Susan Pendergrass speaks with Aaron Renn, author and consultant, and David Stokes, Director of Municipal Policy at the Show-Me Institute, about the recurring debate over whether the city of St. Louis should rejoin St. Louis County. They explore what city county mergers have actually accomplished in places like Indianapolis, Louisville, Nashville, and Lexington, why a full merger in St. Louis would be extraordinarily difficult to pull off, and whether the benefits would even outweigh the costs. They also discuss St. Louis’s demographic challenges, what the Pittsburgh model might offer as a path forward, the cultural barriers that make it hard to attract and retain people from outside the region, and more.

You can find Aaron’s work here.

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Episode Transcript

Susan Pendergrass (00:05): Welcome back, Aaron Renn, to the podcast. So happy to have you and David Stokes, our own expert on cities and counties and all things municipal. I appreciate you coming on, Aaron. There have been murmurings around St. Louis again on a topic that we have revisited for probably a hundred years: should the city of St. Louis be a separate county from St. Louis County?

Before we get to that, I want to ask you something because I was reading the news this morning, and I know that you’ve written about city county mergers before, like cities that are kind of dying and then either pulling in parts of their closest suburbs to sort of make everything look better, broaden their tax base, make their crime numbers look better. I was reading something you wrote a year or two ago about that, and you said that Louisville is a failed example of that. Is that right, basically?

Aaron Renn (01:01): Yeah, I’m a little skeptical of how these things have worked out in practice.

Susan Pendergrass (01:05): Yeah, in terms of losing the flavor and the coolness of the city. Literally this morning I saw an article about how Louisville is having a renaissance and these young professionals are all moving there because they didn’t tear down all their beautiful old Victorian homes, so you can still get one for close to a million dollars. They’ve got a cool art scene and a bourbon scene. So it sounds like maybe Louisville did not lose its personal flavor in the merger. I would be curious to know what you think of that.

Aaron Renn (01:33): Well, I like to put St. Louis in context. I’m glad you mentioned Louisville because many of these river cities have similar characteristics. I like to look at St. Louis as well as three cities in the Ohio Valley: Louisville, Cincinnati, and Pittsburgh. All of them heavily German Catholic in their demographics. All of them are very geopolitically fragmented with many small tiny suburbs throughout. They all have very fragmented neighborhood systems as well, where everybody has a strong sense of neighborhood identity. Where you go to high school is a big social marker. They all have phenomenal collections of urban assets and great historic buildings. They all still have their own unique character in a country where that has sort of bled away.

Aaron Renn (02:31): And they also have curiously underperformed demographically and economically in terms of growth. They’re slow growth places. So one thing I always encourage people is to pan back the lens and don’t just look at St. Louis in isolation. Look at it in comparison or dialogue with some of these other places and see what you can learn from them.

Louisville is actually a quite troubled city in important ways. From a white collar employment perspective it’s doing well, from a blue collar perspective less so. It’s one of the 10 least educated major metros in the country. I don’t want to spend too much time on Louisville, but I want to talk about the city county merger, which is distinct from recombining the city and the county. This has been considered urban planning best practice for 30 or 40 years. There was a book written by David Rusk called Cities Without Suburbs. The idea is that cities that were able to expand their boundaries through either annexation or city county mergers were prospering, whilst cities that did not, like the Clevelands, the Cincinnatis, and the St. Louises, were struggling. So the idea is we need big box government.

Indianapolis, where I live now, had a city county merger in 1970. Louisville did a city county merger, I grew up near Louisville. Jacksonville, Florida, Lexington, Kentucky, and Nashville, Tennessee did as well. What I would say is a few things. Merger is not necessarily bad. For Indianapolis, merger did prevent the city from essentially going down the tubes in important ways. So it really was a win in important ways.

But it did not prevent the historic city from going into the exact same demographic decline as St. Louis. The historic city of Indianapolis has lost almost exactly the same share of its population since 1970 as St. Louis has. Secondly, these are very politically difficult to pull off. They take enormous effort. They often fail multiple times. Louisville had multiple failures.

The most precious resource is always management time and attention. Is this where you want to put all your political chips? And in order to get it passed politically, what happens invariably is that most entities are actually not consolidated. In Louisville, none of the existing incorporated suburban governments were in fact merged. In Indianapolis, the school districts weren’t merged.

This means you don’t necessarily get all of the benefits you think from consolidation, because many things are excluded. And then unlike a corporate merger, where there’s typically a lot of downsizing and cost rationalization, in city county mergers nobody ever loses their job and salaries and benefits might even be harmonized upward to the high watermark. So don’t expect it to save any money. Personally, city county merger might have some benefits for St. Louis. I’m not saying it would have no benefits, but in my opinion it’s not going to be a needle mover and most likely it would be extraordinarily politically difficult and uncertain to pull off.

Susan Pendergrass (06:00): Yeah, no question. It’s been very politically difficult. People don’t want to do it. However, we do have these little tiny school districts and police districts. We have, I don’t know, 28 911 systems. We have a lot of what looks like bureaucratic waste and red tape. To the extent that doesn’t get resolved in a merger, then what’s the point? But I do think, you know, we’ve been talking about the demographics of St. Louis. There were over 800,000 people in the city once. Now there are maybe 280,000 and declining, and we’re in the death spiral of more people dying than being born. We’ve been in that for a while. And I guess it brings up the question of what is St. Louis to do if we are in this death spiral? We’re not having the babies. We’re having fewer babies than we did 15 years ago. So school enrollment is only declining. What is the prescription in that situation?

I’ve been to Cincinnati quite a bit. They’re trying to get people downtown with sports stadiums. It doesn’t really work. Louisville has sports stadiums downtown. I don’t know if people really want to move down there. I don’t see it working in St. Louis. So what is a city in that situation to do?

Aaron Renn (07:18): It’s going to be challenging in a sense because your problems are a little over determined. St. Louis was once a regional capital city, much like a Dallas or an Atlanta or a Denver or a Minneapolis. And it lost a lot of those functions. Many of its headquarters have left. It used to have a lot of professional services firms like ad agencies that did business all over the country, not just for the local market. Now St. Louis, although it’s still bigger than Indianapolis, looks a lot more like an Indianapolis or a Columbus, Ohio, where you have fewer corporate headquarters and most of the service firms are just there to serve the local market. St. Louis has essentially shrunk a little bit in relative importance, and it’s hard to get that back.

The demographics are also quite difficult and create a situation where it’s hard to attract business when you have a shrinking labor force, weak demographic growth, and a weak ability to bring people in from the outside. So it’s a very complicated situation and I don’t think there’s any silver bullet for St. Louis.

Susan Pendergrass (08:39): That’s what I’m asking you for. You have the answers. What’s the silver bullet?

Aaron Renn (08:43): So here are the things I would look at if I were in St. Louis. One of the clear issues that affects all of these river cities is that their wonderful, unique local cultures come with a downside, which is an extreme parochialism that has two negative effects. One, it makes it difficult for the communities to cohesively work together, which I’m not telling you anything you don’t already know. City-suburb divides tend to be bigger. In Indianapolis, regional leadership is mostly all on the same page about the big issues. Same with Columbus, Ohio. Secondly, it makes it very difficult to attract people from out of town because they come there and they can’t make friends, they can’t penetrate the social networks.

Susan Pendergrass (09:15): 100%, yes.

