The St. Louis Streetcar project, which did not receive a TIGER grant, has garnered less attention. The plan would have built a 6.9-mile streetcar system from downtown Saint Louis to the Central West End, at a cost of $270 million (likely a low estimate).

You may not have heard much about this project, because Metro never mentions adding streetcars in its Long-Range Transit Plan. Their long-term improvements are focused on expanding MetroLink or adding bus rapid transit, but not adding a streetcar network. Nor was the project part of East-West Gateway’s (the Saint Louis metropolitan planning agency) Regional Transportation Plan when it was released in 2011 (it was added in 2013). City leadership did not discuss the plan until it was suddenly to receive tens of millions of dollars from the ill-fated Amendment 7.

The downtown streetcar is primarily the creation of Partnership for Downtown St. Louis, an organization whose membership is mostly made up of corporate representatives and whose budget comes from property taxes collected from a Community Improvement District (CID) located downtown. They created the plan and lobbied the city to submit the TIGER grant application. Although the process used to create the streetcar plan did not come from city residents, the methods of payment would have. The proposed methods of payment included a Transportation Development District (with accompanying sales and property taxes), Tax Increment Financing, tax credits, and parking fees.

Those new taxes and fees would have been a hard sell for a transportation mode that shadows the MetroLink and does not provide rapid transit. However, Saint Louis residents should be upset that non-elected corporate representatives were promising residents’ local tax dollars in order to get a piece of residents’ federal tax dollars. This episode also should be a warning that local non-governmental organizations have the ability to push forward wasteful civic projects with taxpayer money.

The post Light Rail Never Sleeps: The Saint Louis Edition appeared first on Show-Me Institute.

Missouri has more than 90,000 lane miles of local roads that are the responsibility of cities and counties, as compared to 33,000 lane miles of highways under MoDOT’s purview. While MoDOT receives most of its funding from fees placed on drivers, local roads do not. Counties and municipalities partially fund their streets with the 25 percent of state fuel taxes remitted to localities, but in most areas that is inadequate. Local governments, therefore, rely on local sales taxes, property taxes, and specially formed taxing districts known as transportation development districts (TDD) to pay for road improvements.

One source of funding localities technically could use—but do not—are local fuel taxes, even though they might be a fair and economically sound way to fund roads. Paying for streets with fuel taxes, as opposed to other forms of local taxation, also might have the benefit of limiting wasteful spending, because the Missouri Constitution stipulates that all local fuel tax proceeds must be spent on roads.

The likely reason no Missouri localities collect fuel taxes (although attempts have been made) is that the state constitution stipulates that voters approve any such measure by a 2/3^rd majority. Other forms of local taxation, such as transportation sales taxes or property taxes, require only simple majorities. TDDs, semi-democratically created ad hoc taxing districts, also are much easier to implement than fuel taxes. It is, perhaps, unsurprising that while no city has a fuel tax, there are more than 170 TDDs in Missouri, collecting revenue with little accountability or oversight.

Moving forward, many of the funding problems that MoDOT faces for highways is mirrored on the local level. Counties and cities face street maintenance backlogs, and residents have noticed. Recent surveys in Springfield and Kansas City showed residents were highly unsatisfied with the state of local streets.

It is hard to tell what portion of the need arises from a genuine lack of funding and what portion is the result of misplaced priorities. However, as Missourians consider if more must be spent, they also should question how more would be raised, and whether the current methods are transparent and economically sound.

The post Local Road Funding in Missouri appeared first on Show-Me Institute.

The Kansas City streetcar plan required the approval of a TDD to provide local funding. Because voters rejected the formation of the TDD, the project lacks local funds and, thus, cannot proceed. But this is unlikely to be the last we hear of plans to expand the streetcar. Some Kansas City officials have made it clear that they view this election as just a setback for their vision of an extended streetcar system. The mayor stated:

“It’s very possible either way, but we’re not going to just roll over and let it go…We’ve got to continue to look for options to get the job done.”

That might mean a newly drawn TDD or some other tax increase that will provide enough local funding to apply for federal grants.

However, for the time being, the election has halted any streetcar expansion plans. Let’s hope the ultimate result of the election is a renewed focus on efficient transportation policy for all of Kansas City.

The post Kansas City Streetcar District Fails To Win Support appeared first on Show-Me Institute.

• Proponents: Streetcars drive development. Cities that have built streetcars have seen development far in excess of project costs. Kansas City has seen new development around the as yet unfinished initial streetcar line. Developers and millennials are attracted to the fixed transportation infrastructure, creating more economic dynamism.

o   Opponents: The idea that streetcars create development is tenuous at best. Streetcars are nearly always coupled with subsidies to developers and corridor improvements that may be the prime factor for any development. In addition, that subsidized development might have been diverted from other areas in the city. Many examples of streetcar development in Kansas City are, on closer inspection, fatuous. For instance, a company (whose owner publicly supports the streetcar) moved from one part of the proposed streetcar line to another two blocks away, and this was counted as streetcar-induced development.

