According to The Kansas City Star back in February 2016:

City Manager Troy Schulte recently estimated it would cost $10 million to knock down all the most dangerous houses and other buildings in the city. That backlog of 870 buildings has built up because in the past, the city has only been able to spend about $800,000 annually to demolish about 100 houses, and more properties keep getting added to the list every year.

The city sold bonds to raise the $10 million to pay for the demolition. Work started in June 2016 and it was to take two years to tear down about 800 buildings. In April 2018, Channel 41 reported that the city surpassed it goal and “taken care of” 895 buildings in two years. That is because many were sold and rehabilitated, not demolished.

According to city data, only 609 buildings actually have been torn down by the city in the three years since. While this is slower than initially planned, it represents good progress toward addressing blight.

As of October 7, 2019, there are 343 dangerous buildings remaining on the city’s list.

The post What Happened to Those 800 Dangerous Buildings? appeared first on Show-Me Institute.

City manager Troy Schulte said he wasn’t concerned about the increased price of the hotel since cost overruns are covered by the developer.

“We are actually getting a better project with lower public commitment,” Schulte said.

This seemed ominously familiar to me. A quick search confirmed my suspicions. Back in 2009, Vockrodt wrote in the Kansas City Business Journal about Cordish’s effort to reduce the property valuation for the Power & Light District. He included this:

Kansas City Councilman Ed Ford said he was told by city attorneys that the Power & Light District’s dispute would not put the city on the hook financially.

“It looks like the city is not going to have a dog in the hunt on that,” Ford said.

But of course it did affect the city because a low property tax assessment meant Cordish paid less in property taxes, which in turn meant there was less TIF money available to apply to bond payments. And because city leaders committed Kansas City taxpayers to paying any bond shortfall, we very much did have a dog in that hunt.

This doesn’t mean that hotel cost overruns will necessarily cost the city—unless the hotel so underperforms that taxpayers are told they need to add amenities to improve performance, exactly as has happened in the past. When it comes to publicly financed projects, being told by city leaders that there is no cause for concern seems itself to be a cause to be concerned.

The post When City Leaders Aren’t Concerned, Taxpayers Should Be appeared first on Show-Me Institute.

Exactly what does it mean to have the conversation? It will doubtlessly require money spent on consultants to draft options, hold meetings, and the like. And what will those plans drive toward? Probably an expensive public finance project to buy a new stadium for a billionaire.

We’re spending money so we can spend money. It’s absurd.

It gets worse. The Star’s editorial board included this nugget:

City Manager Troy Schulte said his conversations with [Royals owner David] Glass associates have left the door open to that possibility.

“He (Glass) is saying, “Give us some options,” Schulte said. “He has not said no.”

In other words, the team owner isn’t even asking for any of this, he just didn’t refuse. And why should he? He’d be a fool to stop the city from offering him the same type of taxpayer subsidies that cities make all the time. As a result, city leaders, including the Star, are eager to start spending money on it.

Wait, there’s more. The Star makes clear there is additional cost beyond the taxpayer outlay of funds on consultants and construction subsidies:

Other possibilities remain east of City Hall and near the 18th & Vine Jazz District. “You’ve got to reserve it, or you’re losing development sites,” Schulte said.

Schulte is saying the city would intervene in the market to “reserve” sites, effectively stopping anyone else who might have a better, unsubsidized, idea for development. (One can imagine that at the time of construction, the then-mayor and council members will point to the lot they have kept vacant and say, “look at this lot no one has developed, we need this downtown stadium to address blight.”)

If Kansas City’s wealthy sports team owners want to consider other locations for their stadiums, and spend their own money doing so, they are free and welcome to do so. But the idea that taxpayers should take the initiative and spend money now so we can maybe spend money later is completely wrong.

The post Downtown Baseball? A Swing and a Miss appeared first on Show-Me Institute.

The Kansas City Business Journal reported that the consultant who prepared the study couldn’t show “how much development might have occurred in the absence of all incentives.” This is no small oversight. Kansas City is spending or diverting hundreds of millions of dollars into various development schemes at significant cost to school districts, counties and other basic services. We ought to have some sense of whether this is working. No private sector CEO worth her salt would permit such a significant investment of resources without any idea of the return it was likely to generate.

