Recorded on December 1, 2022 at the World Chess Hall of Fame in St. Louis, Missouri

Tony Woodlief is Executive Vice President at the State Policy Network. He helps oversee SPN operations, supports SPN’s president in her guidance of the leadership team, and helps ensure the organization’s projects and programs measure success, evolve as SPN grows, and maintain alignment with our vision and mission.

Tony previously served as president of the Bill of Rights Institute, and before that the Market-Based Management Institute. He has also served as president of the Mercatus Center at George Mason University. An alumnus of the University of North Carolina, he has a Ph.D. in political science from the University of Michigan, and an MFA from Wichita State University. Tony has appeared in media outlets including Fox News, The Wall Street Journal, The New York Post, National Review, and C-SPAN’s Washington Journal.

Tony is also the author of I, Citizen: A Blueprint for Reclaiming American Self-Governance. In writing I, Citizen, Tony conducted extensive research on American public opinion to find out what Americans believe and uncover the source of their political animosities. Through his research, Tony discovered that America is more united than divided, despite what the pundits tell us, and traced the source of our perceived animosity to a small minority of dedicated partisans within the political establishment of Washington, DC. I, Citizen tells the story of how these partisans have created the myth of a divided America and how they’ve concentrated power in the hands of unelected bureaucrats and partisan elites, and offers practical solutions for how we can reclaim our right to self-governance by focusing on solutions and commonalities closer to home.

The post WATCH: The Red Vs Blue Myth and the Real Threat to American Stability appeared first on Show-Me Institute.

According to National Center for Education Statistics, just under half (46.6%) of aggregate local school district funding comes from states. Forty-five percent comes from local sources, including 36.4 percent from local property taxes. Those local property taxes are the source of much consternation between cities and school districts.

Across the country, municipal economic development policies such as abatement or tax-increment financing (TIF) allow cities to freeze, reduce or redirect property taxes to developers in order to offset the risks of their investment. In short, the practices permit one political body—cities—to divert the funds of another political body—school districts! And the loss of revenue to schools can be in the millions each year. A story from the St. Louis Post-Dispatch put the cost at $18 million per year for a single district:

The school district relies far more heavily on property taxes, collecting about 61 cents on each tax dollar paid. That means the district, which has little to no say over whether property taxes are abated on real estate projects, missed out on about $18 million in revenue last year.

The Kansas City Public School District (KCPS) estimates that it loses about $26 million each year. Chicago public schools claim a much higher cost to their schools from TIF—as high as $177 million in 2015 alone.

Proponents of these economic development subsidies claim that the funds redirected from schools come only from the increase in property tax—the increment—due to the new development. Without the subsidy, they claim, there would be no new development and so no increase in property tax in the first place. But studies of TIF, such as those conducted on Chicago, St. Louis and Kansas City by UNC–Chapel Hill professor William Lester conclude that there is little if any economic development resulting from TIF. Research shows that areas without TIF grow at the same rate as those with TIF—suggesting that TIF itself plays little to no role.

Part of the reason is that one of the standards for determining the appropriateness of TIF subsidies, often called the “but-for test,” is so weak as to be meaningless. The St. Louis Development Corporation (which oversees TIF in St. Louis) issued a report on its own programs in 2016 that found that due to poor quantitative measurement, one “cannot readily determine what may or may not be deemed a project worthy of consideration for a City tax incentive.” But developers have learned how to game the system, and city politicians are often all too willing to oblige so that they can point to new construction as evidence of their political success. Even worse, these developments are often subsidized in already economically vibrant parts of the city—further evidencing the lack of need for a subsidy.

California was the first state to adopt TIF in 1952, but subsequent policies required the state to reimburse school districts for funds lost due to municipal TIF policy. As a result, California became the first state to end TIF in 2012. While states have differing TIF policies, the basic impact on school districts is the same. Tax revenue that would have gone to support education is diverted to subsidize development—development that research suggests may have happened anyway.

Missouri is considering several reforms to its TIF policy, including narrowing the circumstances under which TIF may be used, strengthening the criteria a project must meet in order to qualify for TIF, and requiring any economic impact analysis to be conducted by a third party. Last year the Illinois legislature mandated a study of its TIF policies that is due to be released soon.

Parents and educators are right to look to governors, state legislators and school boards to make sure education funding is sufficient and that the funds are spent wisely. They should also make sure that the new local housing development, shopping mall or office building isn’t being underwritten by funds diverted under the noses of those same political bodies.

