May 28, 2015

You Cannot Be Serious!

You gotta love Los Angeles, but when I read stories about what officials there might be planning with their minimum wage increase, my blood really starts boiling. Below is the key portion of the story:

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces.

L.A.’s unions want to be able to offer lower wages for potential employers yet force non-union workers to be paid the higher “minimum wage.” That means if employers want to avoid L.A.’s planned wage hike, they would be forced to do business with organized labor.

minimumwageFor unions, the “exemption” seems to have another selling point—to get jobs with these cost-conscious employers, non-union workers would be forced to join the union.

Naturally, many L.A. labor leaders love the idea.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” [Rusty Hicks, a labor leader in Los Angeles,] said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

In fact, minimum wages go directly against this concept. With minimum wages, the government gets to decide whether mutually beneficial agreements between businesses and employees are in fact good enough. And in the case of the exemption proposal, the labor union essentially is inserting itself between employees and employers, undermining both parties’ “freedom . . . to negotiate that agreement.”

Employees don’t necessarily want or need labor unions acting as a middleman and negotiating on their behalf. Usually, individual employees are their own negotiators.

Raising the minimum wage brings with it some negative consequences, like lost jobs and damaged earnings potential. But if jurisdictions do increase the minimum wage, everybody should be forced to abide by them, and that includes labor unions.

The Streetcar’s Economic Development Shell Game

Despite the fact that all serious economic research on streetcars indicates that they do not drive economic development, Kansas City streetcar supporters keep providing misleading or contradictory numbers. They’re at it again.

kcstarmapJust after we published a post lampooning claims about economic development downtown, the Kansas City Star upped the ante by publishing a list of developments along the streetcar line.

The Kansas City Star continues to update  an interactive report that displays about 79 downtown projects totaling more than $1.7 billion that either have been announced, are in progress, or have been completed since the start of 2012, with the exception of some major civic projects.

Meanwhile, Sandy Smith over at NextCity provides us with more made-up numbers on the impact of streetcar development, quoting Downtown Council CEO Bill Dietrich:

“Since we began construction on the line, $900 million of new investment is coming into town,” he says. “We’ve been surveying the people creating these new developments and asking them how much the streetcar was a factor in their thinking. We found that about $250 million of that figure represents developers who said that either they would not be here without the streetcar or that the streetcar was important in influencing their decision to invest.” (According to the city, the latest numbers now total $1 billion in new investment, with $381 million owed to the streetcar.)

So there you have it. Kansas City streetcar supporters keep coming up with conflicting numbers from $250 million to $1.7 billion and everywhere in between. The serious research still remains: Streetcars do not drive development, unlike the myriad subsidies such as those given to Centric and 1914 Main.

Ridesharing: Game Changing for Carpooling and Transit?

As we’ve discussed before, carpooling is the second most popular way of getting to work in Missouri (behind driving alone). However, the use of carpooling has been in steady decline over the last couple decades. Today, 9 percent of workers use carpooling to get to work; in 1980 that number was almost 20 percent.

Transportation experts speculate that slow changes in the way people live and work have driven the decline. More Missourians once lived and worked in centralized geographic areas, reflecting the needs of a manufacturing-based economy and the means of the working class. The dispersal of jobs, residences, and increased ability to afford personal vehicles has made carpooling less attractive. While the decline in carpooling in Missouri may be primarily due to structural changes in the U.S. economy, its renaissance may come in the form of app-based technology created by ridesharing companies like Uber and Lyft.

Services like UberPool and Lyft Line, now offered in test markets around the country, promise to create instant app-based carpooling. Riders request the service (at a steeply discounted price) and may end up sharing their ride with others heading in roughly the same direction. This means that riders do not need to find people to share the ride with or do not need to be going to and from the exact same locations as someone else in a carpool; it can be set up automatically.

uberpool

If this type of technology were to roll out in Missouri cities, it’s possible to imagine tremendous benefits for residents. On-demand carpooling could allow Uber and Lyft to operate like super-efficient jitneys (small private buses with ad-hoc routes) rather than traditional taxis or carpools. Ridesharing companies have been accused of being yuppie-based transportation, but app-based carpooling (with its much lower pricing) has the possibility of greatly increasing mobility for the disadvantaged, especially those who live in areas where reliable mass transit is difficult, if not impossible, to access. In essence, app-based carpooling has the possibility of boosting not only carpooling, but transit (albeit privately operated) usage as well.

UberPool and Lyft Line represent just some opportunities that new business models can provide for Missouri cities. Yet, in Saint Louis and Kansas City, the attitude toward new ridesharing companies has been and continues to be reflexively hostile. If both cities can remove regulatory barriers, residents will be able to benefit from these new services, and ones as yet undeveloped.