• Proponents: Streetcars will increase transit usage. Most people prefer rail and fixed transit to buses, so the streetcar can expect high ridership. In addition, the streetcar’s improvements to the overall transit network will increase transit ridership across the city.

o   Opponents: Streetcars are among the most wasteful methods of boosting transit ridership. As their capacity and speed is not significantly better than a bus, even popular streetcar lines do not carry many riders. Furthermore, as the Kansas City streetcar will run on routes that multiple bus routes already serve, we can expect a good deal of streetcar riders to be former bus users, not new transit riders. The Kansas City streetcar will duplicate, rather than complement, the existing bus network. This means minimal system-wide mobility improvements, and hence, little new system-wide ridership. With a cost of more than $470 million (which could pay for more than 100 buses), the transportation benefits of streetcars are not worth the cost.

• Proponents: More transit spending means more jobs.

o   Opponents: Kansas City needs new jobs that will enrich the city, not jobs that act as a drain on the public purse and the taxpayer.

Put simply, streetcar proponents argue that streetcars drive economic development, improve public transportation, and create jobs, while opponents counter that development claims are unproven, that the costs of the project far outweigh any transportation benefits, and Kansas City needs jobs that bring money into, not extract money from, the city.

The post The Kansas City Streetcar Expansion: Policy Breakdown appeared first on Show-Me Institute.

Source: Kansas City Business Journal

Speaking of bad math, the cost of the projects in MARC’s chart (above) adds up to $800.4 million, not $775.7 million. So what’s getting cut? Does anyone check these things? 

On the surface, that sounds great for residents of downtown Kansas City (if not elsewhere). Previously, they were asked to pay a 1 percent higher sales tax to get the streetcar expansion. Now, they still pay 1 percent more, but they get other road and transit projects that state taxpayers fund, in addition to the streetcar expansion.

Haven’t seen a deal like that since Billy Mays died. But wait, there’s more!

Actually, the math for that “swap” does not work. The TDD’s 1 percent sales tax was supposed to bring in approximately $30 million a year. If the city reduces that rate to 0.25 percent, it will create a funding gap of almost exactly $210 million. That’s the reason the city was originally asking for $210 million; it was not some random number (although the city is not beyond doing that).

Drop the amount that streetcar gets from the state to $144 million, and a $65 million funding gap opens up. And remember that the original plan already had a $31 million unresolved budget gap. That leaves almost $100 million up in the air, ready to come crashing down on Kansas City taxpayers. Unless there is some other very large source of funding for the streetcar, the TDD sales tax cannot be held to 0.25 percent. It would need to rise to about 0.50 percent to maintain adequate funding (but still not addressing the initial $31 million shortfall).

The underlying problem is the incredible expense of building a streetcar system. Even if the federal government and Missouri taxpayers cover massive portions of the streetcar’s cost, there’s still a significant burden for residents in downtown Kansas City. Residents in the proposed TDD, Kansas City, and state will have to decide whether the streetcar is worth it.

The post The Math Does Not Add Up For Murky Kansas City Streetcar Deal appeared first on Show-Me Institute.

Kansas City officials cooked up a plan that would make the tax increase a more palatable 1 percent in downtown Kansas City. They proposed a “swap” that would cap the streetcar’s Transportation Development District (TDD) sales tax at 0.25 percent on condition that the 0.75 percent sales tax passed (a total tax increase of 1 percent). In return, they called for $210 million to be diverted to the streetcar to make up for lost revenue. As we noted, that incredible amount of money could only result in virtually no money for other transit improvements or cuts to road funding. The media in Kansas City, despite ample evidence of a burgeoning deal, did not report on the story until the day before the long Fourth of July weekend.

The Kansas City Business Journal finally reported on July 3 that a deal was in the works, with $144 million going to the Kansas City streetcar, accompanied with sharp cuts to other transit and pedestrian improvement projects. That means about 18 percent of all regional transportation funds will be diverted to a questionable development scheme in downtown Kansas City, should the transportation sales tax pass.

Both the Business Journal and the Star reported that the plan to cap the downtown tax increase at 1 percent is part of the deal, even though simply arithmetic makes this simple “swap” impossible (as a future post will detail).

This murky deal is the worst type of policy making. The “swap” essentially makes the streetcar policy and the transportation sales tax more politically palatable to those living in downtown Kansas City by making state taxpayers unwittingly pay for a massive share of the streetcar. This is the type of bargain that is only necessary because the state and Kansas City plan to spend huge sums on wasteful “transportation” projects, and only possible because a sales tax means that who pays has nothing to do with who benefits.

The post Kansas City’s Murky Streetcar Deal Goes Public appeared first on Show-Me Institute.