The post Cities May Actually Be the Culprit in Underfunding Schools appeared first on Show-Me Institute.

The bill in question was SB 859, which was heard by the Senate Economic Development Committee on February 20. A copy of my own testimony is here. The bill is fairly straightforward; it would limit the circumstances under which TIF can be used and would require a third-party analysis of the need for a taxpayer subsidy.

Opponents of the bill included members of the Economic Development Corporation of Kansas City, whose budget is dependent upon fees generated by the TIF projects they oversee. In fact, EDC staff once received bonuses because the group received so much money from TIF fees. The two officials testifying for the EDC offered anecdotal evidence of TIF success, highlighting two or three projects. But there are at least as many projects in which TIF has been abused, including the world headquarters buildings of Burns & McDonnell and H&R Block, along with other failures such as the Power & Light District and the never-actually-built Citadel. In fact, I am confident that in a battle of anecdotes opponents of TIF would win handily.

Other opponents of reform at the hearing included representatives from a few businesses that have benefitted from these taxpayer subsidies. They urged legislators to “be careful” lest reform hinder Missouri’s ability to fight a subsidy border war with Kansas (a border war, incidentally, that is a “financial folly for taxpayers”). If only those same businesses urged local officials to be careful with the TIF subsidies they give out so easily.

But good public policy ought not be based on mere anecdotes. Even if you don’t care what the research indicates, good policymaking is dependent on good information. And the research on TIF is clear: It doesn’t work at spurring investment or creating jobs. If you don’t want to depend on Show-Me Institute research, you can look at a UNC-Chapel Hill study on Chicago, or to the Upjohn Institute for Employment Research for nationwide data analysis. You can even turn to a study conducted for the St. Louis Redevelopment Corporation on the TIF subsidies that the corporation itself recommends and administers! This is the testimony that should matter.

Legislators should be wary of testimony from people with a vested financial interest in a bill’s outcome, or of testimony that amounts to little more than cherry-picked anecdotes. They should seek out broad research from disinterested parties—which, in the case of TIF, tells us that these subsidies are a waste of taxpayer money.

The post What I Saw at the TIF Hearing appeared first on Show-Me Institute.

Add one more study to that list. This week the Show-Me Institute unveils its own study of TIF in Missouri, specifically in Saint Louis and Kansas City. Authored by T. William Lester and A. Rachid El- Khattabi of the Department of City and Regional Planning at the University of North Carolina–Chapel Hill, the study focused on the but-for analyses used in TIF findings; the argument that development would not happen at a particular site without taxpayer subsidies.  According to the authors,

Overall, the analysis conducted in this study finds no support for the claim that TIF generated tangible economic development benefits in either Kansas City or Saint Louis.

Specific to each city studied, the study offers that there is zero—or perhaps even a negative—relationship between TIF and economic development:

In Kansas City, the estimated impact of TIF designation across all categories is very close to zero with relatively small standard errors, which suggests that the TIF program in Kansas City has been ineffective in promoting business development. In Saint Louis, the results are slightly negative and, for the most part, statistically significant.

Policymakers, developers, and many in the media will likely continue to eschew research and point to new buildings as proof of the effectiveness of development subsidies. But the question that studies like this one this answers is not whether development occurs, but whether it would have happened without the subsidy. The roar of research on the matter is deafening—economic development subsidies do not deliver their promised economic benefits.

The full Policy Study, as well as a shorter Policy Brief, are available at the links below.

The post Does Tax-Increment Financing Pass the But-For Test in Missouri? appeared first on Show-Me Institute.

Using data from 47 cities in 33 states over the course of 26 years (1990 to 2015) the Upjohn study confirmed what Show-Me Institute analysts have been arguing for years: economic development incentives do not grow the economy, create jobs, or boost tax revenue. In his 2017 paper, Upjohn author Tim Bartik concludes (page 116),

The existing research on incentives is that in some cases they can affect business location decisions, but that in many cases they are excessively costly and may not have the promised effects. The new research suggests that much of this consensus is justified.

None of this will surprise frequent readers of this blog. Politicians may like attend ribbon-cuttings and crow about creating jobs, but little of this actually pans out. Instead, cities and states end up hollowing out their tax base, collecting ever less for important services such as public schools, libraries and mental health funds. Simply taxing money out of the economy and then turning around and spending it doesn’t grow the economic pie! The new study confirmed as much:

Incentives are still far too broadly provided to many firms that do not pay high wages, do not provide many jobs, and are unlikely to have research spinoffs. Too many incentives excessively sacrifice the long-term tax base of state and local economies. Too many incentives are refundable and without real budget limits.