Aaron Renn (09:40): You hear it over and over again in places like St. Louis, Cleveland, even Minneapolis, Minnesota. There are some sayings there. If you want to make friends in Minnesota, go to kindergarten, because that’s when everybody makes their friends. Or Minnesotans will give you directions anywhere but their house. They’re never going to invite you over. St. Louis has that reputation. I don’t think it’s just a reputation. And I know you just had Ness Sandoval on.

Susan Pendergrass (09:53): Yeah.

Aaron Renn (10:08): He’s talking about you need to get better on migration. Migration isn’t going to improve if migrants are not going to be able to join the social networks here. And that’s not even just international migration, that’s domestic migrants. So I think that’s a huge issue for the city. Cultural issues are hard to solve, but maybe less intractable than infrastructure.

The other thing is looking at Pittsburgh as a sort of model. Pittsburgh hasn’t solved really most of its problems by any means, but it has been able to regenerate in the city a sort of high value economy around Carnegie Mellon and the University of Pittsburgh Medical Center. It’s done quite well. Many Silicon Valley firms have set up shop there. What’s happened in Pittsburgh, although it’s still a demographic decline story, is there’s been a demographic transition in the city. Pittsburgh went from one of the least educated cities in America to now one of the youngest and most educated. Part of it is old people moved and died off and young educated people replaced them. So the total number of people in the city was declining, but there was a churn happening underneath. And the same thing is already happening in St. Louis.

Susan Pendergrass (11:13): How did they do that?

Aaron Renn (11:33): College degree attainment in the city is now well north of 40%. So the people who live in the city of St. Louis are very educated. That demographic churn has raised educational attainment and thus incomes in the city a lot. Now Pittsburgh was different because it was an almost entirely white city. There’s a racial divide in St. Louis and gentrification concerns become more salient. But St. Louis is now an educated city. This is not an old post-industrial blue collar city. The city of St. Louis itself is very educated. And also being very small, it doesn’t necessarily need a massive change to move the needle. In Indianapolis we have a population of over 900,000. Moving that behemoth takes a lot. St. Louis now being smaller has a situation where there could be a big impact from lower numbers of things. So I think a knowledge economy built around Washington University and your medical centers has some possibilities, somewhat similar to Pittsburgh.

Susan Pendergrass (12:45): So much medical.

Aaron Renn (12:58): Carnegie Mellon’s engineering and computer science areas will be a little different. I might also look at Vanderbilt, what’s going on there? What are some peer schools you could watch to see what’s going on? But I think there are actually some reasons to think that the city of St. Louis, believe it or not, could be sort of turning a corner. It has now demographically renewed itself to a higher educational attainment state. Being small, it probably doesn’t have that much further to fall, and you can start building from there. Obviously there are governance challenges, but looking at the Pittsburgh model, studying similar complexes around peer schools, and addressing the culture issues is where I’d look.

David Stokes (13:33): Hopeful.

Susan Pendergrass (13:47): So as a spokesperson for St. Louis, what do you see for the future?

David Stokes (13:52): Well, I would be curious to get Aaron’s thoughts on that size question, about how the city of St. Louis has in fact gotten so small. It’s about 10% of the metro area. How does that affect the pros or cons of any type of a merger? These would not be a merger of equals. St. Louis County would almost subsume St. Louis City into it. How do you think that would affect things for better or worse?

Aaron Renn (14:28): Well, that was the critique of the Louisville merger by two academics at the University of Louisville. I mentioned the book Cities Without Suburbs. They wrote an academic paper called Suburbs Without a City, which basically said if the merger passed in Louisville, it would essentially mean the suburbs take over the city, not the city taking over the suburbs, because the old city of Louisville only had about 260,000 people and the suburbs would numerically dominate. The same thing would certainly happen in St. Louis. If there were a merger, suburban St. Louis County would control the city in essence.

Another consideration, and this is a Cincinnati issue, I interviewed about 15 years ago the mayor of Cincinnati, John Cranley. Here’s what he said, and I think this is an important point. He said, 30 years ago, city county merger was the thing because cities were in decline and you wanted to tap that suburban tax base to fund the city. But now it’s reversed. Now the cities are coming back and it’s the inner suburbs that are actually going down the tubes. And so in Cincinnati today, we have all the corporate headquarters, we have the universities and the medical centers, and we don’t have to share our tax revenue with anybody. If we were merged with the county government, we’d have to prop up all these failing suburbs. And so I think you’re in a similar situation in St. Louis, where the high value activity, not all of it is in the city of St. Louis because of Clayton and so on, but the St. Louis County suburbs are mostly places that are themselves on negative trajectories. Merging the city, which may be on the cusp of being able to bottom out and turn around, with all of these still declining inner suburban areas, might actually be an albatross around the city’s neck.

Susan Pendergrass (15:16): What would that mean?

David Stokes (16:37): I just think one of the differences between St. Louis and Cincinnati, and I don’t know the property tax base of Cincinnati, is that so much of the city of St. Louis is tax exempt right now. Between Washington University, Saint Louis University, and all the government entities, there’s just so much of it. I say that as somebody who supports property tax changes to make them pay something towards it. But I just don’t think the Cincinnati argument applies to the city of St. Louis right now. That property tax exemption part is a huge factor because the most growing, thriving part of it is the entire giant Barnes-WashU-Cortex complex, and the amount of property taxes they pay is miniscule.

Susan Pendergrass (16:38): Hmm.

Aaron Renn (17:26): Well, some of that is a planning issue. And I think the reality is, when you have a complex like that, are all these people going to move to St. Charles? Maybe not. I’ll tell you, I live in the suburb of Indianapolis named Carmel, and a lot of the hospitals and things have been opening facilities here. When these nonprofit hospitals come up here, we will not approve zoning changes for those hospitals unless they agree to make payments in lieu of taxes. You want to come up here and you want a zoning change, you’re going to have to pay. We were actually quite prescient in that one of the local hospital chains opened a for-profit hospital. As part of the approval deal, we said, if you ever convert to nonprofit status, you will continue paying property taxes. And we did that.

So I think there probably is leverage from the city over some of these entities. You don’t have a lot of leverage over a corporation deciding where to put their office, but that’s not a tax exempt situation. The stuff at Cortex is probably not going to leave if you make them pay a little money the next time they come to you for a zoning approval. I think you need to start looking at how to get more money out of these entities that are nonprofits in name only. These universities and hospitals are effectively gigantic hedge funds. Their executives are extremely well compensated and billions of dollars are flowing through there. Undoubtedly the better solution there is to figure out how to tax them rather than figure out how to tax the soon-to-be-dead mall in the suburb over the border.

David Stokes (19:24): Well, yeah, and that’s sort of the trade off, unfortunately, is that they do pay earnings tax. The employees, many of them very highly compensated, pay the earnings tax. And that’s what makes the city more dependent on local income taxes, not less, because they’re either tax exempt or in the case of Cortex, have tax abatements that make them essentially tax exempt.

Susan Pendergrass (19:25): We do have earnings taxes, right? So the folks who work there have to pay an earnings tax.

Aaron Renn (19:53): Yeah. Again, I don’t know exactly the fiscal architecture there. But I would say you don’t want to do a merger simply to do a tax dollar grab. The lesson of Indianapolis is we did that. We grabbed suburban tax dollars and we used it to rebuild our downtown successfully. But here we are 50 years later, and now we have enormous tracts of decayed suburbia that are an enormous problem. Our entire core county is now in a sense the inner city. We have big challenges because we were not able to invest in ways that allow those suburban areas to retain their allure over the long term.