Worse, the report’s inability to connect investment with return was not a bug; it was intentional. Plenty of organizations, academic and otherwise, have conducted research into this very relationship. In 2016, the St. Louis Development Corporation—the River City’s version of the Kansas City’s Economic Development Corporation—conducted exactly this sort of study and determined that the use of incentives could not be said to drive private investment or create jobs. Incidentally, the company that produced St. Louis’s study, The PFM Group, also submitted a lower bid on the Kansas City project than the vendor the city eventually chose.

A 2018 working paper published by the Upjohn Institute of Employment Research concluded in part, “For at least 75 percent of incented firms, the firm would have made a similar location/expansion/ retention decision without the incentive.” That is a devastating conclusion—and one that is largely supported by research elsewhere. Is Kansas City wasting three out of every four incentive dollars?

Unfortunately, city leaders don’t seem to want to know; the study they commissioned did not even attempt a but-for analysis. City Manager Troy Schulte heralded the study and encouraged developers to make more use of the program. Are we really to believe that every economic development incentive program in Kansas City is a wild success? Really?

The biggest disappointment of the study, as alluded to in the Business Journal’s editorial on the matter, is that the report cannot help policymakers sort good projects from bad. It cannot ensure that future decisions regarding incentives are data-driven. It simply took every bit of economic growth the city has seen and attributed it to the incentives that came before. That is not analysis that encourages better policy. It is political cheerleading, and it is unworthy of the people and policymakers of Kansas City.

The post Kansas City Incentive Study Misses Opportunity appeared first on Show-Me Institute.

First, on June 14, The Kansas City Star reported that the opening would be delayed six to twelve months. A week later, the delay was confirmed to be eleven months. Among the reasons for the delay: The contractor, Edgemoor, hasn’t finalized labor union contracts, the FAA had yet to approve environmental analyses, and the previous cost estimates relied on dated information and were for fewer gates than the current plan envisions.

In a November 8, 2017 press conference recorded by the Star, City Manager Troy Schulte said, “our goal is to deliver a new terminal to this city by the end of 2021.” But on June 27, 2018, Schulte tweeted, “November of 2021 was never a realistic date.”

The problem—as I have argued repeatedly, and as the video above documents—was that the ballot measure voters approved was so bereft of details that it amounted to a blank check. Before the election, it was disheartening to see that the Star editorial board was so eager to endorse a new airport that it misrepresented the facts, possibly because it was relying too heavily on pro-terminal talking points. Now, of course, the same editorial board is dismayed city leaders aren’t delivering what was promised.

What I wrote in September 2017 remains true today,

Process is important in public policy, and while the Star editorial board and others may be relieved that Kansas City finally has a vendor and we’re cleared for a November vote… to advocate for this plan simply because the process is over amounts to letting policymakers off the hook for years of bad behavior. Kansas City deserves much, much better.

No one should be shocked that the voters of Kansas City are not being given what they were sold. Those we expect to represent the public interest—civic leaders, pundits, and the Star’s editorial board—lose their credibility in calling balls and strikes if they root too eagerly for one side. This was an unforced error.

The post Gratuitous “We Told You So” on KCI Airport Vote appeared first on Show-Me Institute.

So far that’s not the case. We learned from a recent story in The Kansas City Star that almost as soon as the deal was announced in May 2015, “the development team approached the city after that announcement to ask if it would consider guaranteeing bond debt on $62 million in catering revenues.” The more alarming part of the Star story, however, are the other obstacles to the deal.

·         The land the city wants to contribute to the hotel deal has a lien on it.

·         The private owner of the remaining quarter of the site has not yet reached a deal to sell.

·         The building contractor has not yet provided a construction price for the whole project.

Yet in testimony before the City Council on October 15 of last year, financier Steve Rattner said that the project was “ready to go” (starts at 2:20:28, emphasis added):

[Councilman Quinton Lucas:] Is it fatal to the project that you have a six or seven month delay?