• Incredible waste: months ago, we pointed out that Kansas City could buy and operate 100 buses serving 130 miles of routes for the same price as the Kansas City streetcar expansion plan. While critics might claim that buses cannot be compared with streetcars (they can), the basic math is unchallenged. Streetcars, which provide only limited service improvement over buses, are many times more expensive and incredibly restricted in their range.
• Dubious benefits: Streetcar supporters must have a hard time keeping a straight face when they claim that streetcars have any transportation benefit. Instead they rely on the argument that these projects bring billions in development. The evidence on this proposition is anecdotal at best, as cities with streetcars have heavily subsided surrounding development. Kansas City is already pushing ahead in this tradition, with anecdotes about new developments that are not so believable on closer inspection, and a raft of subsidies at the ready.
• Everyone will be paying: Even though supporters freely admit that a streetcar is a development scheme limited to a small section of Kansas City, everyone else still gets to pay for it. After all, building a half billion dollar streetcar line can be financially difficult. The proposed transportation development district’s 1% sales tax and new property taxes will cover less than half of the streetcar’s total cost. The rest will come from the federal government, Kansas City residents outside the TDD, and if the proposed 0.75% statewide transportation sales tax passes, the whole state.

Streetcar supporters often make groundless statements about illusive millennials and streetcar economics, but they do make perfect sense when they say that now is a “once-in-a-generation opportunity with the streetcar project.” That’s because once the shine is off the new rails and promises of citywide transformation are unfulfilled, the streetcar will be seen for what it is: just another transit system. Another transit system that is as slow as a bus, but ten times the price. Perhaps that explains the rush to get as much money as possible, as quickly as possible.

The post Don’t Forget the Streetcar is Bad Policy appeared first on Show-Me Institute.

Back in the real world, Kansas City is caught up in a questionable transportation project of its own – joining the rush to become the latest U.S. city to build a super-expensive, super-trendy downtown streetcar system.

With an initial 2.2-mile line already under construction, the Kansas City City Council has unanimously approved the creation of a Transportation Development District (TDD) to expand the streetcar line to almost 10 miles. Kansas City residents need to consider the project’s enormous costs and questionable benefits of the proposed expansion.

Streetcars are an extremely costly form of public transportation. The Kansas City TDD aims to spend $472 million to build 7.6 miles of streetcar routes in Kansas City. That is a mind-boggling $62 million per mile to build a system that (as one critic puts it) “offers little more than a way to move downtown workers from their offices to lunch.” For no more money, Kansas City could add 100 buses to its existing fleet of 250 buses and greatly increase bus service throughout the entire Kansas City metro area.

It is always fun to spend other people’s money and supporters of streetcar expansion expect to raise more than half of the needed funds – or more than $250 million – from the federal government. That still leaves a substantial sum of money that will have to be raised in additional taxes on residents and businesses inside – and, it is important to note, outside – the transportation district.

People within the TDD will have the opportunity to vote in a special election (at a time yet to be determined) on whether to accept higher sales or property tax levies to support the project. Taxpayers outside the district will not get a chance to vote, but they will be on the hook as a result of the fact that the city of the Kansas City is a major property owner within the TDD. As such, the city will shoulder a significant portion of the tax load – and it will pass that burden along to at-large Kansas City residents through higher taxes or reduced services.

The whole project begs the question: What possible advantage can there be to building a new streetcar system, given the much lower costs and the much greater range and flexibility that buses provide?

NextRailKC and others describe the huge expense and extreme inflexibility of streetcar systems as a hidden asset – signifying a valuable long-term commitment on the part of government to provide reliable public transportation within a designated area. According to this argument, developers and investors see this commitment, and so they are inspired to build around streetcar routes.

As a favorite example, streetcar supporters point to Portland’s celebrated Pearl District. There, it is argued, is the proof that streetcars can spearhead incredible urban development that justifies the streetcar system’s out-sized expense. However, even streetcar proponents admit that Portland’s streetcar was only a part of a large-scale investment plan, involving more than $400 million in tax subsidies that supported growth in streetcar corridors.

Kansas City residents would be wise to reject Bart’s advice and listen to his mother’s more mature assessment. Better to improve what is already there – roads and existing public transportation – than to join the rush to be part of the latest urban planning fad.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Beware The Jabberwock (And Downtown Streetcars) appeared first on Show-Me Institute.

But anyone who has read the streetcar’s financial plan knows the math for that “swap” does not add up. The streetcar TDD’s sales tax is supposed to bring in almost $30 million a year. If it is reduced to 0.25 percent, the TDD would only raise $7.5 million per year. With an extra $3 million a year from the state, that leaves almost $20 million per year in lost revenue unaccounted for, or $200 million over 10 years. Because the streetcar needs every dime (and then some) of that sales tax money, where is the extra $200 million going to come from?

The answer to this conundrum lies in Resolution 140500, which Kansas City Mayor Sly James introduced on June 19. It proposes spending an incredible $210 million of the 0.75-cent statewide sales tax revenue to fund the streetcar expansion. To get just how incredible of a request that is, consider that the Kansas City region is only supposed to receive a total of $776 million for all of its road, bridge, transit, rail, port, aviation, and greenway projects. In the plan that the regional planning agency (MARC) released, that is almost every dollar the region planned to spend on transit. That original plan had $32 million for the streetcar, but millions more for improvements throughout the entire region.

