On November 4, Springfield voters will decide on a proposal to increase the city’s hotel tax by three percent. The proceeds from the new tax will help fund a new convention center for the city. A recent report paid for by the Visit Springfield tourism bureau said exactly what Visit Springfield wanted it to say: that a new convention center will generate enormous revenue for the Springfield area. The report claims a new convention center will drive $1.3 billion in new spending over the next 30 years. Exaggerated estimates like this one have been made on behalf of convention centers all around the country for decades, and the historic evidence is clear that Springfield voters should be dubious of such claims.

Between now and November, Springfield residents who visit St. Louis should drive by the largely empty dome attached to St. Louis’s downtown convention center to see how these convention center promises often play out. That dome was a part of a large convention center expansion in the 1990s. The same promises of growth, revenue, and utopia were all made when St. Louis voters approved a similar hotel tax increase back then. Now the dome is mostly empty, and the regional body that manages it is struggling to pay for its upkeep. St. Louis’s local tourism agency thinks the solution is the same thing it always is: further expansion of the convention center. Like a Cold War general in a Kubrick movie or a carpenter with a box full of nails, tourism agencies have the same solution for every problem. Economic recession? Expand the convention center. Economic growth? Enlarge the convention center. Global nuclear war? Definitely gonna need a bigger convention center to commiserate in.

The increased hotel tax isn’t the only public money being used as part of this plan. Other local sales taxes are slated to be used for funding, and state tax dollars are being considered. Tourists, Springfield residents, and possibly all of Missouri will get to pay for this new event space, whether it is actually needed or not.

Haywood Sanders is a researcher and writer with the University of Texas–San Antonio who has studied convention center expansions for decades. He has documented how cities and tourism agencies systematically inflate projections to get these projects approved. Sanders has reviewed the Springfield convention report and noted in an interview with a Springfield News-Leader reporter earlier this year that the report didn’t state how it calculated its room occupancy estimates and ignored underwhelming numbers of comparable convention centers in Overland Park, Kansas, and St. Charles, Missouri. Sanders states that the convention-center industry peaked in the early 2000s and shows no signs of returning to the success it enjoyed back then. With two major convention areas so close by in Branson and Lake of the Ozarks, a new center in Springfield will face intense competition. But I have no doubt that local Springfield convention-center boosters will ignore reality in their quest for tax revenue and city spending.

Visit Springfield wanted a report that claims a convention center will be an economic boon for the city. They got it. As Springfield residents prepare to decide on the hotel tax increase proposal, they should study the work of Heywood Sanders and others to learn about how these claims have been made about many other convention centers in many other cities, and how they usually fail. Springfield voters can also go to St. Louis to see the failures of these promises with their own eyes. Taxpayers should not be on the hook for convention centers whose overstated benefits, such as they are, will largely go to private entities. This is the Show-Me State, and the claims being made by supporters of the convention center for Springfield should be met with a healthy dose of skepticism by voters.

The post Springfield Voters Should Be Skeptical About Convention Center Claims appeared first on Show-Me Institute.

Expanding the tax base makes for good tax policy, and equalizing the tax difference between competitors is also good policy. There is no reason that a hotel should have its guests pay one tax rate while Vrbo guests pay a lower rate. The time period of any theoretical “infant industry” argument is long past. The short-term rental industry is a major part of tourism and hospitality, and it should be treated the same as standard hotels for sales tax purposes.

Of course, I would like to see an expansion of the hotel tax base combined with lowering the tax rate, but saving money for tourists probably isn’t the top priority for local officials. I’ll have to be content with the hope that increased revenue from expanding the hotel tax base will remove pressure to raise the hotel tax rates in the future.

Like marijuana taxes and use taxes, hotel tax expansion can offer a method for new municipal tax revenues in an economically sound fashion. However, cities should not just use these new revenue sources to simply get and spend more money. They can also be used to replace other, more economically harmful taxes. These include local earnings taxes, high commercial property taxes, the ridiculous “economic development” sales tax, and personal property taxes on business equipment. (I am well aware that hotel taxes are usually dedicated to tourism promotion and not as readily exchangeable as use or marijuana taxes, but that is a choice that cities make [and a defensible one], not some order delivered via lightning bolt by Zeus himself that the cities can’t change if they wanted to.)

