Since 2005, the City of Columbia has entered into the business of subsidizing development in a big way. The Columbia City Council approved its first Tax Increment Financing (TIF) project in 2009 and is considering another one.

In 2010, the city actually bought property for $3 million in order to lease it to IBM for $1 (yes, just a dollar) for at least 10 years. In fall 2011, the Columbia Missourian reported that IBM had hired just 101 full-time employees, far short of the 800 jobs promised.

It may not be a tax subsidy, but it is certainly a failed bet: The city has also built a very expensive parking garage that garishly lights up downtown Columbia in the evenings. The Missourian has reported that it costs more than $3,000 each month to keep the lights on in that garage. Of course, the cost of the parking lot is $21 million, and its parking revenue appears to have been paltry.

To this former Columbia resident, the city’s development bets seem contrived. The City Council, hoping for a better hotel, approved a large TIF for the Regency Hotel site on Broadway (demolition site pictured above). In my humble opinion, if the replacement of any hotel in Columbia could merit subsidy, I would nominate the Arrow Head Motel, which looks a little worse for the wear.

Now, the Columbia City Council is moving aggressively forward to allow for the awarding of Enhanced Enterprise Zone (EEZ) subsidies. The City Council voted 7-0 on Monday to set up an EEZ board, the first step needed to hand out EEZ development subsidies, despite the fact that many people showed up to protest that move.

What, exactly, is wrong with Columbia? The unemployment rate in the Columbia metropolitan statistical area is lower than the rest of Missouri. Columbia has a large college campus that guarantees a certain level of sales tax revenue and occupied apartments. It hosts football games that draw even more commercial activity to the city.

And yet, Columbia officials argue that a large swath of their downtown should be considered “blighted” and that the city needs development subsidies.

I wonder, to what success are those officials looking? I have pointed out before (in a Columbia newspaper) that TIF has a very poor track record on both sides of the state when it comes to creating long-term growth.

The Wall Street Journal just highlighted Kansas City’s bad development bets. The Saint Louis area’s use of development incentives has been so inefficient that we have spent more than $370,000 per job created. And the Associated Press just reported that the Kansas City development incentive border war has resulted in $750 million in incentives spent to move jobs across state lines.

Development subsidies that taxpayers fund are no way to provide long-term economic growth. But if Columbia’s city officials are itching to get into the development game, they should do so with their own money, and on their own time.

In 2000, 48 percent of parents in the Maplewood-Richmond Heights School District chose to opt out of that public school system. According to the St. Louis Post-Dispatch, the district was in poor shape. The district was struggling academically, its buildings had fallen into disrepair. The district’s buildings certainly did not sound inviting, according to reporter Elisa Crouch’s description:

The high school was surrounded by barbed wire. Doors with broken locks were chained shut or jammed with broom sticks. Science labs had no running water. Gangs used school walls for graffiti.

That was when Superintendent Linda Henke started at the district. Now, 12 years later, as she retires, the district is much better off. It has made big strides academically, with its students outperforming the state average in Missouri Assessment Program (MAP) test scores. The buildings look more inviting.

According to the Post-Dispatch, Henke had to make tough decisions to improve the district. She terminated 30 teachers, a no small feat given how hard it can be to fire a teacher in Missouri, and the teachers’ union sued the district. The Maplewood-Richmond Heights School District also successfully passed a tax levy increase in 2010 during the midst of a recession.

But the best sign of the district’s success is that more area parents are opting to send their children to public schools. Now, 75 percent of neighborhood children are enrolled in the district. Though some of this change is due to the recession and parents no longer able to afford private school tuition, most of this change is likely attributable to the positive changes made at the district.  Parents are capable of recognizing educational success, and many will, if able, leave a failing district by moving or finding a better educational alternative.

But for every success story like that at Maplewood-Richmond Heights, there are districts that are falling behind with many parents unable to afford a better option. Instead of relegating students to a failing district for who knows how long, wouldn’t it be better if districts were held accountable for failure and rewarded for success?