This money grab for what is essentially a development scheme for downtown Kansas City should enrage not only residents in the Kansas City region, but taxpayers throughout the state. For parts of the Kansas City region not called downtown Kansas City, it essentially means no new funds for more cost-effective transit solutions or other more pressing projects. For the state as a whole, it underlines the incredible waste of a transportation sales tax supposedly needed to fix MoDOT’s highway funding problems. That 4 percent of all sales tax revenue raised over 10 years would go to support an incredibly expensive want with dubious development potential makes the proponents of the sales tax, who constantly argue that our infrastructure is crumbling, look like chicken littles.

If reports are accurate, MoDOT may already have made an agreement with Kansas City to divert this vast sum of statewide sales tax revenue, completely upending the open process through which MARC developed its regional plan and entirely contradicting MoDOT’s preliminary list of projects (which Kansas Citians have been asked to fruitlessly comment on) for the Kansas City region. That should indicate to Missourians just what kind of policy the transportation sales tax would create: wasteful, opaque, and catered to special interests.

The post Kansas City To Spend 27 Percent Of All Regional Transportation Funds On Streetcar appeared first on Show-Me Institute.

2. No political subdivision of this state shall by ballot measure impose any restriction on any public financial incentive authorized by statute.

This proposal is almost certainly in response to the attempt to limit tax incentives for Peabody and other energy companies within the City of Saint Louis. A judge’s order turned away that ballot initiative. While I certainly agreed with the attempt to limit tax subsidies, I was never comfortable with the way the initiative targeted one industry. So, you didn’t hear me objecting to the judge’s ruling. Furthermore, I have, in the past, supported legislative preemption of initiative petitions in certain cases, so I am not saying a referendum should always trump local officials.

However, a blanket prohibition against any local votes against the use of tax incentives such as Tax Increment Financing (TIF), etc., goes way too far. This is terrible public policy and improperly restricts local voter rights. If a city or county has an allowance for initiative petitions under their charter, they should be allowed to use it. If local voters want to reduce or eliminate the use of TIF, Transportation Development Districts (TDDs), Community Improvement Districts (CIDs), Enhanced Enterprise Zones (EEZs), abatements, etc., via their local tax dollars, they should be able to do so.

Attempts to use initiative petitions after the fact against approved TIFs have failed for several legal reasons. However, there should be no legal problem with preemptively prohibiting corporate welfare in a community, as long as the prohibition is even and not targeted at select industries. (Feel free to tell me how I am wrong there, lawyers, but the mere existence of these amendments tells me that is correct.)

These amendments are trying to create a legal roadblock against citizen involvement and input into how people’s own tax dollars are spent, and that would be unfortunate for Missouri.

The post Going Too Far To Limit Voter Input appeared first on Show-Me Institute.

One of the development projects that indicated the streetcar was a “key reason” for their development was the Centric Projects Headquarters, and the project is listed at $2 million. According to Centric’s website, it is a general contracting firm. Kansas City Mayor Sly James appointed the founder, Richard Wetzel, to the streetcar advisory group to consider the Country Club Right of Way. In a blog post on the Centric website, Wetzel wrote, “For years, I have been an advocate of fixed-rail transit in Kansas City.” Wetzel is not a disinterested party; he is a self-described advocate for the streetcar.

As for the so-called economic development that Centric and Wetzel provided Kansas City, for which the streetcar was a “key reason,” it’s not so impressive. The Kansas City Business Journal reported on May 22, 2013, that:

Centric Projects LLC is moving its offices two blocks up Main Street to accommodate rapid growth at the Kansas City commercial general contractor.

The 3-year-old firm is moving from its current 3,000 square feet of space at 2024 Main St. to a new 5,500-square-foot space at 1814 Main St. by the end of July.

The building was previously occupied by Western Blue, which left Kansas City for Kansas City, Kan., in 2010, and is undergoing $1.5 million worth of renovations ahead of the relocation.

So there you have it. Centric’s $2 million economic impact supposedly due to the streetcar is a $1.5 million remodel to a space that likely would have required remodeling regardless who, or why, it was occupied. The company moved two blocks up Main, meaning that they didn’t even move to the streetcar line from somewhere outside the Transportation Development District (TDD). They simply moved to a different point on it. Kansas City officials want you to think this is all due solely to the uncompleted downtown streetcar.

It gets better. That same Business Journal piece goes on to state that Centric is receiving tax incentives for staying in Kansas City, Mo.:

Centric also is receiving tax credits from Missouri for keeping jobs in the state. Kounkel did not say how the tax credits are oriented but said the credits are tied to the number of employees the firm hires and will help “offset expenses.”

Representatives of the Missouri Department of Economic Development, which typically handles the state’s tax credit programs, were not immediately available for comment.

Whatever the amount, the money was wasted, as Centric’s founder said they never considered a move out of state:

“We never considered a move to another state or municipality,” Richard Wetzel, partner at the firm, said in a release. “While we do work all over the metropolitan area, Kansas City, Missouri — and specifically the Crossroads (Arts District) — is where we want to continue to hang our shingle.”