[Steven Rattner:] We are ready to continue—every day we’re spending money to meet our obligations that we have with the city under the contract. We know we can get the financing today. We know what the cost of the project is. So we have the sources and uses. I cannot guarantee you that if we delay this six months that something will happen that will kill the project. Construction costs could go through the roof, and we don’t have that budgeted in so that could kill the project ‘cause you can’t raise enough equity. . . .

This project is ready to go now, right? And we have it under contract now. So can I say without a doubt it is going to kill the project? No. But I cannot guarantee you that the project will happen.

We learn now—a year later—that few of these things are true even now. They certainly weren’t true then. The developers don’t have the financing, they don’t know the cost of the project, they don’t have the land. The project is not ready to go now. City Manager Troy Schulte, who sat in on this hearing, should have known these things. The same is true for developer Mike Burke. Why did they not speak up to correct the record?

No one should be surprised that the convention hotel deal is viewed with such skepticism. Past promises failed to materialize, and testimony such as that quoted above only serves to further erode public trust.

The post Kansas City’s Convention Hotel’s Collapsing Foundation appeared first on Show-Me Institute.

It would be a shame if this money came from the police department amidst a spike in Kansas City murders. Where else could we find the money?

• Perhaps the city could sell the land it is considering using for the convention hotel. After all, that is city-owned land that is also blighted. And according to The Star, it’s worth $13 million. The Pitch says $4.5 million. Either way its a good start. And the city likely owns all sorts of valuable land that it is doing nothing with.
• The city could halt its awful idea to spend $12 million in taxpayer funds to tear down and rebuild a grocery store within 3 miles of at least two other grocery stores.
• Schulte is under order from the Council to find $18 million for the so-called Jazz District. Maybe tearing down “dangerous” buildings is more important.
• We could stop the streetcar project altogether on the grounds that protecting the health and well-being of thousands of families on the east side is more important than a 2.2 mile streetcar to nowhere.

The post The Demolition Option in Kansas City appeared first on Show-Me Institute.

City Manager Troy Schulte says the city learned lessons from that deal; the new project makes none of those same errors. Perhaps. But the City might be making a whole new round of mistakes. 

The St. Louis convention hotel project of the early 2000s was so bad that is changed the way Wall Street investors look at convention hotel investments. In a piece to The Kansas City Star, convention hotel expert Heywood Sanders put it thusly:

With an expanded convention center and domed stadium, consultants told St. Louis city officials they needed a big, new hotel. The 1,081-room Renaissance Grand Hotel and Suites was supposed to be filled by a wave of new convention attendees as the number of major conventions grew from 33 to 56, almost doubling the city’s convention business. But by 2008, the city garnered only 24 major conventions and fewer hotel room nights than in 1999 and 2000—before the Renaissance hotel opened. Without new convention attendees, the hotel couldn’t pay its annual debt service and the bondholders foreclosed in 2009. They finally were able to sell the hotel, at a serious loss, in May 2014.

Regarding that sale, The St. Louis Post-Dispatch reports that the new owners will invest millions in renovation and re-open them. The piece offered this observation:

“We had a shuttered building next to our convention center, and it will be alive with activity,” said David Richardson, a lawyer with law firm Husch Blackwell who advises the city on development issues.

This underscores the risk to Kansas City; will we build a huge hotel just to have it shuttered? It isn't just an idle thought experiment; we've been here before. After all, the last time Kansas City built a convention hotel—The Vista in 1985—the owners were considering bankruptcy within 18 months. A decade later, the city subsidized the Muehlebach hotel and took a loss because business was so soft. Why are these things unthinkable now? Hotel occupancy rates in downtown Kansas City have been averaging at an abysmal 50% to 55%, yet hotel proponents predict the new hotel will have a much better 68% occupancy. Are those reasonable expectations? We don't know—the reports don't explain how they reach those conclusions. But betting on them to be correct is certainly risky.

These same consultants have predicted that Kansas City convention business would almost double if we just built a hotel. Just build it and people will come, apparently. But the consultants again fail to explain how they reach these conclusions. As a result, we don't know if the predictions are reasonable.