That would be a trade-off that would truly benefit cities in Missouri.

The post Short-Term Rentals, Long-Term Taxes appeared first on Show-Me Institute.

The debate over municipal limits on renting out your own property is happening all over Missouri, but most immediately in Lake Ozark and the City of St. Louis. In Lake Ozark, which currently bans short-term rentals in much of the city, the city council is voting Tuesday night on amending the zoning laws and allowing short-term rentals in certain parts of the city. I am opposed to municipalities having a comprehensive ban on short-term rentals. In a tourism-driven area like the Lake, it makes even less sense to have an outright ban.

The arguments for allowing short-term rentals are that: (a) you have right to rent out your own property if you wish to (b) allowing more rental options is good for the tourism industry and local economy; and (c) complaints about the rentals are often overblown, and police or regulators can handle such problems as they arise.

I agree with all of that—but even if you believe with all your heart that zoning violates property rights, the courts have decided that zoning is legal. So, if zoning regulations where you live say you can’t rent out your property, you may need a better argument. Point (b) is hard to dispute, and while point (c) is also true in my opinion, I understand why homeowners next door to the property that is the exception—with lots of parties, noise, crime, etc.—may want their city to take more proactive action.

The legitimate arguments against allowing short-term rentals are also straightforward. Too many of them do involve large parties and general mayhem. More importantly, one has to have sympathy for the property rights of the people who bought a home or condo under existing zoning laws that limited or prohibited such rentals, and are now seeing people trying to change (or governments ignoring) those laws. I support allowing short-term rentals, but I won’t be cavalier about the property investments people made with the understanding such things are not allowed.

It’s a tough issue. I think short-term rentals should be allowed in a tourist area like Lake Ozark (and the entire Lake region), but I understand that limits and rules may be necessary. In more residential locations, tighter limits may be appropriate. However you look at it, this issue isn’t going away in Missouri anytime soon.

I’ll be writing more soon on the role homeowners associations can play in this issue and how short-term rentals should be taxed.

The post Short-term Rentals, Long-term Questions appeared first on Show-Me Institute.

On May 13, David Stokes joined The Gary Nolan Show to discuss a gas tax increase that is headed to the Governor’s desk and a trend in Missouri local government – taxing outsiders.

Read David’s piece in the Springfield News-Leader and the Columbia Daily Tribune

Listen to more of The Gary Nolan Show

The post The latest on a Gas Tax Increase and are Tourists “Free Riders”? appeared first on Show-Me Institute.

The good news is that school districts will have that flexibility this year. DESE recently announced that “The Missouri State Board of Education voted to grant exemptions to the school start date law that goes into effect for the 2020–2021 school year, given the unusual and extenuating circumstances COVID 19 has presented.”

This waiver is good news for districts. The start date law, however, is an unnecessary restriction aimed at supporting tourism at the cost of education. A mandated start date makes even less sense this year, given the chaos created by COVID-19.

To acquire a waiver, districts must apply to the State Board of Education. Requirements for waiver eligibility (listed under the “Calendars, Finance and Funding” tab) include showing local support for moving the start date (DESE is vague about exactly what this means), holding a public hearing on moving the start date, demonstrating how this exemption will benefit students and their learning, and explaining how this exemption will minimize the transmission of COVID-19.

If a district’s waiver is granted, districts can create a school calendar based on student needs. However, the waiver is only good for the upcoming school year. Next year and beyond districts will have to follow the start date law. The coronavirus is an extreme example of how this law can create problems for schools, but there are many other potential situations where adjusting the school calendar could be necessary.

While it’s welcome news that districts won’t be mandated to start school on a fixed date this year, the underlying problem remains. The school start date law harms kids and schools in Missouri, and lawmakers should just get rid of it.

The post School Start-Date Flexibility: A Short-Term Win for Local Control appeared first on Show-Me Institute.

Hopefully by late summer, the pandemic will be controlled enough for students to start the next school year normally. One idea for districts attempting to make up the lost time would be to start the next school year earlier. Unfortunately, the mandated start date law from 2019 would make this impossible.