And I’m not saying that’s impossible, but any short term juice you get, cities always rise and fall. Core cities have proven more resilient and more able to regenerate themselves than suburbs. Part of it is because state governments cannot afford to let their state’s largest city or major urban center go down the tubes.

Susan Pendergrass (21:06): Yeah.

Aaron Renn (21:16): Missouri cannot let St. Louis and Kansas City implode. Michigan cannot just write off Detroit and say who cares. But these suburban areas have proven a lot tougher to save. We don’t have a good model. We’ve spent decades thinking about how to rebuild cities and build districts. There are certain things you can pull off in a city around conventions, civic events, gathering spaces, museums, and government that are very hard to translate to suburban settings. So there’s not a great playbook, especially in declining markets, for renewing suburbs. The playbook for suburban renewal, if you want to call it that, is places like Carmel, Indiana, which are growing and affluent, and therefore can build large mixed use centers, new urbanist developments, trails, and parks. The suburbs of St. Louis County are probably tremendously deficient in infrastructure as we would understand it today.

So again, there may actually be some benefits in having St. Louis City rejoin the county in a sense, because then the county functions are spread and amortized across a larger population.

Susan Pendergrass (22:45): It would immediately improve our murder rate because we would be mixing it in.

Aaron Renn (22:48): Yeah, there is some of that. The murder rate is an artifact of the size of the city more than anything. There are places in Chicago with higher murder rates. A former colleague of mine at the Manhattan Institute, Rafael Mangual, did an analysis of Chicago. He said there are areas on the South Side of Chicago that are larger and have more people than St. Louis with far higher murder rates than St. Louis.

Susan Pendergrass (22:56): We get called out because of the small denominator.

Aaron Renn (23:17): And so there is that. The other thing is Chicago is a good example. New York City was essentially a city county merger. In 1898, the five counties that are the five boroughs of New York were consolidated into one city. Philadelphia was also a city county consolidation from the 19th century. But what happens when you create a very large city of say a million people or more is you really have to scale up your government. You have to have a government that operates at that scale.

What happened with Indianapolis was we merged city and county government, but we didn’t really have a government that could effectively manage this new larger territory. It never built out the infrastructure in the suburbs. In New York, the Bronx has subways, great parks, everything built out with proper infrastructure, because it was part of New York and New York had to expand governance to become a city of eight million. Chicago got big in the 19th century and built a city government that could run a city of three million people. And some of the stuff that gets critiqued there, for example, is a lot of city services were organized by ward or city council district. There are 50 city council districts and every city councilor is sort of a little mini mayor of their district. The alderman essentially has veto power over any zoning changes. It’s called aldermanic privilege. So there are a lot of constraints there.

But if it’s just one mayor and one city council trying to think about a huge city of 77 neighborhoods and three million people, they can’t keep that much in their head. All they can think about is downtown. And that’s what happened in Indianapolis. The mayor and city council can really only think about downtown. We should have built out structures in townships throughout the city so that you had leadership focused on that area and money focused on that area. That’s what made the suburbs work really well. A suburb like Carmel is basically township sized. We have 100,000 people, big enough to do things, but not so big that our mayor and council can’t keep the whole city in their head and plan and manage the whole city.

So if you merge with the county government, you’re going to have to create an entirely new government structure that allows you to essentially manage every sub area of the whole thing and bring it all up to a standard of services. That’s the other thing they often did in Louisville and Nashville. They merge, but they have a two tier service system where there’s an urban services district for the old city which gets more services, and then the others get less. They didn’t do that in New York. There’s one standard of service in New York, one in Philadelphia, one in Chicago. So if you can’t commit to a single standard of service, you’re basically creating a bogus merger in my opinion. If you’re going to do a merger, you need to obliterate every government and entity in St. Louis County and city, merge them all into one with one standard. That’s not going to happen.

Susan Pendergrass (26:35): That’s not going to happen. What do you think, David?

David Stokes (26:37): Yeah, that’s not going to happen.

Aaron Renn (26:43): So you end up with a lot of problems. Louisville didn’t merge any fire departments. Imagine a city that doesn’t have a consolidated fire department. Imagine a city without a single police department. That was actually Indianapolis. When we merged, the Indianapolis Police Department still patrolled the old city, but the new parts of the city that were consolidated in from the county were still controlled by the sheriff.

Susan Pendergrass (27:13): That is 100% what would happen in St. Louis. Everyone would retain their school system and their police department and their fire department. I lived for a long time in Fairfax County, Virginia, which is a single county government. It’s massive, 150,000 students in their school system. It seems to function with a single police department and fire department. But I don’t think you can backwards engineer that into a place that for hundreds of years has been operating as it has been operating.

Aaron Renn (27:43): Lexington, Kentucky worked pretty well because one, the schools were already consolidated, as in the South it’s typically county school districts. Secondly, there were no other government entities, no township governments, no other incorporated municipalities. So it merged everything. And they were sort of able to solve the urban services district issue because the outer areas of Fayette County were horse farms. They actually put in a kind of green belt rule, you can’t develop out there, because they wanted to protect these scenic landscapes. So there was actually a good reason to treat that differently, because it was a very unique American landscape. Lexington, I think, was pretty successful.

Susan Pendergrass (28:15): They are. I appreciate it when I drive across Route 64.

Aaron Renn (28:39): Lexington was pretty successful and wasn’t especially controversial when they did it, in part because there weren’t all these entrenched interests like there are in other places. If you look at places that did the mergers, they weren’t the Cincinnatis and Pittsburghs. They’ve been talking about consolidation in Pittsburgh forever. It was very hard. And Louisville did it, but it was one of the least consolidated so-called consolidated governments. What the Louisville merger functionally did was dissolve the city of Louisville and reorganize county government. The county government now has a mayor and a council instead of the old fiscal court with the judge executive and all that.

Susan Pendergrass (29:21): That’s kind of what would happen in St. Louis, right?

Aaron Renn (29:36): That’s essentially what they did. They basically dissolved the city and the county government was reorganized, but nothing was merged.

Susan Pendergrass (29:43): Did you have a question?

David Stokes (29:45): I want to get back to the fire district point. We’re talking about why this would be so hard. There’s actually a law in St. Louis that only applies in St. Louis County that makes it impossible to consolidate fire districts. Even if a modest mid-sized suburb annexes an unincorporated part of town, they’re not allowed to provide fire services to that new annexed area, or they can, but they have to pay so much to the old unincorporated fire district that it makes it impossible to do so. That’s just one example of how even if you wanted a full scale merger, it would just be impossible to actually carry through.

Susan Pendergrass (30:34): Why do you think people float this idea, David? Why does it come back every couple of years?

David Stokes (30:38): You know, it’s the old line. I remember a study I read about Pittsburgh and St. Louis many years ago. The question was, are the St. Louis and Pittsburgh areas really inefficient with all the fragmented government? And the conclusion was, well, you would never design a metro area like this, but they’ve both made it work over the last century better than you would think. The conclusion was that St. Louis and Pittsburgh aren’t actually as inefficient as you might assume when you run the numbers.