The city may have learned its lesson from the awful plan to build the Power and Light District, but we cannot know what lessons we may have yet to learn. What is clear, however, is that projections of wild business growth seem unreasonable, and that should be enough of an alarm to those elected to protect city resources.

The post The Risks to the City of the Convention Hotel Gamble appeared first on Show-Me Institute.

According to some, ending competition for convention catering business would increase quality:

An exclusive food provider, according to O’Neal, would help the convention center ensure quality control because “with one vendor, the building can control quality better, and that’s what people remember about a building.”

City Manager Troy Schulte agrees. Even if the city weren’t negotiating with Hyatt, Schulte said, he was thinking about moving toward a single caterer. He said the city has received some complaints about catering, which he declined to specify. Schulte said a single provider would make quality control better.

You read that right. Some Kansas City leaders apparently think that reducing choice increases quality. (By the way, Aramark has an exclusive catering agreement at Kauffman Stadium, and they haven’t been doing so well regarding quality.)

This flawed thinking isn’t limited to the catering contract, according to the Memorandum of Understanding. Neither the initial award of catering nor the award of the construction contract for the hotel are to be competitively bid. The city apparently just plans to give those contracts to Hyatt and J.E. Dunn respectively without making sure their bids are the best or the cheapest.

Is it any wonder that city finances are such a mess when even the most basic economic principles of choice and competition are disregarded?

The post Back in the USSR appeared first on Show-Me Institute.

The Power & Light District plan was put together by City Manager Wayne Cauthen, and it was done largely out of the sight of the public. It was too late to make changes when the subsequent city manager, Troy Schulte, told us that in order for the Power & Light District to be self-sustaining, as voters were promised, “You needed Plaza-level holiday-level sales every day of the year.”

Seeking to avoid that same mistake, the 2010 convention hotel effort received lots of scrutiny, including reports from consultants and financiers. Bill Lucas, then president of the city’s hotel steering committee, said, “We’d about have to double our convention bookings” to make the hotel feasible. The project did not go forward because people were skeptical we’d make the goal.

This time the city is rushing a vote on the project to meet an arbitrary political deadline. There are no reports from consultants; no reports from financiers. One councilmember even complained about the short time available to make a decision.

While no one is saying how much convention business will have to increase to repay the investment, consider the impact of TIF giveaways to developers:

• Visitor money spent in the convention hotel itself won’t help us, as we’re giving all the taxes generated from those sales to the developers through Tax Increment Financing (TIF).
• If convention visitors wander to the Power & Light District for dinner and drinks, they’ll pay a high tax rate, but the city is already giving that tax money to Cordish through their TIF. The city won’t see much from it.
• If visitors head north to the River Market, the same will apply—we’re giving at least half of the tax revenue there to the developers.
• Maybe they’ll ride the streetcar. The streetcar will be free, so we won’t see any tourism dollars there (although it appears visitors who stay at the convention hotel will be paying 1 percent to the streetcar Transportation Development District).
• Maybe visitors will go to Country Club Plaza. That will be great, but half of the tax revenue generated from their purchases will go to the developers named in the Plaza TIF.

Therein lies the problem with Kansas City’s frequent use of TIF; we’re hollowing out our tax base. We claim that these developments will help the city, but in order to get the developments, we give away the tax revenue. Kansas City will likely need to more than double our convention bookings to make this financially sound, but no one is saying. This is no way to run a city.

The post How Will the Convention Hotel Help Taxpayers? appeared first on Show-Me Institute.

Steve Vockrodt at The Pitch considers other costs that the city doesn’t seem to be including in their estimates:

The property upon which the hotel will be built (bound by Truman Road and 16th Street and by Baltimore and Wyandotte) is mostly city-owned, which means that it currently generates no property taxes. Troy Schulte, the city manager, has said the land is worth $13 million.

Assuming that valuation is correct, it means that the land—if the city sold it to a developer and it returned to the tax rolls—would generate $333,998 a year in property taxes. Under TIF, the development captures all that money.