Last year, a law passed limiting when school districts could start the school year in the hopes of advancing tourism with a few extra weeks of summer vacation. Putting tourism ahead of education was a bad idea in the first place, and there were other concerns with the law, such as a later start date perpetuating the academic summer slide. The law is an example of why we should be careful about taking away local control from schools, even for seemingly trivial matters such as school start dates. For districts that are not transitioning to remote learning, they have few options to make up the lost weeks, and this law eliminates one feasible option.

The coronavirus pandemic has highlighted the importance of flexibility in education policy. Local control can give districts the flexibility to properly respond to student needs.

The post One Fewer Option for School Districts appeared first on Show-Me Institute.

Missouri has made the decision to mandate the earliest dates that schools can open each year, even as other states are moving away from similar policies. The reason? So that families have an extra week or two to vacation in the state’s tourist areas. I’ll be very curious to see how many families change their plans because of this law.

Where is the outrage from parents with full-time jobs who have to make summer arrangements for their children for a longer stretch of time? Where is the outrage from school boards that clamor for local control? Where is the outrage from principals who know full well about the impact of the summer slide?

The Missouri legislature had the opportunity to improve education in the state by encouraging innovative ideas and options for parents. Instead they chose to manipulate the public school system in the hope that it will benefit the Lake of the Ozarks and Branson. The next time a lawmaker claims that public education is their priority, pay attention to their actions, not their words.

The post Public Education Is More Important Than Tourism appeared first on Show-Me Institute.

The 25-million-visitor claim comes from the 2016 Tourism Economics report prepared for VisitKC by Longwoods International and the U.S. Travel Association. A copy of the report is available at the link at the bottom of this post. The study defines Kansas City as “a five county region in Kansas and Missouri—Johnson and Wyandotte in Kansas; Clay, Jackson, and Platte in Missouri.”

This means the 25 million visitors visited not only Kansas City, Missouri, but Kansas City, Kansas; Overland Park; Olathe; and Independence. It includes the Cabela’s at the Legends Outlet, which for a while was the number one tourism attraction in the entire state of Kansas, and since then has only added attractions such as Sporting KC’s stadium.

The report divides visitor spending by the five different counties, with Jackson County, the home of Kansas City (and Independence) receiving just under half. It is reasonable to conclude that only half of the 25 million visitors are coming to Jackson County—and even fewer may be visiting Kansas City proper. After all, the five-county area has a population of 1.8 million, while Kansas City has only 480,000.

For an administration that talks about dealing only in facts, the 25 million visitors claim is misleading at best. People are right to be skeptical of such big claims, and city leaders should do a better job of ensuring their accuracy.

The post Tourism: When Kansas City Is Not Kansas City appeared first on Show-Me Institute.

An important and rarely addressed point is that a city does not need to have a giant, publicly funded convention center with a dome in order to hold conventions. In fact, many (if not most) conventions are held at private hotels. For instance, the Chase Park Plaza Hotel (located in Saint Louis’s Central West End neighborhood) has rooms that can host conventions and conferences. Some of its spaces can handle up to 2,500 people. Other hotels in the area offer to host conferences and small conventions as well.

For very large groups (with tens of thousands of visitors), a space like the America’s Center is necessary. The only problem is that Saint Louis does not attract many of those events, despite abundant available space. For instance, in 2014 the Saint Louis Convention and Visitors Commission (CVC) hosted 393 events for a total of 425,411 room nights. However, only 14 of those events had more than 2,000 attendees, meaning that about 96% of all events held by the CVC in 2014 could have fit comfortably in hotel spaces. Those small events also account for most of the room nights and attendees that supposedly prop up the downtown economy. Of course, if the Saint Louis government wasn't able and willing to rent extensive convention space at unprofitable rates, groups of various sizes might well be discouraged from holding their events in the city. But on the other hand, without its convention center spending, St. Louis City could afford to cut its hotel taxes in half, remove part of its restaurant tax, and retire much of its civic debt.

The bottom line is that while it is easy to claim that conventions contribute to the local economy (although not as much as supporters might have us believe), that’s not the same thing as saying that publicly funding a massive convention center designed to handle tens of thousands of visitors (and a dome that can seat many more) is of significant benefit to the local economy. And that is even further from proving that the next big upgrade will finally draw the big conventions that are currently bypassing Saint Louis.