One way to do this would be to allow parents to choose what school (and what district) their child attends, with the child taking his or her per-pupil funding to the chosen school. That way, successful districts would attract more students (and funding), while failing districts would have to compete for students and funding, or risk being closed. If competition for students can work for Maplewood, why can’t it work for the rest of the state?

The Associated Press has published an excellent article about the tax incentive border war in Kansas City.

According to the AP, Missouri and Kansas have committed more than $750 million in tax incentives and bonds to lure companies across the state line. That amount of taxpayer money is incredible to promise away in just five years. Perhaps even more incredible is that the former head of the Missouri Department of Economic Development (DED) openly told the AP:

You get to a point where you have to say we are wasting taxpayer money.

For once, I agree with someone associated with the DED. It is certainly nice for elected officials to be able to issue a press release and claim to have created jobs and investment. But that practice is a raw deal for taxpayers. Research has shown that state tax credits have a lousy track record of delivering on promises. And, Missouri taxpayers support this foolish practice at a cost of hundreds of millions of dollars in state tax credits.

Though he has promised in the past to try and rein in tax credits, our governor does not seem to quite get it. Missouri Gov. Jay Nixon told the AP:

I’m going to compete for jobs for our state, I’m not backing up on that. But I think that the real long-term solution is how do we get more out of the region as far as joint economic impact?

Here is an idea: If a company wants to leave Missouri because Kansas has promised it a ridiculous amount of money, like $100,000 per job, let it go. That is a poor use of taxpayer dollars, and when a company moves a few miles, its employees frequently stay where they put. Those employees will continue to own homes, shop, and pay taxes in Missouri.

There are better ways to make our state competitive. Let’s lower the corporate income tax. Why not reduce the state income tax?

The way to encourage economic growth throughout the state is to provide tax relief to all Missourians, instead of participating in a tax incentive game that helps politicians earn political points.

Yesterday, the Missouri Legislature passed House Bill 1659, which allows for the creation of a land bank in Kansas City.

This land bank, if Kansas City officials decide to create it, will have the power to bid against private buyers for vacant property, make expensive development bets, and have the ability to turn down offers from would-be buyers for arbitrary reasons.

We already know that land banking can have disastrous consequences. In my review of the Saint Louis land bank, also known as the Land Reutilization Authority (LRA), I found that the LRA rejected almost half of all formal offers it considered, and allows local officials to have substantial and inappropriate power over who can buy land bank property.

Other land banks in other states do this as well. Consider this Michigan Ingham County Land Bank rejection: An offer to purchase vacant property from the land bank was rejected because “. . . the [land bank] wants to have a home on the vacant property.”

I still do not understand why Missouri legislators want to follow the 40-year history of the LRA. Saint Louis’ land bank began its life with about 2,000 parcels, and now has amassed more than 10,000 parcels of vacant property. The land bank that the Kansas City legislation hopes to replicate also continues to amass vacant property, and helps funnel tax subsidies to private developers. Where exactly is the land banking success that Kansas City hopes to replicate?

During discussion of an amendment that was added to the land bank bill yesterday, the Senate sponsor stated: “Might be a terrible idea. But two years from now they can address that problem.”

I hope so, but I am skeptical. Our legislature passed land banking legislation for Saint Louis in 1971, and it has been an abysmal failure. Instead of addressing that problem, legislators passed a similar bill for Kansas City.

Though Missouri legislators may not accomplish much on tax credit reform, and are pushing forward misguided land bank legislation, there is some good news coming out of the Missouri Capitol: On Tuesday, the legislature passed a bill that would expand the use of charter schools throughout the state of Missouri. This is great news for Missouri students. It is perhaps the best news for students and educators since this.

Previously, charter schools were limited to Kansas City and the City of Saint Louis. If Missouri Gov. Jay Nixon signs the bill into law, charter schools can be opened anywhere in Missouri if the state has designated the area district as unaccredited.

This could certainly help students in the failing Riverview Gardens School District, which has been unaccredited since 2007. Though the district is unaccredited, its students do not have the option of attending a free charter school in their district because it is outside the boundary of Saint Louis City.