Given these arrangements, then, the public subsidy for the hotel is going to be a lot more than $35 million. About half the cost of the $300 million project will wind up being paid for by public taxes.

But wait, there’s more. The Kansas City Business Journal adds:

The post Convention Hotel: Power & Light District v. 2.0? appeared first on Show-Me Institute.

City manager Troy Schulte said the city will spend $950,000 to buy the existing strip mall and parking lot from its current owners, then another $11,050,000 to demolish the empty grocery store that now sits on the site. The city will borrow the money for the project, then repay the loans with projected taxes generated by the development and a special one-cent sales tax collected at its stores.

The city will lease the property to Sun Fresh for $10 a year, but will not provide any subsidies for operating the store.

That last sentence made me laugh: The city will spend $12 million to buy and build the place and charge the tenant $10 a year—but there won’t be any operational subsidies, as if rent isn’t an operational cost.

The problem is that the people who make a living running grocery stores by investing their own money do not think this is a good idea. If they did, the original grocery store might not have remained vacant for 10 years and the proposed grocery store wouldn’t need such a steep subsidy. Taxpayers are underwriting it because it is not a good idea.

Even the Kansas City Star editorial board is skeptical, offering, “The project is a financial gamble for taxpayers.” They concluded, “History shows that a lone project can’t really lift up an entire community. It takes a much bigger effort to do that.” This is true, according to an NPR story last year:

“The presumption is, if you build a store, people are going to come,” says Stephen Matthews, professor in the departments of sociology, anthropology and demography at Penn State University. To check that notion, he and colleagues from the London School of Hygiene and Tropical Medicine recently surveyed residents of one low-income community in Philadelphia before and after the opening of a glistening new supermarket brimming with fresh produce.

What they’re finding, Matthews says, is a bit surprising: “We don’t find any difference at all. … We see no effect of the store on fruit and vegetable consumption.”

It really isn’t surprising. If there was a demand for fruits and vegetables, someone would be providing them. But the demand isn’t there, even when shiny new stores are built.

Once again, Kansas City leaders are embarking on an expensive and ill-considered campaign using public dollars that does not address the real underlying problems. When it fails, the city and its residents will be no better off than before, just poorer. And the infrastructure, crime, and education issues that really need to be addressed will be that much worse.

The post Kansas City Embarks on New Bad Idea appeared first on Show-Me Institute.

Kansas City leaders want to point to downtown as a great monument to government planning. Look at the revitalization, they say. But given the high cost of the investment and the low return in jobs and businesses, taxpayers should be wary of this so-called success.

We’ve written recently on the premise underlying the investment of downtown and found it lacking. The very notion that those sought-after millennials are moving to urban areas is contested. That they are doing so in Kansas City in any fashion worthy of public cost is demonstrably false. That the city is seeing any financial benefit to the development is likewise risible.

Even the Kansas City Star, which has championed the profligate spending downtown, had to report on the failure:

Nick Benjamin of Cordish, executive director of the Power & Light District, thinks the debt shouldn’t overshadow all the positives, and in other ways the city’s investment has more than paid for itself.

“The point of Power & Light and the city’s investment wasn’t solely for Power & Light,” he said. “It was to revitalize downtown. It’s hard to argue that’s not happening.”

It’s happening? Certainly, the city has paid for very expensive buildings that weren’t there before, but what about this “revitalization”? We wondered if there was any way to justify the expenditures for the Power & Light District based on the number of entertainment venues or jobs or the tax revenue they generated. Given that the city is on the hook for $15 million each year to cover business losses, any increase would have to be substantial. Unfortunately, there appears to be no growth in any of our measures.

According to the city’s Comprehensive Annual Financial Report (CAFR), tax revenue from hotels and restaurants grew 16.56 percent, from 2006 to 2014. According to the inflation calculator at the Federal Reserve Bank of Minneapolis, inflation for that same period was 17 percent—meaning revenue growth from Kansas City hotel and restaurant tax was exactly flat.