I think people have trouble accepting that. People look at so many small municipalities, many of them dysfunctional, many of them until recent times funded themselves primarily with traffic tickets, which is a terrible way to fund local government, and that’s not even an exaggeration. And there’s just this fundamental belief that if you can just plan it better you’ll create a better place. I just think it fails.

One of the reasons it would fail, going back to what Aaron led this conversation off with, is that if St. Louis County and St. Louis City joined together, they’re not actually going to lay any government employees off to save any money. St. Louis City government is not going to fire city employees. It’s never going to happen. So you’re not going to save any money and it’s all just going to collapse.

Aaron Renn (32:12): Yeah, New York City and large governments are not more efficient.

I look at it and say, look, I think merger is a solution for failed states, if you want to call them that, in the St. Louis suburbs. Take some micro-suburb that’s a complete scam or is bankrupt and merge it in with its neighbor. Do some consolidation like that, that probably needs to be led by state government, almost like a receivership sort of thing. That’s just kind of good government as you work through it. But I just don’t think the benefits you would gain from trying to do a complete governmental merger of St. Louis City with St. Louis County would outweigh the opportunity cost of how much time and effort you spend on it, when you could be spending that on other things that I think will actually move the needle more.

The downsides are arguably as high as the upsides. There’s no guarantee it’s even net positive in this environment. The time to have merged was when Indianapolis did it in 1970, not in 2026. Nashville did it in the 60s. Jacksonville did it a long time ago.

And then I think it doesn’t fix the fundamental issues around the culture. You’ve got to take a hard look at that and say, it’s maybe very difficult to change. The idea that people who aren’t from here have to be able to move here and get connected and feel like they belong in the city. There’s a couple we know who lived in St. Louis. The wife taught in St. Louis public schools. They’re big urban people. The husband was from St. Louis, and they moved here to Carmel, Indiana.

Susan Pendergrass (33:47): Tell me more about that.

Aaron Renn (34:10): Basically they said, man, people are just so much friendlier here. They make better eye contact, they engage more. It’s just so much more welcoming than it was in St. Louis, even though they were actually in a sense connected because the husband was from there.

So when even people who lived in St. Louis and liked it notice a difference when they leave, that is a killer when you’re already struggling demographically. I had a guy who owned a business in Cleveland who said to me one time, I learned the hard way never to recruit anyone from out of town to work for my company unless that person or their spouse is from Cleveland, because otherwise they will never stay. When that’s where you are as a place, that is just rough. I think that is one of the killers for these river cities.

Susan Pendergrass (35:16): Yeah, what’s the fix for that? I don’t know what the fix is.

Aaron Renn (35:38): I think the optimistic case for St. Louis, and I actually tweeted this a year or two ago, is that St. Louis City educational attainment is really high now. In a sense, it’s a small, highly educated city that is probably going to continue growing more educated. So I think the Pittsburgh option looks viable in St. Louis.

Susan Pendergrass (36:00): And certainly great medical care. I know that the average age is getting older in St. Louis. I think within 10 years, one in four people will be over the age of 65. But we also have an Alzheimer’s research center and access to medical care, which as you get older gets more important. I do think there’s an opportunity to lean in to the medical services that are available, as the country as a whole gets older. I think St. Louis looks more attractive for that reason. So I think you’re right that with universities and medical centers, there’s an opportunity.

Aaron Renn (36:35): Yeah, I think if America’s demographics keep on this trend, a lot of other places are going to get to where St. Louis is. And the thing to be careful of is that when you’re in a declining market, that often prompts centralization of activity and population. What happened with Japan is that once Japan’s population started falling, everybody started moving to Tokyo. It’s Tokyo and a handful of other cities where everything is concentrated, and they literally have ghost towns there.

I don’t think it’s any accident that Indianapolis’ growth really took off once the Rust Belt era and deindustrialization hit the state. Indianapolis and Columbus, Ohio have grown in large measure through drawing people out of the rest of the state as those states declined. Huge numbers of people move from Cleveland to Columbus every year.

Missouri is a little different than that. One of your challenges is that St. Louis does not draw people from rural Missouri. When I looked at the data, it’s not like there’s a massive flow into St. Louis from the rest of the state. So you don’t have that siphon bringing people in.

Susan Pendergrass (37:55): There are public safety issues around that, but yes.

Aaron Renn (38:00): And the issue we have is that we’ve now eaten our seed corn. There’s not going to be next generations of children in the towns I grew up in in rural Indiana to move to Indianapolis anymore. The cohort sizes are going to be smaller. So that pump, even Tokyo is declining now in population. That siphon is draining the water table. We can only rely on that so long.

But I think this is the risk for St. Louis in that kind of environment. People with opportunity might avoid or flee St. Louis and go to Austin, Texas or Nashville. They go to the handful of places in America that are really still growing. That’s a threat even for Indianapolis and Columbus, Ohio. In a declining market, it’s very hard to get people to want to come to a shrinking city because the opportunity space is shrinking. St. Louis’s opportunity space has been shrinking because you’re losing corporate headquarters and your working age population is declining. That dynamic is really going to be a challenge. But within that, the city of St. Louis might end up doing okay. Again, being small actually helps it here.

Susan Pendergrass (39:25): Any closing thoughts on that, David?

David Stokes (39:27): Just that the part of Missouri that is definitely still growing, and that probably is attracting those young rural people who are moving to a city, is going into southwest Missouri, the Springfield-Branson area. That’s absolutely the growing part of the state. And even Kansas City is growing certainly more than St. Louis is.

Aaron Renn (39:48): Yeah, it’s not a culturally cohesive state. Springfield and that area are definitely growing, and growing despite the fact that they have nowhere close to the urban assets of a St. Louis. It’s interesting to watch, and we’ll just have to see what happens.

Susan Pendergrass (40:05): It is. I think about it a lot. I’ve been talking about this in terms of school enrollment for years and years, where you could see the biggest kindergarten cohort was after the Great Recession of 2009. You know that that’s the biggest kindergarten cohort for the last 15, 16, 17 years. We do nothing but build schools and hire teachers. We are slow to catch on to these things happening. But I think your perspective is certainly very interesting. On the question of the merger, it’s not worth the cost for whatever benefits there might be. But it still gets talked about, so I appreciate you coming and giving us your thoughts on it. Maybe we’ll have to have you back to talk about it again.

David Stokes (41:02): And Aaron, I want you to come back. I want to find out how we get more roundabouts in Missouri. I love roundabouts. I go to Carmel it seems like once a year for these gigantic youth sports tournaments up at Westfield, just a little bit north of you. My kids’ sports take me there. And I love the roundabouts. You cannot get enough of them.

Aaron Renn (41:09): I’d love to talk about that. My favorite topic.

Aaron Renn (41:24): Yeah, it’s great. We hardly ever have to stop. There are barely any stoplights or stop signs left in our city. It’s amazing. We’re one of the few growing places in America where traffic is better today than it was 20 years ago.

Susan Pendergrass (41:32): They’re awesome.

David Stokes (41:45): People don’t realize how good that is for air quality and everything. You just keep moving along, not stop and start. We need 100 times more roundabouts in this area.

Susan Pendergrass (41:55): Are you pretending that people stop at stop signs in St. Louis? Because let’s be honest, people don’t stop at stop signs.

David Stokes (42:00): Well, they roll them, but it’s still wrong when they roll them. Maybe all the people blowing red lights on Kings Highway at 50 miles an hour are just being environmentally conscious. I need to give them more of the benefit of the doubt, I guess.