In fact, there is cause for optimism that the charter school expansion bill could result in quick, positive change. The St. Louis Post-Dispatch reports that a graduate of the district (class of 1977) has been waiting to open a charter school in Riverview Gardens to help students there gain better access to a quality education.

Some opponents of the charter school expansion bill have pointed out that charter schools can fail. That is true. In fact, that is the whole point of the charter school model: When a charter school fails, it should be shut down, instead of being allowed to continue to provide students with a poor education.

I have argued here before that it is very important to shut down failing charter schools, like the Imagine Schools that will be closed this year. The hope is that by closing down poor schools and directing more students and resources toward successful charter schools, we can quickly identify and replicate successful schools.

If only we held our traditional public schools as accountable.

Last night, yet another piece of legislation received the “Kansas City Land Bank Bump.” Senate Bill 729, which began as a short, three-page bill, ended the night at an impressive 78 pages.

The bill originally was a relatively uninteresting piece of legislation meant to improve procedures for Missouri counties making purchases. Now, the poor thing is bloated with language addressing, among other things, Springfield School District board elections, local debt collection, economic development boards, and the creation of a Kansas City land bank.

The land bank “amendment” alone added 35 pages to SB 729. This is the third time the land bank legislation has been tacked onto an unrelated bill. First, it was attached to a bill that was supposed to improve transparency. Then it was added to a bill that was supposed to help counties manage their budgets.

This last-ditch attempt to push legislation to the finish line by any means necessary is unfortunate and opaque. We saw efforts like this last year, when legislators rolled an extensive list of bills into a 356-page behemoth that entailed the creation of hundreds of millions of dollars in tax credits. Despite that bill’s failure, it appears that land bank proponents are taking a page from tax credit proponents’ strategy manual.

If legislators intend to vote on this bill before the end of the legislative session on Friday, I hope they at least take time to read it. The land bank legislation (or “amendment”) raises a number of questions that remain unanswered:

• Why allow a government land bank to bid against private would-be buyers? Don’t we want this property to have a chance of being redeveloped privately? (141.984.6)
• Why allow a government land bank to incur debt without limitation? (141.981.6 (3))
• Why allow a government land bank to borrow against promised funds from the state of Missouri? (141.994.1)
• Why allow a government land bank the power to build, construct, lease, and furnish property? Wouldn’t that put it in direct competition with the struggling private real estate market? (141.983 (13))
• Why create a government land bank? Where is one example of a government land bank that has accomplished a significant reduction in vacant government-owned property?

In the final week of the legislative session, Missouri legislators may vote on the creation of a land bank in Kansas City. Given the attempts to attach the land bank legislation in its entirety to unrelated bills as an “amendment,” there is a good chance that some legislators will try to get the bill passed this week.

In addition to testifying and providing suggested changes to the legislation, I have also written here repeatedly about the pitfalls of creating a land bank, in light of the 40 years of failure we have experienced in Saint Louis City. If legislators — despite the evidence that land banking can lead to abuses of political power and poor decision making — still want to pass the land bank legislation, perhaps they should consider recent land banking news from other states:

The Columbus, Ohio land bank is asking the State of Ohio for money.

The fiscal note for the land banking bills (H.B. 1659 and S.B. 795), reports that passing the legislation will not cost the state money. However, the legislation itself mentions possible funding from the state several times. Columbus, Ohio provides a good example of what could occur if the Kansas City legislation is passed. The new land bank is requesting $8.2 million from the State of Ohio. A newly established Kansas City land bank could make a similar request.

The Saginaw, Mich. land bank bought a hotel, used it for police training exercises and now plans to spend up to $400,000 to demolish the hotel and build an “aesthetically pleasing parking lot.”

Regular Show-Me Daily readers know that we are not a fan of government development bets. Well, land banking takes that practice to the next level. Instead of government officials attempting to pick winners and losers by awarding tax subsidies, land banks can purchase and attempt to redevelop property. What could possibly go wrong?

