April 23, 2014

Kansas City Streetcar Economic Development Claims Don’t Add Up . . . Literally

Perhaps in reaction to the Show-Me Institute’s assertion that there are no studies supporting the claim that streetcars alone cause economic development, NextRailKC hurriedly compiled a list claiming to prove the opposite. We say hurriedly because not only does the information provide no detail on how it was collected, but the table attached isn’t even properly tabulated. Simple arithmetic (we used a calculator) indicates that their table yields $791 million in development and 1,984 housing units. (The summary they provide is $879 million and 1,997, respectively. They even mis-tabulate the numbers provided in their legend. What did Kansas City pay for this?)

Light Rail Icon

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

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

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

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

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

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

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

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

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

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

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

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

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

Education Establishment’s ‘All Or Nothing’ Approach May Kill Transfer ‘Fix’

Friedman - ed bureaucracy against competition

The Kansas City Star recently ran a piece with the headline, “Private school provision could doom Missouri student transfer bill…” It certainly is possible that Missouri Senate Bill 493, which “fixes” the problems with Missouri’s student transfer law and creates a small private school choice program, could fail to be passed and signed into law. If this happens, the blame undoubtedly will be heaped upon the tiny school choice aspect of the bill. In truth, the blame should fall directly on the education establishment, whose all or nothing approach is bent on stopping school choice rather than creating an effective public education system for kids.

Saint Louis area school leaders have boldly claimed that choice and competition work everywhere, except in education.

In the private sector, choice does create competition in the marketplace. It works there. But is [sic] does not work in public schools, at least not in Missouri.

That statement was not made based on careful examination of the evidence or grounded in any factual proof. It was pronounced on the basis of protectionism.

Of course, the establishment’s opposition to school choice is not surprising. In 1975, noted economist Milton Friedman wrote, “There is no doubt what the key obstacle is to the introduction of market competition into schooling: the perceived self-interest of the educational bureaucracy.”

As it currently stands, the proposed private school choice program would allow students to transfer to a handful of small non-religious private schools that are located within the boundaries of an unaccredited school district. When I testified before the Missouri House Education Committee about this matter, I pointed out that state representatives from these districts were debating whether there are one or two private schools that meet the criteria for inclusion in the choice program. If anyone is being intractable or uncompromising on this issue, it is not the school choice supporters. It is the education establishment.

Pay And Park And Pay For The Streetcar

We have written about the immense cost of the $500 million streetcar expansion plan in Kansas City. Planners have designated a transportation development district (TDD) to pay for the streetcar, which will implement a 1 percent sales tax in most of downtown Kansas City and property assessments for properties situated close to the streetcar line.

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

Pay,_Park_&_Pay

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

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

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

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

April 22, 2014

Few Students Transfer From Kansas City Public Schools – Thanks To Charter Schools

Kansas-City-Missouri-Downtown_at_Twighlight

It is always risky when you make predictions; but aside from the time I bet against the Harlem Globetrotters, I’m doing pretty well. I previously predicted that 2013 would be a banner year for charter schools, and it was. In a December 2013 post titled, “How Choice Changes The Transfer Dynamic in Kansas City,” I predicted that the inter-district transfer law would have less of an effect in Kansas City than it has in the Normandy and Riverview Gardens School Districts in Saint Louis. I wrote:

The existing prevalence of school choice in Kansas City will most likely make the impact of student transfers minimal in comparison to the experiences at Normandy and Riverview Gardens. If school leaders in Kansas City and the surrounding areas handle the situation well, this expansion of school choice could actually benefit the districts and the students.

To date, only 23 children have applied to transfer from the unaccredited Kansas City Public School District to an accredited district. Does this mean that the students don’t want school choice? Not really.

In many ways, charter schools in Kansas City have acted as a release valve. They have provided families with another option and made the prospect of riding a bus or driving to neighboring districts less appealing.