Susan Pendergrass (42:12): That’s exactly right. All right, thanks so much. I really appreciate it.

Aaron Renn (42:19): Thank you.

Produced by Show-Me Opportunity

The post The St. Louis City-County Merger with Aaron Renn and David Stokes appeared first on Show-Me Institute.

They say that the best time to plant a tree was 20 years ago, and the second-best time is now. That about sums up my opinion on the City of St. Louis’s one-percent earnings tax, the continuation of which is before St. Louis voters on the April ballot. The best time to start phasing out the earnings tax really was 20 years ago, and the second-best time is still now.

The 20 years in the saying is particularly appropriate in this case, as the Show-Me Institute released its first study on the earnings tax almost exactly 20 years ago. Professor Joseph Haslag, then at the University of Missouri, documented how the earnings tax reduces overall income and employment in the city by encouraging businesses and individuals to locate outside of the city. Additional studies conducted by Show-Me Institute analysts and others have found similar results regarding the harms of local income taxes generally.

Haslag didn’t just demonstrate the harm of the earnings tax; he also recommended a strategy to replace it in order to maintain necessary city services. Haslag suggested changing state laws to allow St. Louis to institute a land tax, which is simply a property tax on the value of the land only. Pittsburgh is one city that had beneficial results from implementing land taxation in the 1980s. Alas, while land taxes are popular with economists and fiscally beneficial, they are politically unpopular to say the least. Needless to say, land taxes have never been adopted in St. Louis (nor has state law been amended to allow them). But the harms of the earnings tax have continued to help drive St. Louis’s population and economy lower, and those fiscal harms were exacerbated during the pandemic.

An easier change (legally, if not politically) than a land tax would have been to start phasing out the earnings tax 20 years ago while increasing a combination of property and sales taxes over time to replace the lost revenues (while cutting spending where possible as well). Poor decision-making over the past two decades has made that already-difficult change almost impossible. Damaging special sales taxes such as community improvement district (CID) taxes are now ubiquitous throughout shopping areas in the city. Primarily used as a smokescreen for harmful corporate welfare, CIDs and other special sales taxes have driven sales tax rates sky high. While the sales taxes have gone up, commercial property values have plummeted. According to the St. Louis Business-Journal, downtown St. Louis office buildings have lost 19 percent of their assessed value since 2019, and even more if you go back further. The largest office building downtown, the AT&T building at 909 Chestnut, paid $5.5 million in property taxes in 2009. It paid just $200,000 in 2024. While that is the most extreme example, similar examples can be found throughout downtown.

The economic situation in the city was already bad, and the tornado that hit in May made it even worse. It was the type of disaster that could make people consider radical changes, and perhaps the land tax is the type of radical change the city needs. (For the record, the Show-Me Institute’s offices were destroyed in the tornado, and while we’re a nonprofit, our office building is subject to property taxes.)

As large parts of the Central West End and the Northside are still recovering from the tornado, St. Louis city government has commendably allowed homeowners with damaged homes to reduce their tax payments, but the long-term impacts on city tax revenues may be significant. The population of New Orleans still hasn’t recovered from Hurricane Katrina and, while the damage to St. Louis was not that severe, the risk is the same.

I suggest it is time to change state law to allow for a land tax, including on land owned by larger “nonprofits” like Barnes Hospital. The land tax could be imposed on the value of the land throughout St. Louis at a level that would gradually increase to make up for revenue lost as the earnings tax is phased out over a period of 10 years (or more). (Other changes would be necessary, including ending the tax subsidies the city gives out.) What makes land taxation so beneficial is that as homeowners and businesses rebuild their damaged property, they aren’t hit with higher taxes for the home or building. The tax is set to the land, which can’t be altered, rather than the building. So, return to the city, rebuild your home or business, make it even larger—do whatever you want—and you won’t be punished with higher taxes.

Pittsburgh in the 1970s was experiencing economic difficulties just as St. Louis is now. Land taxation helped spur investment in Pittsburgh, and it could have the same effect on St. Louis. The city has been hemorrhaging population, jobs, and wealth for decades. Honestly, at this point in its history, what does St. Louis have to lose?

The post It’s Time to Phase Out the Earnings Tax. Honestly, Nothing Else Has Worked . . . appeared first on Show-Me Institute.

Long-time readers of this site will not be surprised. I argued in 2018 that Kansas City’s “creative‑class” investments—downtown luxury apartments, entertainment districts, and infrastructure built for young urbanites—did not amount to a sustainable strategy for long‑term growth and retention. I observed that many millennials preferred the suburbs: affordable housing, space, good schools, and stable services.

Booth’s column helps explain why. The urban‑core housing boom may have been good at attracting people in their 20s and early 30s. But when that cohort started families, cities lacked housing and civic infrastructure suitable for children and long‑term residence. As a result, the creative‑class gamble has begun to backfire. Cities may keep a veneer of vibrancy and high rents, but underneath many are losing the people who once anchored stable communities—workers, taxpayers, parents, consumers.

That matters for Missouri cities such as Kansas City (and for other mid-size urban areas nationwide). A city’s strength does not come only from bars, nightlife, or trendy apartments. It comes from stable families, long‑term homeownership or stable renting, good schools, reliable infrastructure, and civic engagement grounded in predictable community roots. The creative‑class theory always rested on uncertain assumptions about life‑cycle stability.

As I pointed out in 2018, and as current national trends affirm, there is no magic bullet to make downtown living the default for most families. A better path remains broad and neutral: keep taxes reasonable, maintain infrastructure, support quality schools, and enable stable, moderately priced housing—suburban or urban—that families actually want.

Creative‑class strategies may look shiny on paper and flashy in media. But when they fail to adapt to one of life’s key transitions—from young adult to parent—their long‑term contribution to stable growth may have been nothing more than a short‑lived boom.

The post New Observations Confirm Skepticism of Creative Class Urbanism appeared first on Show-Me Institute.

That result should raise alarms—but not eyebrows. Set-aside requirements like this often function less as solutions and more as stumbling blocks. Rather than spur construction, Kansas City’s policy has become something to work around. Developers have leaned on other incentive-granting agencies or opted for minimal in-lieu payments instead. Meanwhile, regulation continues to inflate costs and suppress supply. As I’ve written before, regulation can be a root cause of unaffordability.

The KCBJ analysis looked at 114 development incentive applications since 2021. None resulted in affordable units under the set-aside rule. Many projects qualified for exemptions—using low-income housing tax credits (LIHTCs), being historic rehabs, or receiving incentives from agencies outside the city’s economic development corporation (EDCKC).

Examples:

• Of six qualifying EDCKC projects since August 2022, just one plans to meet the 20% set-aside (16 of 78 units at 60% MFI).
• Larger developments often went through the Port Authority of Kansas City (Port KC) or other entities, thereby sidestepping the requirement entirely.

The result is a policy with good intentions but poor results—and plenty of incentive for developers to seek workarounds.

Two themes stand out.

First: Incentives, not mandates, are doing the real work. Port KC has become the go-to agency for developers. Since mid-2023, it’s reviewed 17 housing proposals totaling over 5,000 units and $2.6 billion in investment. Because Port KC isn’t bound by the set-aside ordinance, many developers simply pay a lower in-lieu fee and move forward. A city spokesperson even admitted that some of these workarounds were done “at the request or with the blessing of city leaders.”