Centric’s example only serves to confirm the Show-Me Institute’s claim that there is no evidence that streetcars alone lead to economic development. Centric did not move from outside the streetcar taxing district so there is no net new development. The $2 million (actually $1.5 million) economic impact it claims would likely have been required of anyone who occupied the space, and Centric received other economic incentives to relocate within the TDD.

We learned all of this in the course of a few hours searching online. Is Kansas City really this inept at calculating economic development, or is this a concerted effort to mislead voters?

The post Kansas City Streetcar Economic Development Claims Don’t Add Up . . . Literally appeared first on Show-Me Institute.

Over the past two decades, Missouri has seen an explosion of new, alphabet soup-like taxing districts that increase tax rates to fund new services of questionable public purpose. These districts include the use of Tax Increment Financing (TIF), Transportation Development Districts (TDD), Community Improvement Districts (CID), and more. Cape Girardeau currently is considering imposing a CID to support its downtown area. Cape Girardeau city officials should think twice before they embark on this course of action. These types of special taxing districts often fail basic good-government principles of transparency and management. In fact, a CID in Lake Lotawana (outside Kansas City) failed and defaulted on its bonds in 2010. Lake Lotawana should serve as the canary in the coal mine for Cape Girardeau.

CIDs are independent taxing districts created to collect sales and property taxes and spend money to improve an area in a wide variety of ways, including beautification, infrastructure, security, and much more. There are two primary problems with the use of CIDs. The first problem is one of transparency. The state auditor’s office has consistently issued reports documenting deficiencies in the management and accountability of public dollars by CIDs, TDDs, and other special taxing districts throughout Missouri. These districts fail to comply with state laws in a number of areas, including the transparency of the special taxes, use of competitive bids, and filing of annual financial reports. If Cape Girardeau chooses to enact the downtown CID, the city council should carefully oversee the CID to ensure it complies with all state laws and any additional local requirements.

The transparency problems often include the lack of an independent board of trustees for existing CIDs. Generally, these boards consist of representatives from the businesses involved with establishing the district, in this case Old Town Cape, Inc. Too often, these boards treat the collected taxes as a private fund instead of what they are, public tax dollars. The Cape Girardeau City Council should insist on instituting a CID board of directors that will primarily answer to the taxpayers of the city and county, and not just the property owners.

Furthermore, Cape Girardeau city officials should place a maximum cap on the level of property taxation allowed for the CID. Unlike most other types of property taxes, CIDs have no legal cap. TDDs have a maximum tax of 10 cents per $100 of assessed valuation, but there is a CID in Lake of the Ozarks with a tax rate of $4 per $100. Nobody is proposing anything near that high for Cape Girardeau. The rate in the petition is set at 67 cents per $100 of assessed valuation, but local government should address the fact that CIDs have no statutory rate limit by making certain the final legislation caps the tax rate at the level set in the current proposal.

In a related issue, businesses and city officials should take steps to inform residents and shoppers about the extra sales taxes they will pay within the CID. If shoppers are aware of the increased taxes and still choose to shop within the district, that is their choice.

The larger issue is that these special taxing districts often fund primarily private goods with public dollars, such as better parking lots for businesses. The proposed Cape Girardeau CID is not as bad in this case as many other taxing districts. The proposal at least states that the new sales taxes will be used in the downtown area to fund public improvements, such as trash and security. However, taxpayers should be concerned that these promises to fund legitimately public concerns are not altered over time and end up funding private aims with tax dollars.

The CID in Lake Lotawana mentioned previously failed on just about every count. The board often did not take minutes. It operated in secrecy, including lending CID money to a company that board members controlled. It spent more money than it should have and did not even properly collect the taxes it was owed. It was a prime example of what can happen when little-known taxing districts like CIDs are given so much authority.

The Cape Girardeau City Council should take a very careful look at the transparency issues with CIDs and the possible tension between public and private interests in this proposal. If officials determine that a CID is an appropriate application in this instance, all possible steps should be taken to make certain the new taxing district is responsible to the people. Many similar taxing districts in Missouri have failed both of those tests – producing what is best described as a non-nourishing alphabet soup.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Cape Girardeau Should Think Twice Before Establishing CID appeared first on Show-Me Institute.

Streetcar proponents argue that this is a valid way of funding the streetcar. Businesses will see more customers and property values will increase near the streetcar line, so the TDD simply solves a collective action problem through its taxing district. However, what is less defensible is a special new tax on pay parking spots in the streetcar’s TDD.

According to exhibit 14 presented at the recent streetcar TDD hearing, the streetcar TDD will assess $54.75 per surface pay parking space. That new tax would affect up to 4,000 downtown parking spaces. With this tax, those who have chosen not to ride the streetcar get to pay extra precisely because they are not benefiting from it. Far from solving a collective action problem, this tax penalizes the lifestyle of some to pay for the lifestyle of others.

Furthermore, a tax of $54.75 per year on each parking space is likely to drive up the cost of parking and will be a disincentive for businesses to build more paid parking in the city. While that might be part of a long-term strategy for some rail supporters, purposely making it more difficult to park in order to increase public transportation usage might negatively impact residents and businesses.