If we think about it another way, the low transfer number demonstrates the positive impact of charter schools. The nearly 10,000 students in Kansas City charter schools would rather stay in those schools than transfer to the Independence, Raytown, Hickman Mills, or other surrounding school districts. It is amazing what can happen when individuals are free to choose, rather than being compelled to send their children to a school that isn’t meeting their needs.

Missouri Needs The Sunrise Act

Missouri Rep. Eric Burlison (R-Dist. 133) has proposed legislation tightening the requirements for licensing new occupations in Missouri. It is called the Sunrise Act, and I think it would be an important public policy change for our state. (The legislation has been added to another bill at this point.)

This legislation is not radical. It does not ban new licenses. It does not implement extraordinary new requirements for a new license law, such as a greater than 51 percent vote like some tax increases have. It simply requires that attempts to institute a new statewide occupational license actually provide some evidence for the need and benefit of the license. Right now, there is none. The state legislature could wake up tomorrow, agree that every dog walker in the state needs a license to walk dogs for a fee, and pass that law without any supporting evidence. That is not an exaggeration (leaving aside the fact that the bill introductory period has passed).

The legislation further requires that if a license is proposed, the lowest level of licensing necessary to accomplish the public good will be applied. In other words, if you successfully demonstrate that the public will benefit from some level of licensing of dog walkers, you can’t impose heart surgeon-type standards to accomplish that goal. If the necessary public good is served by simply requiring dog walkers to register with the local government and undergo a background check, then you cannot add educational requirements, training hour minimums, continuing education rules, insurance or bond mandates, uniforms, and a host of other rules, all of which are common in licensing laws. For more strict licensing requirements, the Sunrise Act would require some level of additional evidence that those tighter laws are needed.

This issue happens regularly. For example, why are lawyers more stringently regulated than accountants? If you practice law without a license (except representing yourself), that is a crime. But accountants can do many things without a particular license, they just cannot hold themselves out as a CPA (certified public accountant) unless they have met those requirements. People without the CPA license still can be paid to keep company books, prepare tax returns, and much more. They can still do a job they want to do without calling themselves a CPA, and that is what is important.

The point is not to debate lawyers versus accountants. The point is that imposing burdens on people’s jobs and occupations should be more difficult than it is. That is all the Sunrise Act really does. Instead of imposing new burdens on someone’s job, it actually imposes a burden on the person who wants to license that job. That is where the burden should be.

April 21, 2014

Collective Bargaining In Columbia, Mo.

Columbia MO salary schedule

In 2007, the Missouri Supreme Court decided that teachers have the right to organize and bargain collectively. Since then, approximately 30 school districts in the state have entered into a formal collective bargaining agreement (we have posted those documents here). Last year, the Columbia School District became the latest to enter into a collective bargaining agreement when the district and the Columbia Missouri National Education Association (CMNEA) bargained a one-year contract. Now, they are back at the negotiating table.

The Columbia Daily Tribune reports that the main bargaining point right now is “making up one year of frozen pay increases.” A few years ago, the district was unable to afford pay raises and instead “froze” teachers’ pay for two years. Thus, any teacher who is currently in the district and was there during the freeze is two steps behind on the salary schedule. Experienced teachers the district hired, however, were able to bring in all of their experience. This has resulted in different levels of pay for two teachers with the same level of experience.

As an illustration, look at the graph above. This chart displays the salary schedule for a teacher with a master’s degree in Columbia and other surrounding school districts for the 2012-13 school year (N. Callaway, S. Boone, Moniteau schedules are from 2013-14). As you can see, after the first couple of years, Columbia teachers should earn significantly more than other area teachers. However, the 67 percent of teachers, according to the CMNEA, who were impacted by the freeze are two steps behind where they should be (dashed line). Even with the “freeze,” the frozen teachers are still earning more than most of their neighboring peers.

According to the Columbia Daily Tribune report, the CMNEA polled its members to determine if they wanted to boost all salaries or make up the frozen steps. The former would give raises to all teachers, while the latter would only impact the 67 percent of teachers who were impacted by the salary freeze. Interestingly, 80 percent of CMNEA members “asked the bargaining team to prioritize restoration of the steps” over adding money to the base.