The 33 states that Upjohn considered account for 92 percent of the U.S. gross domestic product, and the 45 industries it analyzed account for 91 percent of U.S. labor compensation. Kansas City has undertaken its own analysis, of sorts, of its economic development policies, but has hired a trade group of development financiers to do the work. Seriously.

Politicians and those aligned with wealthy developers may not like or care about the research—but it’s becoming increasingly difficult to wave it off and pretend it doesn’t exist.

The post Economic Development Policies Still Failing appeared first on Show-Me Institute.

First of all, CDFA is not an accounting or financial auditing firm. According to their website, they are:

a national association dedicated to the advancement of development finance concerns and interests. CDFA is comprised of the nation’s leading and most knowledgeable members of the development finance community representing hundreds of public, private and non-profit development entities.

Their mission is “to promote the common interest of Development Finance Agencies with respect to public policies and programs,” which isn’t exactly what you’d expect from an independent, disinterested organization.

In short, we’ve agreed to pay up to $350,000 to an association that represents development financiers and their “interests” to evaluate the effectiveness of our development financing. How likely is it that CDFA will be critical and impartial? This is a legitimate concern, because Mayor James has already stated that “City Hall doesn’t do a good enough job of promoting how economic development benefits the city.” Are we paying for analysis, or for cheerleading?

To assess their own economic development programs, the Saint Louis Development Corporation hired The PFM Group, an independent public financing advisory company. Of themselves, PFM writes,

Founded April 11, 1975 on the principles of expert, unbiased advice, the PFM Group of companies also provides investment advisory and management/budget consulting services to clients across the country and are recognized as industry leaders. 

For $180,000—roughly half of what Kansas City proposes to spend—PFM completed a substantive analysis of St. Louis economic programs and concluded that TIF and abatement are extremely costly and have little or no economic development impact. (We’ve reviewed their findings here.)

Other studies of economic development subsidies like TIF have been conducted by scholars at universities such as the University of North Carolina-Chapel Hill and Washburn University in Topeka. These studies, along with works published in the Journal of Urban Economics, and in Urban Studies have raised serious concerns regarding the impact of economic development subsidies.  Other regions have found substantial costs associated with little economic benefit, so Kansas City should take its self-evaluation seriously.

States like California, which ended TIF in 2012, and cities like St. Louis should be applauded for facing the reality of their economic development policies. Not so in Kansas City. If our leaders are serious about promoting good policy, they need to be willing to seek out independent, disinterested research and make the appropriate changes.

The post Kansas City Hires Fox to Watch Henhouse appeared first on Show-Me Institute.

Kansas City Councilman Scott Wagner worries that people need to be convinced of a particular project before moving ahead.

“Increasingly, the burden is falling on the developer to show residents that there will be a benefit for the area, that the ‘but for’ clause is real,” Wagner said. “If people don’t believe a financial need exists, it’s easy to fight it.”

Is this too much to ask? Should taxpayers just trust the Economic Development Corporation (EDC)—a nonprofit organization funded mostly from the fees assessed on the projects it recommends—to have the final say? Apparently, yes. According to one developer, the people just don’t know enough to have a worthwhile point of view,

Whitney Kerr Sr., a longstanding area real estate developer, fears an anti-development tide could thwart the city’s momentum. He worries that “people who have no knowledge of real estate economics” have become too empowered.

Clearly, Kerr and developers like him would prefer the people to just be quiet and keep forking over their tax dollars to the supposed real estate experts at City Hall. Remember, it was former Mayor Kay Barnes who actually said in 2006 of the Power and Light District,

"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.
 

Quite the opposite, the District is a swirling financial black hole that will swallow up about $15 million from the general fund each year from now through 2040. And there is no evidence that the District has netted the city any additional businesses, jobs, or tax revenue. In fact, according to the Missouri Department of Revenue, projects in tax increment financing (TIF) districts regularly fail to meet their developers’ own job creation projections. The great cost and low return of these subsidies is the reason that states and localities have been reforming TIF across the country. California, which was the first state to adopt TIF in 1952, ended it altogether in 2012.