Kansas City has already decided that those not residing in the TDD will pay for the streetcar through special assessments on city-owned property that the taxpayers must cover. Furthermore, all Kansas City residents will pay for the streetcar through the mass transit sales tax (a portion of which can be diverted to the streetcar) and capital improvement taxes used for streetcar planning. In addition, there still is a $30 million budget gap in the TDD’s funding plan that someone will have to cover.

Now, if residents make the decision to drive — and not ride the streetcar — downtown, they will have to pay for the privilege of not riding the streetcar.

The post Pay And Park And Pay For The Streetcar appeared first on Show-Me Institute.

The Robin Hood of legend was renowned for robbing from the rich to give to the poor. Liberals have heralded the story as an example of social justice and ethical redistribution. Conservatives see him as a hero of the trodden-upon taxpayer, cruelly set upon by wealthy and entitled elites. It is perhaps because of this dual view that the legend has survived so long.

Officials in Kansas City crafted a bizarro Robin Hood streetcar taxing plan that takes from the poor to give to the rich.

The city has created a Transportation Development District (TDD) encompassing much of the city in order to fund a significant portion of the rail line. The TDD will levy a “special assessment” on homes, businesses, and charities within a one-third mile of the proposed tracks and a 1 percent sales tax everywhere in the district.

While we have argued that claims that streetcars cause business development are completely unproven, streetcar supporters counter that there is some evidence that the project will increase property values along the route. And indeed there is some evidence that property values will increase, especially if the city pours money into the corridor, as NextRail KC officials hope. But while values may go up, property and sales taxes are guaranteed to increase as well. Even then, those increases in value primarily benefit the property owner when selling the property. (If you rent your home or apartment, your rent will go up but you won’t benefit from any property value increase.)

In other words, some of the poorest parts of Kansas City — those already in dire need of transportation and infrastructure improvements — will be paying more in taxes so that the already developed parts of Kansas City can get new sidewalks, landscaping, streetcars, and the increased property values that go with it. Those outside the TDD will also pay more through sales tax and the special assessment levied on government property, and by however the city decides to close the $30 million to $50 million gap in financing.

Seriously, that is Kansas City Mayor Sly James’ plan.

To make matters worse, non-profit organizations along the route will pay a special assessment that will impact their ability to serve those same communities in need. Not only is the city throwing the east side into the deep end of the pool, they’re pulling up all the ladders. That is why Fr. Ernie Davis, pastor at both St. Therese Little Flower and St. James, wrote a letter to his colleagues at other churches (emphasis added):

But most frightening is the proposal to assess churches, schools and charities within the corridor. That will literally take bread out of the children’s mouths and books out of students’ hands in order to fund a streetcar…. I hope you will study the issue and to the extent that you are able, lend your support to efforts that would derail the streetcar until there is a different funding formula that would not impose such a heavy burden on those who are least able to afford it.

Here at the Show-Me Institute, we are not totally opposed to some types of charities making property tax payments. But we have never included churches in that, and our argument has always been focused on true public needs, not pricey public toys such as a streetcar.

The Kansas City streetcar robs from those who don’t have to give to those who don’t need, or even want.

The post Kansas City Streetcar Robs Poor to Pay … Rich? appeared first on Show-Me Institute.

We have written before that the Kansas City Streetcar is an exceptionally expensive and inefficient transit device. We have also warned that the claims of streetcar induced development are, at best, premature. Now we learn that, according to a streetcar plan that the City Council passed last week, no one knows how Kansas City will pay for the project.

The proposed TDD includes a 1% district-wide sales tax and a new tax for properties within 1/3 mile of the streetcar track. That new property tax ranges from 40 cents per $100 of assessed value, to $1.04 per $100. One might note that the $1.04/ $100 rate is on city-owned properties, which Kansas City residents will pay through taxes somehow. The consultants who created the TDD calculate that available revenue for debt service from property and sales taxes will be $177 million, but the capital costs of the streetcar extension plan are around $515 million.

How does $177 million pay for $515 million? First, the planners assume that the city will pay the utility costs of the project from other revenue, or about $28 million dollars. That lowers the project cost to $487 million. Then, they assume the federal government covers half the plan, which, as the authors point out, is not guaranteed.  That leaves a funding gap of about $53 million. The study further reduces this gap through contributions from the city’s Mass Transportation Sales Tax, which essentially means they will divert funds from KCATA. They also plan to offset costs with rider fares (they optimistically assume revenue of $2,000,000 per year, much better than some other streetcars). With those additional funding sources, the gap is only $31 million.

Where will the streetcar get that extra $31 million? There is no answer to that. The consultants hope that increased economic activity from the streetcar will raise TDD revenue, but that is risky. Among the proposed revenue sources they claim could be used for the streetcar: various federal grants, Missouri state tax credits and grants, the city park capital improvement fund, a city gasoline tax, new TIF districts, private foundation grants, among many others.