The post The Saint Louis Convention Center: How Critical is it? appeared first on Show-Me Institute.

Civic leaders claim conventions support tens of thousands of jobs and bring more than a billion dollars into the local economy. Therefore, if the city can spend another $200 million to upgrade the convention center and renovate the Dome, the region might see an even greater benefit. Unfortunately, the Dome and the Convention Center are underperforming, and the businesses conventions they support are not even close to being the main breadwinners in Saint Louis’s economy.

The city upgraded the convention center in the 1990s, adding the Edward Jones Dome and funding the completion of the Renaissance Center. The convention center itself does not directly make any money, but the argument is (and was) that it brings in tourists who spend money (mainly at hotels), which translates into a tax benefit for the city. When the Dome was built, city leaders expected “hotel nights” from conventions would rise to 800,000 annually. But it didn’t happen. Saint Louis convention business growth has been low ever since. 

Even in 2014, total convention-related hotel nights remained at 425,411. Worse yet, about 60% of those hotel nights are accounted for by convention groups with fewer than 2,000 participants, who certainly don’t require a venue as large as the 60,000+ seat Dome. In 2015, only nine conventions had more than 10,000 participants (accounting for 80,000 room nights). The CVC often blames the NFL schedule for holding down the number of conventions the city can compete for, but in the six months when no games were held at the Dome, nine large conventions was a far cry from busy.

What of the convention center’s huge impact on the Saint Louis economy? City leaders can throw numbers around all day, but according to the Census, less than 1 percent of Saint Louis City’s business payroll came from the hotel industry in recent years. That’s less than a third of the city’s total law-firm payroll. Even if we combine all the restaurants, all the entertainment venues, and all the hotels in the city (many of which are mainly supported through non-convention business), we’re talking about 7 percent of the city’s payroll. That’s less than city’s manufacturing payroll and about half the city’s healthcare industry payroll. 

Despite these realities, the city is not $400 million in debt for infrastructure improvements to lure manufacturing companies. It is not planning to spend more than $200 million on hospitals or legal offices. How has it come to be that the city’s focus (both financially and politically) has become so tied up in entertainment and tourism when that is clearly not the city’s competitive advantage?

The post Conventions, Saint Louis, and the Future of the Edward Jones Dome appeared first on Show-Me Institute.

The two most important arguments in the debate over whether Kansas City taxpayers should subsidize a private convention hotel are made by the proponents:

• First, they argue that it does not make business sense to build a hotel of this size in downtown Kansas City right now. Consequently, they need taxpayers to invest first, and they need taxpayers to invest to the point that it does make sense. (This is the argument with every TIF project, by the way.) The difference here is scale: the project requires the public to subsidize half the cost.
• Second, they claim that demand will increase simply by increasing hotel room supply. The proponents are not doing anything else, such as increasing the visitor and tourism budget so that they can dedicate more resources to attracting conventions. They're just building a hotel. That's all.

But Kansas City doesn't need more hotel rooms; we're already oversupplied. According to the same consultants hired by the developers for this project, the occupancy rates (the number of rooms sold divided by the number of rooms available) at existing downtown hotels is a paltry 50% to 55%. That means we're only selling half the rooms we have. According to the chart above, taken from an HVS report from 2015, hotel room supply has outpaced hotel room demand in all of Kansas City for years. 

Exactly how increasing room supply (represented by the red bars on the chart) by building a new hotel will increase demand (the yellow bars) or the occupancy rate (the red line), is unclear. But taxpayers are being asked to invest $165,000,000 on that very proposition.

The post Convention Hotel Field of Dreams appeared first on Show-Me Institute.

And with more than a quarter of Spaniards out of work, more people than ever before have been crisscrossing the city with their violins and voices, for extra cash. People squeeze giant accordions onto the metro, and roll amplifiers on carts across cobblestones.

The street performers are a tourist attraction. But Madrid’s mayor, Ana Botella, says the clamor has reached its limit.

If this sounds like an idea that could only gain traction in a country known for fascist leadership, consider that Saint Louis did the exact same thing until recently. The Show-Me Institute has highlighted efforts to reform occupational licensing for things such as performers and valet parking.