Second: Regulation continues to push costs up. Developers cited permitting delays, costly energy codes, and other burdens as key barriers. As one put it, requiring reduced rent on top of high costs is a “double negative.”

This tracks with previous findings: When regulation increases costs, it restricts the market’s ability to deliver lower-priced housing. If the goal is more affordability, then cities must lower the baseline costs—not just impose mandates.

The post Shocker! Kansas City’s Affordable Housing Set-Asides Nets Zero Housing Units appeared first on Show-Me Institute.

The post Why America Can’t Build Enough Housing with Edward L. Glaeser appeared first on Show-Me Institute.

In 2020, Kansas City became the first major U.S. city to eliminate bus fares entirely. At the time, city leaders leaned on a slapdash four-page “mini report” that promised an $11 million local GDP boost. To put it mildly, it was wrong.

Since then, ridership dropped, assaults on drivers went up, and the Kansas City Area Transportation Authority (KCATA) is now staring down a $10 million budget gap. The COVID money that kept KCATA afloat runs out next year. KCATA’s new leadership is asking to study whether fares should return. That’s where we are now: back at the beginning, but with less credibility and fewer resources.

The New York proposal has the same weaknesses. The author estimates a 23% increase in ridership, a 12% increase in speed and billions in economic gains—all for the low, low cost of $600 million in forgone fare revenue. But his math is speculative, his benefits are theoretical, and like in Kansas City, the costs are very real.

The problem isn’t just financial. Prices matter. Fares aren’t only about revenue—they’re also a tool to manage demand, discourage misuse, and incentivize better service. Eliminate them and you get overuse, fewer behavioral constraints, and more wear on already stretched systems. You also change the customer’s relationship with the service. When it’s free, expectations fall—for riders and for the agency.

Proponents talk about fairness. But there’s nothing fair about asking everyone to pay for a system that primarily serves a few. The better solution is targeted subsidies for those who need the help, which would preserve incentives, protect the system, and respect taxpayers.

Kansas City tried fare-free transit. It failed. New York doesn’t have to make the same mistake.

The post Free Buses, Costly Lessons appeared first on Show-Me Institute.

A 2003 Clemson University study by economists Robert Baade and Victor Matheson puts this into stark perspective. They looked at the 1994 World Cup, hosted in the United States, and found something shocking: Instead of the $4 billion economic boost that event advocates promised, host cities actually lost between $5.5 billion and $9.3 billion. Let that sink in. Instead of making money, these cities were left holding the bag for billions in losses.

The report lays out the problem:

1. Stadium Spending is a Black Hole – FIFA demands that host nations build or upgrade multiple stadiums, often at obscene costs. South Korea and Japan spent $4 billion for the 2002 World Cup. Many of those stadiums are underused today, costing millions just to maintain.
2. The Tourists Don’t Come – One of the biggest myths is that these events bring in a wave of free-spending tourists. In reality, regular tourists stay away to avoid inflated prices and congestion. The net impact is often negative.
3. Jobs? What Jobs? – Yes, major events create work—but mostly low-paying, temporary jobs that vanish once the event is over. Meanwhile, businesses that don’t cater to event-goers—restaurants, retail, theaters—often see a drop in revenue.
4. FIFA (or the IOC, or the NFL) Walks Away with the Money – The real winner? The governing body that runs the event. FIFA collects billions in ticket sales and sponsorships, while host cities are stuck with the bill for security, infrastructure, and maintenance.

The World Cup is far from the only culprit. Cities and nations have been burned time and again. The 2016 Rio Olympics left Brazil with $13 billion in debt, abandoned venues, and zero lasting benefits. The 2014 Sochi Winter Olympics cost $50 billion, much of it wasted on corruption and vanity projects. The Super Bowl, despite constant hype, has been shown in multiple studies to provide a fraction of its promised economic impact.

Politicians and event boosters always paint the same rosy picture. They promise jobs, economic growth, and global prestige. But the reality, as study after study has shown, is that these mega-events rarely—if ever—pay off.

If a city really wants to strengthen its economy, it should focus on investing in infrastructure, public services, and policies that support small businesses and long-term growth. Chasing after one-time spectacles that benefit global organizations far more than local residents is a mistake.

So the next time you hear about a city bending over backward to host the World Cup, the Olympics, or any other mega event, ask the hard question: Who actually benefits? If history is any guide, it’s probably not the taxpayers.

The post Mega Events Fail to Deliver: World Cup Edition appeared first on Show-Me Institute.

The Big Easy has long struggled with economic hardship. Between hurricanes, crime, population loss, and a fragile tourism industry, the city has spent decades trying to regain its footing. Now, officials are using a familiar formula: host a major event, clean up the streets in high-visibility areas, woo corporate leaders, and hope business investment follows.

We’ve seen this before, and the results are almost always the same. These big events provide a temporary tourism boost, but they don’t drive long-term economic growth. The promised “boom” turns out to be a weekend blip, leaving taxpayers on the hook for security, infrastructure, and publicly funded subsidies that rarely pay off.

Take the 2016 Rio Olympics: billions spent, venues abandoned. Or Kansas City’s NFL draft, which filled bars for a weekend but left downtown empty as soon as the crowds dispersed. And New Orleans has been down this road before. The city has hosted 11 Super Bowls, yet its economic struggles persist. If the game were truly a catalyst for prosperity, wouldn’t we have seen the results by now?

New Orleans’ real challenges have nothing to do with hosting big events. The city struggles with high crime, crumbling infrastructure, and a reputation for red tape that drives businesses away.

Louisiana officials tout a $10 billion Meta AI center as a sign of a turnaround. But real economic success comes from stability, not one-off incentives and government handouts. Businesses thrive where there’s predictability—not just tax breaks to lure companies in temporarily.

Visitors saw an enhanced police presence, vehicle restrictions, and heightened security in the French Quarter. But that won’t change the fact that the city has one of the highest crime rates in the country—a problem that can’t be solved with temporary measures.

Some business leaders remain optimistic about the benefits of incentives, arguing that Louisiana can’t afford to keep losing talent and investment to Texas and Florida. But unless the city addresses its deeper systemic problems—crime, education, infrastructure and a business climate that discourages investment—it will continue to rely on big events as temporary Band-Aids.

New Orleans doesn’t need another Super Bowl. It needs leaders willing to fix real problems—not just hang banners and hope for the best.

The post The Super Bowl Is a Bad Bet for New Orleans appeared first on Show-Me Institute.

Several years ago, Kansas City decided to make its public transit free for all. After all, the purpose of local government is to just give things away for free, isn’t it? For several years, the pandemic-related free federal money train has allowed this “free transit” plan to continue, but that train is coming to a stop. Now, Kansas City leadership has some decisions to make. The transit authority has considered ending the “free” part of the ride before, and now it is time to do away with it once and for all.

Nobody is suggesting funding the entire transit system with fares. Subsidizing transit is an accepted part of urban economics, but that doesn’t mean you should make it free. “Subsidized” transit means you help low-income workers, encourage alternate transportation to large events, and help offset traffic problems. “Free” means you get homeless people sleeping on the bus and cuts to bus lines because you don’t have enough funding. “Free” results in fewer people using transit because the bad aspects of “free” are what matter most to people. Here is what happened in Tucson, Arizona when it moved to “free” transit several years ago:

“We have become a mobile refuge from the elements, frequented by drug users, the mentally ill and violent offenders that have made Sun Tran unsafe to ride,” the local Teamsters union warned in a letter to the city.