To sum it up, a large TDD that imposes a 1% sales tax and property tax increases will not fully fund the streetcar (even with the federal government already paying for half), and the planners know it. Unless the federal government is willing to pay the balance, Kansas City or Missouri tax payers will be expensively called on in some way to make up the difference. All in all, the funding section of the streetcar plan should have been called “here be dragons.”

The post KC Streetcar TDD Will Not Raise Enough Money for Expansion appeared first on Show-Me Institute.

The TDD is intended to raise $471.9 million to complete the nascent streetcar system throughout the inner city. Our position is that these systems are less efficient at moving people than buses and that the promises of economic development from streetcars are without empirical basis. To their credit, most streetcar supporters spend their time arguing that the streetcars bring economic development and do not try to claim that streetcars are more efficient people movers.

Nevertheless, many proponents have the idea that it is cheaper in the long run to build a streetcar system than to expand bus service. This post addresses these arguments and asks how many buses the Kansas City Area Transportation Authority (KCATA) could buy and operate if it were given the resources of the $500 million streetcar plan.

Using data from the National Transit Database, KCATA, and actual performance of streetcars in Portland, I estimated yearly operating costs and revenue streams for the streetcar and an expanded bus system. While any such calculations on an unfinished system require some estimation, my calculations are streetcar-friendly by assuming high ridership, elevated farebox recovery, and controlled capital and operating costs.

The findings were that KCATA could buy and operate 105 additional buses for the same cost of building and operating 7.6 miles of streetcar lines.  To satisfy objectors who might claim huge life cycles for streetcars, I also made a calculation assuming the streetcars were not replaced and that only buses were replaced. This reduction in streetcar costs meant KCATA would only be able to buy and operate 100 buses.

To put that in perspective, KCATA currently only operates 257 buses for 61 bus routes that serve the entire Kansas City region. Adding 105 buses would significantly improve regional services and would utterly transform bus service if they were bound to the TDD meant to serve the streetcars. The chart below shows what type of bus service 7.6 miles of streetcar lines buys:

The case is clear. Whatever one believes about the economic development promises of streetcars, in terms of providing mobility, buses are far more cost-efficient than streetcars.

The post Kansas City Streetcar Expansion Could Buy More Than 100 Buses appeared first on Show-Me Institute.

The Show-Me Institute policy staff has argued numerous times that streetcars do not improve mobility or connectivity. Development along streetcar lines is likely due more to tax incentives and other government investment that diverts development to the favored corridor. Even researchers who do not oppose streetcars point out that there is a lack of proper research on a streetcar line’s effect on regional development.

However, backers of the streetcar in Kansas City are not content to wait for real, rigorous studies on the success or failure of the streetcar fad before charging ahead. That is because streetcars are too expensive to build without matching federal dollars, at more than $50 million per mile, and federal policy can change quickly.

For instance, during the Bush administration, streetcars received little federal dollars. The department at the time focused on transit projects that were cost-effective and promoted congestion relief. But those guidelines changed under the Obama administration to favor “livability.” This change in policy, coupled with the stimulus, made billions of dollars available for streetcars in Kansas City and across the country, mostly in the form of TIGER and MAP-21 grants. However, the federal favor shown streetcars may not outlive the Obama administration, which would effectively kill any attempt to expand the streetcar in Kansas City. There is little wonder that there seems to be a race to lock up federal dollars.

Funding expensive and inefficient transportation options with money that falls from the sky is a short-cited policy for Kansas City. Federal grants may fund new transit infrastructure or increased capacity, but grants for repair and maintenance are rare. This means that the costs of the proposed $500 million streetcar system will continuously rise for Kansas City, likely beyond what the initial TDD will support.

And as the experience of Portland has shown, streetcar users will not be willing to pay anything like the full cost of their ride. After years of “free zones” (free streetcar rides in many areas of the city), tax breaks, corridor improvements, and high-density zoning, passengers using the existing streetcar lines declined following the imposition of a $1 fare. That fare, enough to deter ridership, only generates an insignificant percentage of the Portland streetcar’s $251 million capital or $8.2 operating budget, all for 7.3 miles of track.

If Kansas City cannot afford to build the streetcar without federal aid, it cannot afford a streetcar with federal aid either. If Kansas City residents approve the TDD and the proposed system is built, it virtually guarantees that, like Portland, everyone in the city, region, state, and country will pay for a mode of transportation whose sole purpose is to divert development to favored sections of downtown Kansas City.

The post Spending Money Kansas City Doesn’t Have On Streetcars It Doesn’t Need appeared first on Show-Me Institute.

In 2006 and again in 2010, Money Magazine cited Lee’s Summit as one of the 100 Best Cities in the United States. The Lee’s Summit Chamber of Commerce boasts on its website: “Lee’s Summit is an ideal place to live and work, providing a desirable lifestyle that everyone can enjoy — high-quality, affordable housing in safe neighborhoods endowed with fine schools and excellent health care facilities.”

So why in the world is the Lee’s Summit City Council rushing to adopt an economic development program aimed at blighting large swaths of the city?