What to Do With Vacant School Buildings

Vacant School Buildings-1Public school systems are tasked with a tremendous responsibility. Not only do we expect them to educate our children, but we also expect them to be good stewards of the tax dollars we give them. To do this, a school system must make sure buses are running on time, nutritious meals are prepared for students, teachers deliver effective instruction, and students are supported in safe environments. These, of course, are just some of the obvious responsibilities of a school system. Urban school districts, such as Saint Louis and Kansas City, have a unique problem to deal with—vacant school buildings.

Like most urban school districts, Saint Louis and Kansas City have had declining enrollment for decades. They are also facing stiff competition from charter schools, which enroll 29 and 42 percent of all public school students in each respective city. This has left each district with more than 30 vacant school buildings. Vacant buildings are a problem for the district and the community. The cost of maintenance can be a drain on resources, diverting dollars away from the classroom. The buildings can also become an eyesore for the community, inviting vagrants and illegal activity.

In my latest paper, “Vacant School Buildings: An Examination of Kansas City and Saint Louis,” former Show-Me Institute intern Abigail Fallon and I explore this complex issue. Unlike most areas of education, little research exists on vacant school buildings, and few claim to know how to handle these properties. While there may not be a definitive answer on what should be done, we argue that school districts should be more intentional about divesting these buildings or putting them back to productive use. To that end, we offer some possible solutions, namely, that these buildings should be made available for lease or sold to charter schools.

The bottom line is that school districts must become more diligent in dealing with this problem.

May 27, 2015

Cheap Rent: A Saint Louis Advantage

Recently, I talked to a financial advisor (who did not live in Saint Louis) about whether I should buy property. To get a sense of whether owning or renting was my best way forward, the advisor asked, logically: “How much do you currently pay in rent?” I replied with my current monthly rent, after which there was a pause, and then the advisor responded: “OK that [the rent] is not realistic.”

Not being from Saint Louis, the advisor did not know that almost unrealistically cheap rent (from the rest of the country’s perspective) is readily available in the region. In fact, Saint Louis was just named the most affordable major city in the country for recent grads by Trulia Trends (“investigators of unconventional house hunting trends”).

Their analysis showed that a recent grad in Saint Louis would on average make just under $26,000, allowing them to afford almost 20 percent of units in Saint Louis. How expensive can it get in other cities? In Portland, Oregon, the median wage of recent grads is under $19,000, which would allow them to afford about 0.1 percent of rental units available. Following close behind Portland, in terms of unaffordability, are Riverside, Orange County, and Miami.

Rent

One might assume that the relationship here is one of growth and desirability. Saint Louis, with relatively low growth, is not as attractive as the fast-growing Portland or Miami. But economic growth is not the whole story, because following Saint Louis on the list of affordable metros are some of the fastest-growing metropolitan areas in the nation, including Houston, Dallas, Atlanta, and Phoenix. Most likely, multiple factors, including desirable weather and urban containment policies (of which Portland has been a very prominent example), are important in making a city unaffordable for young people. Put simply, it takes capped supply along with high demand for rent to become unattainable for the average grad.

As things stand, Saint Louis is in the opposite situation from cities like Portland or Boston, in that there is plenty of supply but not a whole lot of demand. That puts Saint Louis in a good position to attract startup businesses and startup graduates from more expensive metropolitan areas. However, if Saint Louis is to gather momentum in attracting businesses, it should keep a positive regulatory attitude toward new building and avoid restricting supply through urban containment.

Convention Hotel Justification Built on Fiction

Kansas City Mayor Sly James has announced an effort, long discussed at City Hall, to subsidize a convention hotel downtown. Part of the justification for this expense is the need to attract more conventions to Kansas City, despite the fact that the convention industry is already crowded and in decline.

In Kansas City’s case, justification for this expense is also built upon a fiction. When the effort to bring the GOP convention to Kansas City fell apart last year, the Kansas City Star reported a local consultant urging coworkers on the convention bid to stay on message:

“Nothing negative,” one public relations consultant wrote. “The reason given for the decision should be a lack of downtown hotels. Period. Please stick to this messaging. . . . Let’s all take care of one another. We’re still a team.”

Reporter Dave Helling revisited this argument recently. In the email exchange, another person responded:

I couldn’t agree more. Thanks for reminding us all to stick together. The only thing I would add is a lack of downtown hotels IN CLOSE PROXIMITY TO THE CONVENTION SITE.

