Fault appeared first on Show-Me Institute.

The fact that the developers have requested eminent domain should disqualify it from the start. From the article about the proposal (emphasis added):

The developers have asked the city for the power to use eminent domain to force property owners to sell, but said they are not considering it now.

So they want the power of eminent domain, but as of now they say they don’t plan to use it. Until they deal with a property owner who does not feel like selling, of course. Just the threat of eminent domain impacts the entire process negatively.

They also want tax subsidies:

They need approval for $35 million in tax incentives, plus an extra sales tax.

So, a big TIF, plus a CID or TDD (to be determined), so that average people throughout the region can subsidize this development.

I don’t know if there is a real market for new apartments, condos, shops, etc. in this part of Webster Groves. There may well be. But if the project has to have huge tax subsidies and the threat of eminent domain, then I would doubt it.

The TIF commission should deny the TIF and the Webster Groves City Council should refuse the eminent domain and oppose any CID, TDD, etc. Then the developer can talk with the property owners and move forward or not.

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The case is complicated. My purpose here is not to get into the legal minutia of the lawsuit filed by the ice rink owners against the city of Hazelwood. But the broad strokes are important. The suit claims that the city has harmed the owners of the ice rink by taking ownership of much of the property in the mall. With the city owning much of the land, it becomes tax exempt, thereby making the ice rink pay even more of the bond debt. The suit also claims that the City of Hazelwood is dragging its feet on approving a youth sports center proposed for the site, and instead favors building an industrial park. The ice rink owners want the youth sports project to help share in the current tax burden, and clearly don’t want to wait for a possible industrial park years down the line.

The whole thing, as Marty Huggins might say, is a mess. SMI analysts have discussed this failure before and for good reason. The entire project from its inception is a perfect example of why local governments need to stay out of the economic development game, not get more involved in it. The mall is partly within a floodplain, in a struggling area, and was launched when indoor malls were already falling out of favor. The original project building the mall may well not have gone forward if Hazelwood and Bridgeton had not supported it with tax subsidies. If it had gone forward anyway, it would have done so with private money. But no, tax dollars—in the form of subsidies—helped propel this financial failure.

Hazelwood seems to be doubling down on its efforts by taking ownership of the land to promote its preferred use of the land. The city’s track record doesn’t justify such a move. A private entity wants to put a sports complex there now. Unfortunately, this sports complex will be getting some tax subsidies. But those subsidies are coming from St. Louis County, and they’ve already been approved.  The best Hazelwood can do at this point is get out of the way and approve the project—more taxpaying entities in the mall will help ease the unfair burden on businesses such as the ice rink. The city doesn’t need to try and do more—it has done enough damage already.[/vc_column_text][/vc_column][/vc_row]

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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.

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In 2016, $25 million in government assistance (including TIF and special taxing districts) was approved for this site but the developers never moved forward with the plans. It’s not yet clear exactly what developers will be asking for this time, but whatever it is, it’s too much. Crestwood is not a blighted community and even if the property is an eyesore, there is no reason for government to be giving out incentives for this property. There’s already a Schnucks and an Aldi right across the street. Do we really need subsidies to build another grocery store in this area? And is it fair to the existing stores to have the government subsidizing their competition?

Using taxpayer dollars to fund private projects isn’t a good idea. Developers aren’t going to quit asking for these unfair advantages, but lawmakers need to stop giving them out

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Supporters of the bill argue that the mandate makes sense because customers ask for biodiesel and it would support local industries. Yet if biodiesel truly is popular, a mandate wouldn’t be needed to convince people to buy it. Supporters also argue that this mandate would be a good way to support Missouri farmers, as it would require half of the mandated biodiesel to be made from Missouri-grown materials. Forcing everyone to buy a certain state industry’s product is not only a heavy-handed way to “support local industry” but also certain to give rise to legal challenges. Has anyone heard of the Commerce Clause?

Detractors of the bill argue that biodiesel is more expensive at the pump than regular diesel and that mandating a more expensive fuel will harm the state’s economy. While prices do fluctuate, the true cost of biodiesel appears to be more expensive than regular diesel, although the price at the pump is trending downward. In 2015, biodiesel was 12 cents per gallon more expensive than regular diesel. In 2019, biodiesel cost roughly the same as diesel in the Midwest and was actually less expensive than diesel when calculating a nationwide average. But this calculation omits the current subsidies that biodiesel producers receive each year of $1 per gallon of biodiesel produced. Without these subsidies, that extra dollar will show up in the price at the pump.