It may seem strange for teachers who were not impacted by the freeze to vote to restore steps, but if you know your teacher research literature, this doesn’t really come as a shock. Cuky Perez, of Stanford University, conducted a behavioral experiment and found that female teachers were relatively averse to pay inequities. That is, they are not comfortable with co-workers earning different amounts. That may be a contributing reason we have these poorly designed salary schedules.

Nevertheless, it will be interesting to see how this shakes out in Columbia.

April 20, 2014

But Tomorrow Will Rain, So I’ll License The Sun

Saint Louis County officials are considering licensing landlords who are within the county’s jurisdiction (Bill No. 73). You read that right. If you want to rent out apartments, duplexes, your own home, whatever, you’ll need a county license to do that within the unincorporated parts, which includes 320,000 residents. This is completely unnecessary. Why someone would try to further restrict the housing market anywhere in Saint Louis in 2014 is beyond me.

This will drive up rental unit costs within the county. Not because of the license fee itself, which is very low ($15), but because anything that limits supply will drive up prices. Now, some prospective landlords will not invest within the county because of this new fee and, more importantly, the accompanying regulations. Is that what the county wants? If landlords are allowing renters to do criminal activity within their homes, the county police simply should use existing law to hold people responsible. A general new license on every landlord in the county will do nothing but increase government interference with property rights and decrease the overall supply of housing.

Landlords are to modern politicians what Christians were to Roman Emperors; a quick and easy group to place blame on and abuse whenever they wanted. A study of a very similar proposal in Milwaukee found no evidence for benefits from these programs. You know why? Because there aren’t any. This is another terrible licensing idea from Saint Louis County.

April 18, 2014

Saint Louis Taxi Commission Takes Consumers For A Ride

The only nice thing I can say about the St. Louis Metropolitan Taxicab Commission (MTC) is that at least there is only one taxi licensing agency doing a terrible job for Saint Louis. We used to have two (city and county), and they did a really terrible job.

Short of that, the MTC has made it plain for all to see that its role is to protect incumbent cab companies from competition. Who cares what changes technology brings? They are going to operate the same way no matter what. Mobile phones, GPS, Internet maps, new phone apps, who cares? They have a job to do, and limiting new entrants into the market is job No. 1.

Why does the new technology matter? It matters because it has dramatically evened out the information advantage that taxi drivers used to have over customers. Now, even a first-time visitor to Saint Louis arriving at Lambert-St. Louis International Airport can check out in just a few minutes on their phone: 1) online reviews of cab companies, 2) the clearest route to the destination, 3) estimated fares for the trip, and more information if needed. Consumers are ready and able to negotiate for themselves, and most cab or mobile app-based drivers know that.

We do not need the MTC protecting us. Just as important, by restricting competition, the MTC is actively hurting taxi consumers in Saint Louis (and Kansas City as well).

Bring back the crooked assessor.

Here We Go Again . . .

One of the biggest fights out of last year’s Missouri legislative session was about Missouri House Bill 253, which cut individual and business income taxes. Missouri Gov. Jay Nixon vetoed the bill and the legislature failed to override his veto. This failure didn’t stop the legislature from passing a new tax cut bill, Senate Bill 509. Below are some highlights of the bill:

  • The top tax rate is cut by .1 percent per year if state revenues increase by $150 million. Once fully phased in, the new top tax rate will be 5.5 percent.
  • Tax brackets are to be adjusted for inflation.
  • Business owners who pay their company’s taxes at the individual level will be able to deduct 5 percent of their business’s income. This deduction will increase by 5 percent every year until it reaches 25 percent.
  • Creates an additional $500 personal exemption for people with incomes less than $20,000.

Nixon already denounced the legislation and will likely veto the bill. He has trotted out the same talking points he used when he vetoed last year’s tax cut. “Once again, members of the legislature have chosen to ignore evidence that Missouri is already a low-tax state — sixth lowest in the nation,” Nixon said. I guess the governor felt that Missouri’s taxes weren’t low enough for Boeing when he signed a $150 million incentive package for the company to move manufacturing jobs here. Also, Missouri is not a low-tax state, particularly when it comes to income taxes.