As one very sensible Kansas City bus rider put it at a transit meeting on November 13: “she doesn’t mind paying a fare as long as it’s affordable and bus lines don’t get cut.”

Fares are an important part of funding for a decent transit system. Perhaps more importantly, they also help keep the elements out of the system that make other people not want to use it. The Kansas City Area Transportation Authority should reinstate fares immediately.

The post It’s Time to End Free Transit in Kansas City appeared first on Show-Me Institute.

In this episode, Susan Pendergrass speaks with Bryan Caplan, Professor of Economics at George Mason University, about his latest book Build, Baby, Build: The Science and Ethics of Housing Regulation. They discuss reducing housing regulations to address the housing shortage, the broader impacts of housing policy on urban development and affordability, how to talk about public policy, and more.

Order the book here.

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Produced by Show-Me Opportunity

The post Build More Housing with Bryan Caplan appeared first on Show-Me Institute.

Using household employment data, Wall, a professor of economics at Lindenwood University, tests whether employment growth in the two major cities appears to cause employment growth throughout the rest of the state.

Interestingly, the data show a statistically significant relationship between growth in Saint Louis and outstate Missouri. For example, a one percentage point gain in employment in Saint Louis would lead to a half percentage point gain in outstate Missouri the following year and then smaller gains in the years after that. Wall did not find as strong of a relationship in Kansas City, though the results were not far from being statistically significant.

Why these findings occur is a matter that can be explored further, but the point is clear. Saint Louis and, to a lesser extent, Kansas City are economic drivers for the state. Missourians have a vested interest in seeing sound policies put in place to help these cities flourish.

Click here to read the full report.

The post Is Growth in Outstate Missouri Tied to Growth in the St. Louis and Kansas City Areas? appeared first on Show-Me Institute.

Daniel DiSalvo is a senior fellow at the Manhattan Institute and a professor of political science in the Colin Powell School at the City College of New York–CUNY.

Read Big City Pensions and the Urban Doom Loop here.

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Produced By Show-Me Opportunity

The post The Urban Doom Loop with Daniel DiSalvo appeared first on Show-Me Institute.

The growth of the St. Louis MSA, which contains 7 counties in Missouri and 8 counties in Illinois, has been stagnant for years, driven in no small part by poor population growth in St. Louis City. While some lawmakers were pleasantly surprised that our 2020 numbers weren’t worse, I’m disappointed at what has become of a once booming and prosperous Midwestern region.

What is it that keeps St. Louis out of the race?

Maybe it’s the sales tax rates that can be over 11 percent. Or the earnings tax in St. Louis City. Perhaps it’s the poor public schools and lack of school choice. Or the crime. It’s likely a mix of all these things and more; anything that makes St. Louis a less attractive place to live, work, or start a business has negative effects on population growth. You would think that years of stagnant growth would inspire lawmakers to take steps in the right direction, but we’ve seen little change. Maybe this fall from the top 20 will finally light a fire under lawmakers.

The post We’re Not in Last Place—We’re Not Even in the Race appeared first on Show-Me Institute.

The main veto was for a new 300-unit apartment complex right by St. Louis University. The new apartments will be marketed toward students, of which there are many nearby because it is right next to a major university. The developers were asking for a 10-year, 95 percent tax abatement. A 95 percent tax abatement on an $80 million project is a lot of money for the developers, and that money will inevitably be offset by higher taxes on other residents and businesses. The idea that a development such as this at this location needs a huge tax subsidy is absurd. I commend Mayor Jones for these two vetoes and hope it sends a signal for the rest of her administration.

Don’t get me wrong. I think taxes in the City of St. Louis are too high. But if Mayor Jones and the new generation of city leaders can substantially reduce tax subsidies for the lucky few and expand the tax base by doing so, then we might be able to get a tax cut for everyone. If the taxes on commercial development are too high, then lower the commercial property tax surcharge for all businesses. Giving away generous tax abatements to some (who, shockingly, tend to be politically connected) is not the solution.

This is a positive step for Mayor Jones’ term.

The post The New Mayor Vetoes Two Tax Subsidies appeared first on Show-Me Institute.

As voters in the City of St. Louis prepare to vote on whether to retain the earnings tax in April, the city is in a tight spot. The city and school district need more revenue, which comes about through more taxes. But because taxes are high and a detriment to growth (especially the one-percent earnings tax), businesses are not locating in the city and the economy is not growing. So, to attract new businesses and convince current ones to stay, the city selectively gives out generous tax incentives. These may attract some businesses and residents, but because of the incentives, they don’t provide the tax revenue that the city was after in the first place.

Are you with us so far? Count us among those who agree that poor public schools and a high crime rate are harming the City of St. Louis more than taxes. But if the economy were growing, City Hall and the board of education would have more money to hire more police officers and teachers. It’s as if St. Louis is in its own Catch-22: a problem or situation where every solution is impeded by other conflicts. Call it our Catch 1%.

St. Louis’s “solution” to the problem of losing businesses and residents over the past couple of decades has been to offer generous tax benefits to every politically influential Milo Minderbinder who asks for them. Last year alone, there were 70 million uncollected tax dollars because of various subsidies. That approach has been a failure. It has led to substantial tax subsidies for developers who do not need them, such as the St. Louis Cardinals and their Ballpark Village development. They succeed while paying significantly reduced taxes. Their subsidies have helped them drive out smaller competitors (e.g., Mike Shannon’s) who paid taxes, but now no longer do because, well, they are closed. The use of tax subsidies actually leads to a reduction in tax revenues. That’s Catch 1%.

The same thing goes for the idea that tax subsidies are intended for blighted sections of the city. Clearly, there are parts of St. Louis that are struggling, and these areas might well benefit from the use of tax subsidies. But for the most part they aren’t getting them. Why not? From an economic development official’s point of view, the incentives are misaligned. If you have tax dollars to invest, why not direct them into a thriving area surrounded by other successful businesses? You’ll look that much smarter when the development succeeds—even if it would have been just as successful without the government handout. The projects that truly need the incentives aren’t the sure things . . . and that’s the whole point of the incentives—to bridge the gap between failure and success for a project in an economically depressed area. But in St. Louis, the less a project needs a tax subsidy, the more likely it is to get one. That’s Catch 1%.

So here we are, giving out tax incentives to people who don’t need them in places that don’t need them and still funding city government with an earnings tax that limits economic growth. Could the City of St. Louis operate without the earnings tax if the residents and voters wanted to do so? Of course. Most large cities in the United States do not have local income taxes. One problem (of several) with the tax subsidies and abatements the city gives away is that they make it impossible to rely less on the earnings tax and more on local property taxes, which is how many comparable cities fund their local services. Nobody says it will be easy to phase out the tax, which brings in an estimated $159 million per year. But if voters decided to end it, during the 10-year phase-out period an overall effort toward ending corporate welfare, raising alternative (and less economically harmful) taxes, budget cuts, continued pension reforms, service sharing with other governments (as in re-entering St. Louis County), and privatization efforts (e.g., the water utility) would allow St. Louis to continue to fund necessary services. It bears repeating that most comparable cities, including Chicago, Memphis, Omaha, Tulsa, and Nashville, fund their local services without local income taxes.