In response to a Sunshine Request to the Regulated Industries Division in Kansas City, we learned that from 2007 to 2014 the number of businesses possessing licenses to sell liquor dropped over 13 percent from 870 to 769. Likewise, the number of employee liquor permits, such as those required of bartenders, dropped 7.5 percent from 11,767 to 10,937. In both cases these declines were slow and steady over time.

Kansas City did not get a hockey team or a basketball team out of the downtown development. It did not get a concert venue that it didn’t already have in Kemper. It did not see a net gain in jobs or businesses. It did not see an increase in tax revenue. However, it did get more debt to be paid out of city coffers—meaning less money for roads, parks, and public safety. And the city will be paying that debt for a long time. According to the same Star piece:

Even with a double-digit bump in sales, it’s not nearly what was anticipated in 2004, when consultants projected that new city and state tax revenues paid by the district’s residents and businesses would be able to cover the debt.

“I don’t think there will be a point at any time in the foreseeable future, probably the next 20 years, where it actually pays for itself,” acknowledged City Manager Troy Schulte.

Back in April 2006, the Kansas City Star quoted then-Mayor Kay Barnes:

“We’re going to look like geniuses” in five or 10 years, Barnes said. The city is paying low interest rates for projects that are capable of paying off the debt, she added.

Whoops! If this is genius and the downtown development is a success, it is the sort of genius and success that Kansas City cannot afford.

The post A Tale Full of Power & Light, Signifying Nothing appeared first on Show-Me Institute.

Instead, it appears officials are willing to consider spending even more of the citizens’ taxpayer dollars, not on necessary services, but on items such as sidewalks, bike lanes, and light rail.

Kansas City’s Citizens’ Association, self-described as the city’s oldest non-partisan community organization, presented the astonishing numbers and an analysis of the city’s long-term financial future at a forum on Thursday. Association Chairman Dan Cofran developed a daunting, two-page primer on city finances.

The Association reported that Fitch Ratings downgraded its outlook on Kansas City’s credit to negative. That downgrade does not include the recent Kansas City taxes or the impending 15 percent annual water rate increase to cover a mandated sewer renovation.

Something needs to be done but officials do not appear to know how or where to start, and did not present any concrete plans to address the situation.

Panelists such as Kansas City Councilwoman Jan Marcason and City Manager Troy Schulte only agreed that the city must make the tough decisions that it has failed to do in the past, such as revamping the sewers. However, what those tough decisions might be were barely discussed. Marcason also declined to cite examples of spending that the City Council has rejected.

Even worse, Kansas City seems to have no serious plan for responding to Kansas’ recent tax reductions and eliminations. In fact, Schulte said Kansas City should not “race to the bottom” on taxation and suspected that Kansans would grow to regret the cuts. Again, no plan was introduced to counter Kansas’ recent business-friendly actions.

Panelists did share the view that limits voters have placed on them — such as term limits and requiring approval of the earnings tax every five years — are burdensome. The panel failed to recognize that taxpayers took those steps to try to rein in spending and approvals for every project seeking tax incentives.

Cofran continuously asked how citizens might enforce any long-term strategic plan. Marcason suggested only “working together.” If past actions and this event are any indication, few city elected officials are willing to work together, develop a plan, or make any tough decisions.

The post Kansas City’s Financial Plan: There Is No Plan appeared first on Show-Me Institute.

What could go wrong?

Councilman Russ Johnson has filed a resolution that would direct City Manager Troy Schulte to apply for a Federal Transit Administration grant to study extending the proposed streetcar line to the Country Club Plaza and University of Missouri-Kansas City area.

The current proposal has the line running a 2.2-mile route from River Market to Crown Center. The second leg would add a little more than three miles.

City officials apparently feel they need to go straight to ludicrous speed with this crazy train proposal, but basically all of the same objections apply to the new plan as the old. Kansas City’s streetcar plan attempts to satisfy a market demand for transit that does not exist along the proposed route and will cost at least — and now, potentially far more than — $100 million to get off the ground. In addition, despite city promises, the plan will make the city less competitive, not more competitive, with a spike in local taxes.