It might be in the city’s best interest to regulate the activity to provide for passable sidewalks and streets, and to protect Madrid’s tourism industry. However, one such group of performers, called the Potato Omelette Band, objected to the requirement and secretly videotaped its audition, which contained lyrics critical of the city effort:

“Oh, my poor Madrid, my city. They are kicking out musicians and artists, and replacing them with police,” the song goes. “There is no jury better than the hat — the hat you put on the floor to collect donations.”

Indeed. While Americans debate whether government ought to act on an issue or whether it even has the power to act, musicians in Madrid remind us of the simple truth that nothing is better suited to solve problems than free people operating in a free market.

The post There Is No Jury Better Than The Hat appeared first on Show-Me Institute.

Car-rental companies and airlines say heavy taxes on their services damp demand. With rental cars, some consumers, particularly leisure travelers, are discouraged from travel or opt for smaller cars to hold down the price of a rental, where taxes can sometimes exceed the car cost.

“Taxes clearly have an impact on consumer behavior,” said Richard Broome, spokesman for Hertz Corp.

A survey last year by the U.S. Travel Association, a nonprofit industry group, found 49% of respondents had altered plans because of high travel taxes, such as by staying in less-expensive hotels and spending less on shopping and entertainment. Ten percent of people surveyed said they had changed city choices for trips because of taxes.

Kansas City’s tax levels rank just behind mega-cities such as Chicago, New York City, and Boston, and in a competitive travel market where fuel is expensive and money is tight, every increment of tax can have consequences. I love my hometown, but does Kansas City have the amenities of Manhattan that would allow it to get away with charging a little more for a hotel? Of course not. As Policy Analyst David Stokes noted last year in a commentary about hotel taxes in Jefferson City, “hotel tax votes are often an easy choice for voters, because it can seem like an attractive idea to tax somebody else to fund your own public service or community asset.” But as we have noted before on this blog and in print, hotel taxes are not just a tax on tourists. They also are a tax on the city’s competitiveness, as the Wall Street Journal also notes.

Unfortunately, Kansas City’s abysmal tax ranking(s) probably will not change anytime soon. Not only have the city’s leaders spent citizens into a hole over the years — raising the city’s debt levels to among the worst in the region — but they seem intent on larding up the city’s budget with taxpayer-funded developments, from streetcars to convention hotels to entertainment zones. This is not a sustainable path. The city must change course.

The post Kansas City Among The Nation’s Worst For Tourism Taxes appeared first on Show-Me Institute.

If the vote passes, Pettis County expects to net an additional $100,000 in tax revenues. As a result of this increase, Pettis County will assume the City of Sedalia’s current obligation to pay $72,000 annually to fund the Convention and Visitors Bureau (“CVB”).

That raises the question: what should Sedalia do with the money it no longer needs to spend on the convention bureau? The city could spend more on tourism or other pressing government services. It could also pass those savings along to taxpayers by reducing sales tax or property tax rates.

Spending additional resources on tourism would not benefit the city. People who attend the Missouri State Fair have to go to Sedalia anyway. Cyclists who bike that end of the Katy Trail are highly likely to stop there as well. Most tourists will visit and spend in Sedalia regardless of how much, or how little, the city spends on advertising. Additional dollars spent promoting tourism will have limited benefits for the city’s economy.

The second option is applying the $72,000 to other government services. If there is a widely agreed-upon public good the city needs to address, perhaps moving the money toward that need is its best use. But lacking a widely agreed-upon need, the city should not just spend the $72,000 because it has it. Returning the money to the taxpayers has benefits that might be hard to immediately quantify, but they absolutely exist.

The third option — decreasing the sales tax — would benefit tourists as much as residents and produce little overall benefit. Sales taxes relating to tourist attractions result in less economic distortion than other types of taxes. If the sales tax is successfully raising tax revenues without distorting the local economy, it should be low on the list of things to cut.

Which brings us to our final option — reducing property taxes in Sedalia. Businesses in Sedalia suffer from the high commercial property tax surcharge imposed by Pettis County. According to research done at the Show-Me Institute, Pettis County has a significantly higher surcharge than its neighboring counties. In order to alleviate this burden, the city should reduce property tax rates to make their businesses more competitive and give their residents additional purchasing power.