There is only one possible answer: The city council has been bitten by the same parasitical EEZ bug (Enhanced Enterprise Zone) that has attached itself to other cities and counties across Missouri.

In fact, almost a third of our state has been officially declared “blighted” as a result of the widespread use of EEZs, TIFs (Tax Increment Financing), TDDs (Transportation Development Districts), and other such programs that combine local subsidies for commercial development with the use of eminent domain — enabling developers to force residents out of their homes and small business owners out of their shops and offices.

On April 11, we presented testimony to the city council on the efficacy — or, more accurately, the inefficacy — of Enterprise Zones in Missouri. The Show-Me Institute had recently conducted a study comparing the economic performance of two groups: (1) eight Missouri counties that employed Enterprise Zones, and (2) 12 neighboring and economically similar counties that did not. We found that economic growth in the two groups was almost identical.

In other words, there was no evidence that Enterprise Zones had any positive impact on economic growth or employment. They seemed to be a waste of time and money.

Our statements to the Lee’s Summit City Council made this perfectly clear, and none of the economic development officials, city staff, or consultants at the meeting made an effort to argue otherwise.

Yet it was a clear that most members of the city council, along with the consultants and development staff, had already made up their minds: They wanted to move ahead as quickly as possible in setting up an EEZ.

One reason for the rush is the fear that the 2010 Census numbers, which are still being finalized, will show that poverty and unemployment rates in Lee’s Summit have dropped since the previous Census — which could have the effect of making Lee’s Summit ineligible for the subsidies from the Missouri Department of Economic Development (DED).

Not that Lee’s Summit was any kind of an economic basket case 10 years earlier. Based on the 2000 Census, the median income for a family in Lee’s Summit was $70,702, or close to double the median family income for the state as a whole.

Nor does Lee’s Summit suffer from a lack of growth. Between 2000 and 2010, the population of Lee’s Summit grew from 70,700 people to 91,364 — an increase of 29 percent.

But neither prosperity nor rapid growth has dampened the enthusiasm of some city council members at the thought of spending some easy money.

On the night that we testified, one member of the city council argued that because the DED is giving the money away, Lee’s Summit might just as well take it. The proposed EEZ for Lee’s Summit is a particularly egregious example of throwing away taxpayer money for no good cause — in promoting a solution for a problem that does not exist.

Patrick Tuohey is the western Missouri field manager and David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Lee’s Summit EEZ: A Solution In Search Of A Problem appeared first on Show-Me Institute.

Ray County is in the process of establishing eight different EEZ districts under one county umbrella. This is a massive bet government planners make that they know what, where, and how economic growth will occur in the county over the next two decades. I have studied the results of Enterprise Zones (EZs, the very similar precursors to EEZs in Missouri) in counties that adopted large EZs in the 1980s in Missouri. The economic data shows that the counties that adopted these zones did no better than neighboring counties that did not. Government planners cannot see the future, and they should not be empowered to use tax dollars to bet on it.

The dirty little secret that the DED, MARC, and the Ray County EEZ proponents do not want you to know is that EEZ, Tax Increment Financing (TIF), Transportation Development Districts (TDD), and other similar subsidies do not work. They do not succeed in growing the local economy. All this myriad of subsidies does is shrink the local tax base, encourage more government planning of the economy, and increase the chances of eminent domain abuse. As a famous Swedish economist once said, “It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.”

If you ask a DED or MARC official how effective EEZs are, they will tell you how much investment has occurred within EEZs over the past decade. Their hope is that you will assume all the investment is because of the EEZ. Their lie-by-omission is that they have no idea how much the EEZ aided that investment and how much would have occurred anyway. The consensus among economists is that special tax incentives such as EEZs matter little, and only a very small portion, if any, of investments within a zone can be credited to the subsidies. Yet government planners will happily let people assume the incentives make all the difference while hoping nobody asks any follow-up questions.

Most people would claim to oppose corporate welfare, but that is exactly what is being hoisted upon us in Missouri; one special taxing district at a time. This is all being done under the cover of fixing blight, without any real definition of what that means. But the word “blight” is not empty talk. It means many things. One thing it means is that Ray County is taking a major step toward much heavier use of taxpayer subsidies for all types of commercial activity. Once you have blighted a major portion of the county, it is but a short walk to the point where almost every development in the area has some type of subsidy. That is not a “maybe.” That is the current reality in Kansas City and Saint Louis.

Tools such as EEZs fail because politicians cannot see the future better than markets can. Ray County should focus on low taxes for all businesses, not special incentives for a few. It already has the lowest commercial property tax surcharge in the region. Ray County should trumpet that loudly. It does not need a massive implementation of Enhanced Enterprise Zones.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Ray County Does Not Need Enhanced Enterprise Zones appeared first on Show-Me Institute.

I will also have my regular weekly appearance with Manny Haley on the Morning Magazine on KRMS Lake Ozarks 97.1 FM at 10:15 a.m. We are discussing the Dierbergs Transportation Development District (TDD). Join us for Show-Me at the Lake.

The post Show-Me On The Radio Tomorrow appeared first on Show-Me Institute.