You probably also will hear progressive groups complain that passing this bill will blow a hole in our budget and seriously harm state revenues. That’s what the Missouri Budget Project is doing. However, the group doesn’t show its arithmetic in its report. This is par for the course for the Missouri Budget Project and the “report” isn’t very useful for actually discussing the bill’s merits.

I’m glad the legislature is trying to cut taxes. I prefer more significant cuts (such as fully eliminating the individual and corporate income taxes). However, I’ll take any forward progress in cutting taxes. Hopefully, this time, the cuts will get enacted.

April 17, 2014

Pennsylvania’s Tax Credit Scholarship Program…Winning!

This week, the Show-Me Institute released our third and final case study about tax credit scholarship programs in other states: “Pennsylvania’s Education Improvement Tax Credit Program: A Winning Educational Partnership.”

The study’s author, Andrew LeFevre, is well acquainted with Pennsylvania’s tax credit scholarship program, having served as the executive director of the REACH Alliance and the REACH Foundation, statewide school choice organizations. He wrote:

In 2001, Pennsylvania became the first state in the nation to enact a highly innovative public-private partnership in the form of an education tax credit aimed at corporations. Since then, the popular Educational Improvement Tax Credit (EITC) Program has provided more than 430,000 scholarships to students from low- and middle-class families . . .

In 2012-13 alone, the program provided more than 68,000 K-12 and pre-K scholarships. “The EITC Program has accomplished what many have been advocating for years: a way for the business community to be involved in children’s education and provide more schooling options,” LeFevre said.

I encourage you to check out this new case study along with our studies about tax credit scholarship programs in New Hampshire and Arizona. I also invite you to learn more about tax credit scholarships by attending our event on April 25, “Expanded Opportunities: A Discussion About Tax Credit Scholarships.”

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April 15, 2014

Unappointed Charter School Commission Undermines Intent Of Law

School Icon

In 2012, the Missouri General Assembly passed a bipartisan charter school law. As the St. Louis Post-Dispatch reported, the bill “could expand charter schools statewide while making it easier to weed out underperforming ones.” That was the intent of the law, to expand and to improve charter schools in Missouri. A key part of this effort was the creation of “The Missouri Charter Public School Commission.” Last year, the Missouri Legislature approved $300,000 for operations of the commission. Yet, almost two years after being established in state statute, that commission has yet to be appointed.

Senate Bill 576 (2012) states the “commission shall consist of nine members appointed by the governor, by and with the advice and consent of the senate.” The governor is to select four candidates, from slates that the commissioner of education, the commissioner of higher education, the president pro tempore of the Senate, and the speaker of the House of Representatives provide. The governor appoints the remaining five candidates, but one must be selected from a slate that the Missouri School Boards Association provides.

The commission would play an important and needed role.  Like universities, it could sponsor and oversee charter schools, but it also could serve as an important safeguard. The Southeast Missourian noted, “Under current law, the State Board of Education can suspend a charter school sponsor, but the board then takes responsibility for the schools.” The passed and signed legislation “would make the Missouri Charter Public School Commission responsible for those schools.”

By not appointing this commission, the intent of the law is not being fulfilled. I’m told that the slates have been submitted, but still no appointments have been made.  There is no reason to delay these appointments further.

Sales Tax Is Wrong Way To Fix Roads

Last weekend, my commentary about a proposed 1 percent sales tax to fund transportation infrastructure, which recently passed the Missouri House of Representatives, ran in the Columbia Daily Tribune. I argued that this sales tax, which would mostly be used to pay for roads and bridges, is not good economic policy and unfair to those who choose to drive less. As the commentary stated:

Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as daily commuters and interstate trucking companies.

The better way to fix road funding in Missouri is to implement tolling or to raise the gas tax. With the Missouri Senate now considering this sales tax, it is more important than ever that people are informed about the policy implications of using general taxes to pay for transportation infrastructure.

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