January 30, 2014

Streetcars Are Not Economic Development

Over the weekend, KCPT’s current events program Rukus (starts at 4:33) quoted a Show-Me Institute blog post (Streetcars Will Waste Your Money and Your Time) which points out that there is no evidence that fixed rail removes cars from the road or drives development. It read:

We know from previous studies that rail transit does not remove cars from the road. And we know that it is not the rail lines themselves that drive economic development but rather the additional tax incentives that governments hand out along rail lines.

Kansas City Star editorial board member Yael Abouhalkah interrupted Woody Cozad’s comments on the quote to ask, “Proved by what?” For that, we refer him to the links above. Abouhalkah went on to say, “They just had two downtown without incentives.” He never explained what he was referring to, but we suspect it refers to two hotels that Abouhalkah wrote about in August:

Yes, it can be done: Someone can build a hotel in the Kansas City area without a taxpayer subsidy.

Hallelujah.

…It puts new development along the planned two-mile streetcar line, near the Kauffman Center for the Performing Arts, and near the Power Light District and Sprint Center.

First, we at the Show-Me Institute share Abouhalkah’s enthusiasm for anything built in Kansas City without taxpayer subsidies and we are pleased he is highlighting the matter. The problem in the piece is that this development has nothing to do with the streetcar, aside from possibly diverting it from another location in Kansas City. According to Abouhalkah’s own newspaper, the developers’ interest predated the streetcar (emphasis added):

Rob Schaedle said the firm’s first interest in Kansas City was in 2009 when it considered redeveloping the old 21-story Federal Reserve Bank of Kansas City building at 925 Grand Blvd. Though it admired the historic structure, the firm decided to pass on converting it into a hotel.

But we liked the market,” Schaedle noted and in August of this year bought the property of its new project for $4.5 million.

Abouhalkah and other streetcar boosters are simply claiming credit for any development that occurs after plans to build a streetcar. This is the most basic of logical fallacies: post hoc ergo propter hoc. But this is not uncommon. In a study of economic development programs across Missouri, my colleague, David Stokes, quoted researchers who wrote:

“The best case is that incentives work about 10 percent of the time and are simply a waste of money the other 90 percent.” The authors then relate that, in their experience, “it is not unusual for public officials to attribute all new employment to incentive programs.”

Streetcars will not improve the economy of Kansas City. The economic development handouts, amounting to corporate welfare, will be the engine that drives any development, and even nine times out of 10, that is  “simply a waste.” As time goes on, it will be increasingly difficult to determine exactly what prompted development, but rest assured that everything will be credited to the streetcar.

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