Popular opposition to these development subsidies isn’t a product of the people’s ignorance of real estate economics, but rather of their understanding. They don’t want to hand their money to Kerr and others for dubious development projects when the city cannot keep Westport from flooding in the rain.

As for Mr. Kerr and other apologists for the status quo, it is unlikely that they have read a lot of the economic research literature on but-for analysis, or else they would understand the public’s discomfort. As a public service, here is a link to a study conducted by the University of North Carolina-Chapel Hill on TIF in Chicago. Before complaining about the lack of “knowledge of real estate economics” in others, perhaps they should educate themselves.

The post Taxpayers’ Subsidy Skepticism Is Warranted appeared first on Show-Me Institute.

The Kansas City office had been struggling with its finances, a difficult time made worse because key members of its small administrative staff were in ill physical health.

Nearly 30 percent of NAMI-KC’s revenue came from a share of the Jackson County Community Mental Health Fund tax levy.

Robertson does not mention that due to an extension of The Kansas City Star’s property tax abatement, the paper of record does not pay into the mental health fund levy. Nor does he mention that the Community Mental Health Fund did not receive over $891,000 in 2015 alone due to Tax Increment Financing (TIF) and tax abatements in Jackson County. (The Star’s 15-year extension is worth $245,000 alone!) Those funds are kept by property owners or diverted back to developers.

Defenders of Kansas City’s development policies respond that this money was never being collected in the first place, so it isn’t fair to say that it’s being taken away from schools, libraries, or the mental health fund. Once the TIF or abatement is ended, they say, those funds will be better off than before. But this ignores the specifics of the Star, which sought to extend a 10-year abatement for another 15 years.

Supporters of such subsidies also give too much credit to TIF policy for driving up property values. A study by the University of North Carolina at Chapel Hill looked at TIF policy in Chicago and found that

After controlling for potential selection bias in TIF assignment, this paper shows that TIF ultimately fails the “but-for” test and shows no evidence of increasing tangible economic development benefits for local residents.

Developers are reaping a windfall from development subsidies in Kansas City. That money is diverted from other worthy causes, notably schools and mental health services. When publicly funded organizations like NAMI-KC are forced to shut their doors, the blame lies largely at the feet of pro-development policymakers.

The post The Negative Impacts of Development Subsidies appeared first on Show-Me Institute.

“You should do everything, including underwriting flights, to get as many highways in the sky as you can,” said John D. Kasarda, director of the University of North Carolina’s Kenan Institute of Private Enterprise and author of “Aerotropolis: The Way We’ll Live Next.”

Sounds a lot like Saint Louis so far. But (emphasis added):

There doesn’t appear to be support for the idea if it involves public money.

“I don’t agree with subsidizing flights or subsidizing certain airlines. We should work to lower the costs of all of the airlines at the airport,” said Allegheny County Executive Dan Onorato. He said the county doesn’t have money to provide such backing.

Pennsylvania and the Allegheny Conference on Community Development agreed to provide up to $9 million if Delta Air Lines’ flight between Pittsburgh and Paris missed revenue targets. They paid the maximum $5 million after the first year of service, but it’s unknown whether they will owe money for the second, which ended June 1.

Onorato appears to be taking the principled stance of not letting the government pick winners and losers at the airport. As to the airport, at least, Allegheny County taxpayers can be proud of its executive’s fiscal prudence.

The post Kudos, Allegheny County Executive Dan Onorato appeared first on Show-Me Institute.

The University of Missouri?Columbia has won approval to drop the hyphen from its name, in all but its most official communications.

This name change follows a series of identity crises suffered among Missouri universities. The University of Missouri?Rolla recently changed its name to Missouri University of Science and Technology; Southwest Missouri State University is now Missouri State University; and Central Missouri State University is now the University of Central Missouri.

OK, good — I’m glad that we’ve got that all cleared up now.

This name change bothers me. Yes, Mizzou, we all realize that you’re the flagship school of the University of Missouri system, but do you really have to change your name to prove it? UM?Columbia fears that the hyphen gives it the appearance of being a “regional” school.

Yes, in the same way the University of California?Berkeley is a “regional” school. Or how about that regional school, the University of Michigan?Ann Arbor. And UNC?Chapel Hill?

Maybe now that the “University of Missouri” has solved its name issue, it can concetrate on competing with those other “regional” schools in the most recent U.S. News and World Report rankings.

The post Mizzou 38, OU 35 appeared first on Show-Me Institute.