It appears everyone fell in line. In Helling’s story about Kansas City’s elimination from hosting the GOP convention, written as soon as the decision was announced and before he received the internal documents mentioned above, he wrote that there were several reasons being offered:

Kansas City’s relative lack of enough high-quality hotel rooms close to the Sprint Center.

The city’s potential struggle to raise $60 million for the event.

Poor rail transit.

That same story goes on to detail the politics included in the GOP’s decision, including this telling part:

“The competition was tough,” said Brenda Tinnen, chairwoman of the Kansas City Convention and Visitors Association. “There are politics involved in these decisions. . . . I’m not sure that there was any one thing that said, ‘OK, this city is better than that city.’”

Tinnen is likely correct. There always are many reasons a convention does not come to a city. It is rarely the case, as some in Kansas City government want us to believe, that conventions are lost because of any one thing. But that is what we hear from the “team” of consultants, government officials, and public relations professionals.

Taxpayers should be wary. Such expensive decisions should be based on sound policy and economics, not a mere fiction promulgated by some on the convention “team” who write about the need to “take care” of one another—whatever that means.

May 26, 2015

From Standardized Tests to Standardized Character

Grit, not to be confused with the popular Southern breakfast dish, is a personality trait. Described by Webster’s Dictionary as “mental toughness and courage,” grit is a catchall term for personal virtues like perseverance and self-control.

Interestingly, a growing body of research is finding that traits like grit might be more important to children’s success in life than traditional academic knowledge.

The Washington Post recently reported:

[Angela] Duckworth, a former middle school teacher [and University of Pennsylvania researcher], is known for helping to popularize the notion that a student’s success is correlated to that student’s level of self-control and “grittiness,” or ability to keep working toward goals.

Her research has shown that grittier students are more likely to graduate from high school, score higher on SAT and ACT exams and be more physically fit. Grittier students also are less likely to get divorced, and they typically experience fewer career changes.

Dr. Thomas Hoerr, head of New City School in Saint Louis, is the author of Fostering Grit: How Do I Prepare My Students for the Real World? Hoerr’s instructional suggestions echo Duckworth’s findings. “Teachers should embrace teaching the whole child, and should consciously seek to foster the intrapersonal and interpersonal qualities which will make a difference in life—such as grit,” Hoerr said in an email.

Given the fact that grit is important, and it appears that teachers can have an effect on the “grittiness” of students, there is a movement around the country to link measures of students’ grit to the evaluation of schools and teachers.

Even though they both feel that fostering grittiness is important, neither Hoerr nor Duckworth are pushing for tying teacher evaluations to student grittiness.

Why? The biggest issue is measurement. Student self-assessments are commonly used to measure social and emotional factors, requiring students to self-evaluate their level of hopefulness about their future and asking questions like, “Did you laugh or smile a lot yesterday?” Duckworth has noted that grittier students, those who tend to have more self-awareness, are more likely to rate themselves lower. The very thing that makes them gritty drives them to hold themselves to a higher standard. If teacher or school evaluations are based on this measure, they will be inaccurate.

While grit is clearly important, the measures for determining teachers’ impact on it are not ready for prime time. It took decades to be able to link simple math and reading scores, and we’re still working out the bugs on those. It will be some time before new measures are available.

Grit

May 22, 2015

Union President Agrees That Union Elections Lead to Greater Accountability

Bradley Harmon, president of CWA Local 6355—a union representing state government employees—recently testified before a legislative committee against a union election bill. Although he was there to offer his opposition to the bill, he ended up admitting that the elections he opposes actually make unions more accountable to the workers they represent. See the clip, recorded by Progress Missouri, below:

Holding elections for government unions is one of the most exciting labor reforms discussed in Missouri right now. Currently, if you work for the government and you’re represented by a union, you’re pretty much stuck with that union. If you can organize, gather signatures, and then win a “decertification” election, you may force the union out. But barring this, government employees, like teachers, social workers, and firefighters, are pretty much “married for life.”

Holding regular union elections addresses this issue. When employees of public institutions get the option to vote for their representatives every few years, union representatives are forced to be accountable to their members. When workers get a vote, a union executive’s job depends on representing workers well.

You can read more about government union elections in Missouri here, here, here, and here.

Convention Hotel: Power & Light District v. 2.0?

Just in case you thought the city actually had learned its lessons from the Power & Light District debacle, recent reports will disabuse you of that notion. We were initially told that there only would be a $35 million payout from the city, financed by bonds. The rest of the $150 million in city support would be made up of abatements, TIF, and a Commercial Improvement District (CID) tax.