Is this really what Kansas City needs to be investing in right now? The Kansas City Star‘s Yael Abouhalkah recently noted that Kansas City has the second-worst debt service burden among the largest cities in the region and one of the highest tax burdens. Why would the city aggravate concerns that are already making it less competitive, and why on Earth would they double down on such a plan?

The post Double Trouble: Kansas City Considers Extending Trolley Line To Plaza appeared first on Show-Me Institute.

City Manager Troy Schulte was appropriately blunt recently discussing Kansas City’s troubled pension system. He proposed good changes that could affect thousands of current and future city employees, while saving taxpayer dollars along the way.

“I don’t think our pension system is sustainable in the current structure,” Schulte told [the Pension System Task Force] evaluating the city’s retirement programs. The panel, which meets again today, should pay close attention to his recommendations.

The Task Force is presently comparing its systems (police, firefighters, and city employee systems) to those of a peer group of eight cities, including Oklahoma City, Denver, and Minneapolis.  And what are some of the preliminary findings? First, Kansas City taxpayers contribute an amount equal to 12.88 percent of a civilian employee’s salary towards his/her pension plan. This contribution rate is greater than rates in each of the peer group cities.

Second, the cost of living adjustment for retirees is three percent per year, higher than six of eight peer cities. Finally, the two percent per year multiplier is greater than those in seven of eight peer cities. Thus, retirees with 30 years of service receive 60 percent of their final average pay upon retirement.  In Indianapolis, by comparison, a retiree would only be entitled to 30 percent, based on a one percent per year multiplier.

While Kansas City’s self-analysis is fine so far as it goes, greater Missouri has approximately 130 government employee pension programs, ranging in size from the gargantuan Missouri State Employees’ Retirement System to the relatively miniscule Antonia Fire Protection District Pension Plan.  That’s right, 130!

Perhaps Kansas City is not alone, as the entire state of Missouri could be sitting on a pension time bomb.

Because public pensions are largely funded by Missouri taxpayers, taxpayers and their elected representatives need to address numerous issues in an open forum.  For example, are present and future liabilities underfunded, and if so by how much? Will future shortfalls be funded in the form of taxpayer legacy costs (i.e., future tax increases), by increased employee contributions, or by some combination of both? Should we begin now to require government employees to contribute to their pensions from current wages, thus tamping the insatiable demand for increased future benefits that arises when pension beneficiaries are not required to bear the costs? Have the managers of these pension funds reasonably estimated future portfolio returns, thus assuring that today’s contributions adequately support tomorrow’s payouts?

One may easily imagine a host of further questions that need to be asked.  That dialogue should occur soon, before time runs out.

The post Kansas City: Grabbing the Pension Bull by the Horns? appeared first on Show-Me Institute.

The project, cast as a “self-sustaining venture,” has had trouble occupying its 511,000 square feet of retail space. City planners blame the vacancy on the downturn of the economy. Without a fully occupied site, the project is having trouble recapturing the tax dollars originally allocated to finance the project.

This is not to say that the project was a failure, but rather to point out the difficulty in predicting its success. Of the original $295 million, $212 million was used to rebuild infrastructure around the project area (which could more readily be considered a legitimate expense). Many of my friends love the Power and Light District as a weekend hangout, but rosy projections and rationalization won’t save taxpayers any money.

A perfect example of the inherent fallacy of utilizing a centralized plan is found in Nassim Nicholas Taleb’s book The Black Swan. He writes:

The inability to predict outliers implies the inability to predict the course of history, given the share of these events in the dynamics of events.

Governments who believe they have a better chance than individuals of predicting future events have the tendency to be vastly irresponsible, and the bill almost always lands at the feet of the taxpaying public.

As plans like Kansas City’s Power and Light District come together, they are sold to the public in the most favorable light with the most favorable projections. Unfortunately, those projections almost never translate in the real world. Public projects usually cost more than expected and produce less.

The fact remains that the project has been undertaken, and I believe City Manager Troy Schulte put it best:

“20-20 hindsight is always good, but I’d tell taxpayers to come down and enjoy downtown, because you’re paying for it,” he said.

The post Central Planners Get It Wrong, Again appeared first on Show-Me Institute.