Reducing the property tax would increase expendable incomes for both businesses and homeowners. Businesses may use that additional money to expand or to create new jobs. Homeowners will increase consumer spending or savings rates. These benefits are not as easily seen as additional billboards along I-70 or radio ads, but in the long run, they attract, retain, and promote economic growth.

According to economic theory, taxing inelastic goods (which are less sensitive to price) is preferable to taxing elastic goods (which are more price sensitive). So, taxing hotel rooms in a tourist location like Sedalia is preferable to taxes on business property. But, Sedalia should not use this change to justify increased government spending.

Consequently, a reduction in property taxes to offset the new hotel tax revenue is the best option. The proposed guest tax overhaul in Pettis County is a good idea only if the savings are passed along to all voters and taxpayers.

The post Pettis County Guest Tax Overhaul Would Benefit From Tax Rollback Provisions appeared first on Show-Me Institute.

Take a moment to check out the two commentaries my colleague David Stokes has published on hotel taxes: here and here.

The post Grandview to Vote on Hotel Tax Tomorrow appeared first on Show-Me Institute.

Contact your local representatives and let them know how important this event is to you and for what reasons, whether it is because of the economic impact it has on the local communities and state as a whole, the educational aspect of providing an interesting curriculum to the schools, that it promotes healthy lifestyles for children and adults alike (Bike sales increased the week of the event in 2009), the Tourism exposure as the eyes of the world focus on Missouri for a week each year, or the increased sense of community as all of the host cities unite to put together a special welcome to the visitors from nearly 100 countries and all 50 states. Or maybe you can just tell them you want it because it is a heck of a lot of fun!

The Tour of Missouri, like other potential recipients of state funds, does a lot of constructive things. But that’s not enough reason for the state to continue subsidizing it when revenue decreases.

In order to show that Tour of Missouri deserves a subsidy, supporters would have to demonstrate that a dollar spent on the Tour gives Missourians more benefit than that same dollar would if spent on anything else. There are other programs out there that claim to accomplish some of the same things as the Tour. For example, it’s been suggested that archery is a good basis for interesting curricula. Film tax credits are said to boost the economy, local food initiatives to engender healthy habits, and Census promotional events to build community.

This state representative gets the idea:

“You wouldn’t want to cut something that was proven to have brought money back,” he said, adding that the money has to come from somewhere. By way of example, he said you could ask educators if they would cut $1 million from Parents as Teachers or Career Ladders programs to fund the race.

Some people have told me that comparing programs like that is a “false choice.” They say that we don’t have to choose between Parents and Teachers and a bicycle race, because we can have both. They imply that it’s unfair to bring up education funding when you’re discussing a subsidy for an unrelated program — as if no program could appear deserving when held up against the schools.

If by “false choice” people mean that we shouldn’t fund one program we like best to the exclusion of all others, then they’re right. We don’t want to fund public schools and nothing else; government funding is not winner-take-all. However, at the margin — when we’re deciding where to spend that last dollar of state funds, or where to make the next cut to balance the budget — we do need to compare programs. We need to make sure that we’re cutting funds from the program that is least necessary, not the program that is most productive.

People who still think these decisions at the margin are “false choices” are making a mistake. They’re assuming that their favorite program doesn’t need to be as productive as others when, in fact, it does. Resources are scarce. Tax dollars can’t go toward funding just any program that does a nice job. Deciding to increase funding for one program but not another would be a false choice only if there were some way to give every program the full funding increase its supporters want. There isn’t — so, as the state representative pointed out, a dollar spent on one program is a dollar that could have been spent on something else.

It’s also a mistake to think that schools would gobble up all the money if only the most deserving programs were funded. Suppose we decided to spend tax dollars where they’re most needed, and we started funneling dollar after dollar into education. Pretty soon, the state would be in dire need of other services that schools can’t provide. In that situation, a dollar spent on one of several other programs would be more productive than a dollar spent on schools.

Besides comparing programs as I’ve discussed, legislators also have to consider whether the last dollar spent on a state program would have been put to better use if left in the private sector. If the answer is “Yes,” it should be returned to the taxpayers.

Choosing between funding a program that’s “a heck of a lot of fun” and funding a program that’s boring but productive may be a difficult choice, but it isn’t a false choice.

The post Hard Choices, Not False Choices appeared first on Show-Me Institute.