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

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

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

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

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

In addition, the just-released copy of the memorandum states, the city will pay fixed annual management fees to the hotel owner through the 15-year catering agreement. The fees, ranging from $2.4 million to $5.4 million, have a net present value of $47.3 million, according to the [Memorandum of Understanding] MOU.

And if event gross revenues are insufficient to make the scheduled fee payment, the MOU states, “the city shall pay from any legally available city funds.”

In other words, if the project underperforms, taxpayers will make up the deficit. Sound familiar? The MOU also requires that taxpayers subsidize the construction of the hotel by forgoing tax income on the materials; income from the sale of the site to be used; and a cap on the fees required for construction. These costs likely are not counted in the project total, but they are real funds the city would forgo. The Journal continues:

In addition, the developers will receive a sales tax exemption on construction materials, and the city, which owns three-quarters of the proposed hotel site, will donate that land (though it will be due payment if the hotel is ever sold).

The MOU also calls for the city to cap the developer’s fees for zoning, permits, inspections and reviews at $800,000 and to provide no subsidies to any competing hotels for 10 years after the new Hyatt’s opening.

That last part is the kicker. Hyatt realizes that the deal it wantswith its myriad subsidies, tax breaks, and payoutsif directed toward other hotels, would hurt their business. It only follows that the deal they are asking for now will hurt the hotels already downtown.

Who on the City Council is going to stand up for (1) those existing hotels who likely will be hurt by this project and (2) the taxpayers who are being asked to underwrite something that will undercut previous subsidized investments?

May 21, 2015

The Convention Hotel’s Tax Breaks and Gimmes

Reviewing the Memorandum of Understanding (MOU) between the city of Kansas City and the developers who want to build a convention hotel, I see that the developers are asking to be exempted from all sorts of taxes. You can read your own copy of the MOU here:

It appears that, unlike most TIF projects, the developers want 100 percent of incremental economic activity taxes, including sales taxes and the earnings tax. Page 11 of the MOU states,

The City will . . . redirect through its annual budget the City’s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project’s tax revenue sources . . .

In  other words, they want the half that they get from the TIFs directly, and then they want the city to give them the rest through the appropriations process. Here is the tax revenue the developers want to keep:

  • Tax Increment Financing (TIF): as mentioned above, all economic activity taxes collected by and for the county, school district, library district, and the zoo will be redirected back to the project for 23 years.
  • A Super TIF that collects for 30 years the tax not captured in the TIF above, including the convention and visitors tax, and redirects it to the developers.
  • A 100 percent exemption on sales taxes on construction materials and real/personal property taxes.
  • The creation of a 1 percent Community Improvement District (CID) tax that will then be redirected back to the developers.

Here are some extra freebies the developers want:

  • A cash contribution of $35 million.
  • The city’s portion of the land, valued at $13 million.
  • Fees generated by zoning, permits, inspections, etc., capped at $800,000.
  • A management fee to the hotel for catering amounting to $62,363,816 over 15 years. Should the event fees be insufficient to cover this, the city will pay, “from any legally available city funds,” just like we do with the Power & Light District.

Here are some possible problems for the city, based on past issues:

Not mentioned in the MOU is any exemption from the streetcar Transportation Development District (TDD). Apparently, funding the downtown streetcar is more important than funding the city, county, schools, libraries, and zoo. What does that say about the City Council’s view of the rest of Kansas City?

Kansas City’s Convention Hotel Memorandum

The City Council of Kansas City is considering subsidizing half of a $300 million downtown convention hotel adjacent to Bartle Hall. There is a lot to be considered in the deal, the least of which being whether the city should be using taxpayer dollars to build hotels when the city seems unable to provide basic services.

As we examine the deal, we wanted to share the Memorandum of Understanding with our readers. You can find a copy of it here.

Next Gen Event: The Uber Effects of Ridesharing

When it comes to ridesharing companies like Uber and Lyft, too often our policymakers and the media highlight conflict: fights with existing cab companies, battles over regulation and deregulation, disruption between ridesharing companies and drivers, and safety and privacy issues for consumers.

The immense opportunity that ridesharing, as a technology for transportation, provides for cities both in terms of added mobility and new employment, however, gets short shrift in these conversations. In cities that allow ridesharing, getting around town has become significantly easier (and in some cases cheaper). Plus, ridesharing has provided hundreds (if not thousands) of new jobs in these cities, all by making better use of the resource most Americans already own: a personal vehicle.

On June 18, I’ll detail the current impact of ridesharing companies on urban transportation, their future potential, and some of the roadblocks preventing Missourians, and Saint Louisans in particular, from taking advantage. Come for the talk, stay for the BBQ:

Next Gen Invite

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