The prudent course of action is to let the market work. If biodiesel is truly popular and cheaper than regular diesel, a mandate is not necessary. A mandate, particularly as this one is drafted, amounts to little more than a handout to certain farmers at the expense of anyone who buys diesel fuel.

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One of the many serious flaws with the TIF process is that it empowers cities to make financial decisions that impact other taxing districts far more than the city itself. Boonville is happy to surrender decades worth of property taxes to the developer because Boonville is substantially funded by sales and gaming taxes. It is the school district, the county, and other taxing districts which are funded at a much higher percentage by property taxes that take the real hit here.

Boonville itself may be well-funded by the gaming taxes, but are other taxing districts in the region awash in tax revenues? Based on comments from the Cooper County Health Department administrator, I would imagine not. As she described funding in her office during the pandemic:

Melanie Hutton, administrator for the Cooper County Public Health Center in rural Missouri, pointed out the local ambulance department got $18,000, and the fire and police departments got masks to fight COVID-19.

“For us, not a nickel, not a face mask,” she said. “We got (5) gallons of homemade hand sanitizer made by the prisoners.”

To be clear, she was referring specifically to funding from the state and federal governments, but I think it is clear that her own department is lacking the proper resources to deal with the pandemic. The Cooper County Health Department is primarily funded by property taxes, the very taxes that the Boonville City Council (which has no authority over the Cooper County Health Department) will impact with the TIF vote.

The fact that the city council gets to reduce funds for the county health department is absurd. But that is how the tax subsidy, abatement, and credit game works. How does a local community win that game? Well, as the wily computer told a young Mr. Carrie Bradshaw in “War Games” many years ago, the only winning move is not to play.  

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If approved by the Lee’s Summit City Council, this project could receive an additional $18.9 million in development incentives. According to an article in the Kansas City Business Journal, that would bring the total to $74.3 million in public support, which includes $32.3 million from transportation development district (TDD) bonds, $5 million from community improvement district (CID) reimbursements, $4 million in state funding, and $1 million in city funding. That’s a lot of taxpayer money!

This project is a mixed-use sports and entertainment project and it includes volleyball courts, children’s parks, restaurants, and retail establishments. Given the uncertainty regarding when we will return to “normal” use of these types of facilities, is this really where taxpayer dollars should be going?

The timing for this project is bad, but even in different times, it would still be a bad idea. Not only do government handouts give unfair advantages to some developers over others, but research shows that incentives such as these don’t result in measurable benefits for the communities that pay for them. They can end up being a huge waste of taxpayer dollars, which is something local governments really can’t afford right now. The developers for this project have already received more than enough public dollars. Do we really need to give them more?

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A groundbreaking new study by the Lawrence Berkley National Laboratory found that wind power plants significantly reduced their output once their eligibility for federal subsidies expired. Wind energy is subsidized through the Production Tax Credit (PTC), which reimburses wind power plants between $15 and $24 for each megawatt hour generated over a period of ten years once the plant is operational.

The study examined pre-2008 “old” plants that have operated during and after their PTC eligibility, as well as post-2008 “new” plants that do not have post-PTC data available yet. The study found that production dropped roughly 10 percent in the years after PTC reimbursements ended, and 13 percent overall after 17 years.

The authors note that this coincidental timing

suggests that maintenance and operating strategies change when projects lose access to the sizable tax benefits afforded by the PTC…After the window of PTC eligibility has passed, operating profitability declines and, therefore, so does the operational rigor.

Overall, the study found

clear evidence that operators are carefully adjusting behavior based on the PTC status to maximize profitability, which provides an additional level of plausibility to the idea that operators would also change maintenance regimes based on the PTC status.

This study adds to the growing evidence that wind plants are quite reliant on subsidies. The federal Energy Information Administration forecasts that new wind plants will face a steep drop in construction after PTC eligibility expires in 2020. While the tax credits will continue for ten years for plants that are deemed eligible before PTC expires, new plants won’t be eligible after 2020.

Show-Me Institute analysts have often written about how subsidies affect markets in any industry, and energy production is no different. Markets should not be designed so that companies chase after subsidies and change their behavior to maximize handouts. Energy subsidies distort markets, alter industry behavior, and rack up large taxpayer bills.

More wind power plants are being built in Missouri to qualify for the PTC before eligibility ends in 2020. Given the perverse effects of wind power subsidies, Congress should not extend the PTC as it has several times before and Missouri should not consider a state-level replacement once PTC eligibility expires.

Tax revenue will be hard enough to come by in the coming years. It should not be given away to prop up favored private industries.

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