As St. Louis City voters prepare to decide the fate of the one-percent earnings tax in April, they do not have a simple choice. But the way the city has been operating for years is not working. The population is still declining, crime rates are high again, and the schools are failing too many students. If the city continues to go along as it has been for years, managed decline is about all we can hope for. Perhaps it is time to break out of the Catch 1% the city is in and do something radical.

The post Earnings Taxes and St. Louis’s Catch 1%. appeared first on Show-Me Institute.

Tax-increment financing (TIF) is Missouri’s bad idea that refuses to die. Now it is Boonville’s turn to face off against the TIF zombie. Developers have proposed a new, 400-home subdivision in Boonville. Great news, right? Well, there is a catch. The developers want a massive TIF subsidy to fund the project. Residents and taxpayers in Boonville should reject this horror show of a proposal.

TIF is a type of tax subsidy that allows developers to keep the taxes they would otherwise pay to fund some of a project’s costs. With TIF, if a property generated $100 in property taxes before it was developed but generates $200 after improvements are made, the developer gets to keep the $100 difference.

Of course, the actual numbers in this proposal for Boonville will dwarf our little example. As best we can tell, the current property pays $1,176 per year in taxes based on its current appraised value (as farmland) of $116,300. The new subdivision, based on stated goals of 400 homes at an average of $200,000 each, would, if not for the TIF, pay $1,026,912 in property taxes, based on an assessment of $15.2 million at the current area tax rate. With TIF, that would result in an annual subsidy—once the project is fully built—of approximately $1,025,736. For the life of the TIF (23 years is standard), that would be an estimated $23,591,930 maximum subsidy. That is outrageous. Even if the city council were to consider a smaller subsidy, any tax incentive would be a needless giveaway to the developer.

While the people of Boonville may want more housing opportunities for the area, using TIF for residential projects would benefit only the developer. If the city’s population grows as the TIF proposal assumes, and people currently living in Columbia or elsewhere move in to fill the 400 new homes, it is certain that at least some of them will have school-aged children. Boonville will have hundreds of new children in the school district without the expanded tax base to pay for them. Of course, a likely scenario is that some of the home purchasers will come from other parts of Boonville. Local families will move from houses where their property taxes fund the schools to new homes where they do not. How do you think the Boonville R-1 school district is going to pay to educate the children in this subdivision with 400 homes not paying taxes to the schools? There is only one answer: they are going to raise taxes on everyone else.

TIF has had numerous negative economic effects in Missouri. It has increased government involvement in the economy, subsidized politically connected developers, sparked abuse of eminent domain, shrunk the tax base, and made corporate welfare a permanent fixture of development. Furthermore, TIF has failed at its main purpose: economic growth. An Iowa study of TIF usage concluded that, “On net (…) there is no evidence of economy-wide benefits, fiscal benefits, or population gains.” Other studies across the country have found similar results.

The dirty little secret that economic development officials in Boonville and around the state don’t want you to know is that subsidies like TIFs and Enterprise Zones do not work. They do not succeed in growing the local economy. St. Louis and Kansas City have tried using generous taxpayer subsidies to revive their local economies for decades. It has not worked. I can already hear readers in Boonville saying, “But we’re not Saint Louis or Kansas City.” That’s absolutely right—you are not. And there is no reason for you to imitate their mistakes. It is one thing for Saint Louis or Kansas City to try these projects and have them fail. It would be even worse for a city like Boonville to follow that example with the knowledge that the entire process has consistently failed. At least the trailblazer who takes the wrong path has an excuse.

The post Will Boonville Repeat the Mistakes of St. Louis and Kansas City? appeared first on Show-Me Institute.

According to an analysis of Census data conducted by Aaron Renn for the Show-Me Institute, the Missouri portion of the region is falling behind in every measure: per capita income, college degree attainment, population growth, job growth, and well as personal income and GDP growth. Renn points out:

The Missouri portion of the metro area by itself would perform worse and be ranked lower on all the statistics above as compared to the Kansas City metro area as a whole. This is due to the superior performance of the Kansas portion of the region compared to the Missouri portion.

Show-Me Institute researchers have written for years about the many things Kansas City can do to make itself a more attractive place to live, work, and shop. Too often rosy regional stories have lulled local leaders into a false sense of success. Kansas City, Missouri isn’t succeeding. This report should spur leaders and activists to look seriously at our own performance and work to improve it.

The post Kansas City is Falling Behind the Region appeared first on Show-Me Institute.

On the most recent Show-Me Institute podcast, Dr. Susan Pendergrass is joined by Aaron Renn and Patrick Tuohey. They discuss Aaron’s recent paper published by the Institute. The report analyzes the economic conditions of Kansas City, Kansas versus Kansas City, Missouri.

Aaron Renn is an independent researcher and was formerly a senior fellow at the Manhattan Institute.

Patrick Tuohey is currently a fellow at the Show-Me Institute, where he formerly served as director of municipal policy.

Listen to the podcast here: https://soundcloud.com/show-me-institute/smi-podcast-kcmo-vs-kck-aaron-renn-and-patrick-tuohey

Read the full report here: https://showmeinstitute.org/publication/employment-jobs/kansas-city-missouri-vs-kansas

The post KCMO Vs KCK: Aaron Renn Joins the Show-Me Institute Podcast appeared first on Show-Me Institute.

According to the new estimates, the city of St. Louis is getting close to dropping below 300,000 residents. The city’s 2019 population estimate is 300,576, down by over 2,800 from 2018. This isn’t a new occurrence, but rather a continuing trend—the city’s population has fallen by nearly 6% since 2010, shown in the graph below.  St. Louis County also lost population, dropping by 1,014 from 2018 to 2019.

Other areas of Missouri are not experiencing this same trend. Right outside of the St. Louis area, St. Charles passed the 400,000 mark, adding 3,242 people in 2019. Many other areas also experienced growth, including Clay, Greene, and Jackson counties.

Though we can’t know for certain why people are moving out of St. Louis, Show-Me Institute researchers have written on population trends before, and much of what has been said still holds true. Policies that promote success and freedom for people and businesses can attract residents while those that place onerous burdens can deter.

Things like an earnings tax on residents and workers, high sales taxes, and stringent business regulations can create an unwelcoming environment. Additionally, poor school performance, high crime rates, and failed public projects can make St. Louis an unattractive option.  If we want to reverse the trend, policymakers will need to address these issues. The sooner, the better.

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Mind you, a new baseball stadium funded by taxpayers might be great for the owners of the Royals. But what evidence is there for any benefit to taxpayers?

The St. Louis Federal Reserve pointed out that stadiums fail to drive economic development in a 2017 report, concluding:

Building sports stadiums has an impact on local economies. For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.

A 2019 piece in The Berkeley Economic Review, a publication of the University of California–Berkeley economic program, also failed to find any economic benefit from sports stadiums:

Over the last thirty years, building sports stadiums has served as a profitable undertaking for large sports teams, at the expense of the general public. While there are some short-term benefits, the inescapable truth is that the economic impact of these projects on their communities is minimal, while they can be an obstacle to real development in local neighborhoods.

The owners of the Royals are welcome to build a stadium wherever they like. But if they want to take tax dollars away from schools, public safety, and infrastructure to help build the stadium, they should share any evidence they have that such a plan presents a good return on investment for taxpayers—not just themselves.

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