Consider the case of Saginaw, Mich. In December, the Saginaw land bank purchased a hotel for $235,000. Since then, refrigerators and microwaves have been looted, and the sheriff’s department has conducted “emergency response exercises” there. The building is riddled with black mold, and the county is paying $15,000 per month for utility costs at the vacant hotel.

Government officials say that investors aren’t interested in the property, so the next step is to demolish the building and build a parking lot. The demolition is estimated to cost another $300,000 to $400,000.

The Missouri land bank legislation is modeled on Michigan’s land bank law. If legislators pass S.B. 795 or H.B. 1659, a Kansas City land bank would have the powers to make similar development bets with taxpayer money.

The Missouri Legislature passed land banking legislation in 1971, and it has been an abysmal failure. The Saint Louis land bank holds more property than ever, and pays more than $1 million every year just to mow the grass on its properties. Why repeat past mistakes?

It was comical that Missouri legislators, apparently blind to irony, tacked a lengthy land bank bill onto a bill that was supposed to increase government transparency.

Well, lawmakers have done it again. The latest bill to get what I am now going to call the “Kansas City Land Bank Bump” is Senate Bill 692, a bill that was initially intended to help counties manage their budgets. This time, the bill ballooned from two pages to an impressive 93 pages. It appears that about 30 of those pages are dedicated to creating a land bank in Kansas City.

Given that a land bank created under this bill could entail unlimited amounts of debt, the addition of the land bank language to a county budget bill is almost as ironic as the previous act of desperation.

Moreover, these moves may not even be constitutional. The Missouri Constitution states that bills cannot contain more than one subject, and that subject must be clearly stated in the bill’s title. Does “decreasing county budgets” accurately describe a bill that would create a land bank? Perhaps, if SB 692 passes, a court will have to decide.

Look, if a land bank is such a great idea (and after extensive study, I do not think it is), why can’t legislators pass it on its own merits, instead of continuing to try and hide it as an amendment to unrelated bills?

In my study of Missouri school superintendent compensation, I noted that many superintendents are promoted up through the ranks of school teachers. Similarly, many school board members are former teachers.

This means that when school administrators and board members consider layoffs and teacher termination, many of them may have fresh memories of serving as a teacher. Many may also have friends who continue to serve as teachers in the district. As a result, people who consider layoff and termination decisions in Missouri’s school districts may consider the impact on teachers more carefully than the long-term impact on students.

Though Missouri law technically allows for teachers to be terminated on the basis of “incompetency,” we have shown here that districts rarely fire teachers. For example, the Parkway School District, which employs more than 1,200 teachers, has terminated just five in the past 10 years. Though state law is part of the problem, school leadership certainly plays a role.

Education expert Rick Hess writes about school administrator’s lack of leadership triggering similar teacher tenure reform efforts in Massachusetts. He writes:

Given the freedom to craft sensible, quality-sensitive evaluations that thoughtfully give some weight to seniority, the state’s school boards and superintendents have . . . punted.

Hess’ observation is likely relevant to Missouri. In our collection of teacher tenure data, we have also requested some districts’ termination policies. Frequently, those policies follow state law, with little added.

So, even though Missouri law states that teachers “shall be retained on the basis of performance-based evaluations and seniority . . .” during layoffs, districts can, in practice, choose to favor teachers who have seniority.

This is why a legislative fix is needed. Missouri House Bill 1526 would require that a teacher’s individual performance be the “most heavily weighted factor” when layoffs are considered. School districts, which receive a tremendous amount of state funding, should not be allowed to make decisions that favor teachers at the expense of students.

When it’s used to hide unpopular legislation.

On Wednesday, the Missouri House took an otherwise laudable government transparency bill and used it to hide legislation that would create a government land bank in Kansas City. The transparency bill, S.B. 467, ballooned from just two pages to about 40 pages with the unwieldy amendment.

Some legislators continue to push the Kansas City land bank bill forward, despite the fact that a similar land bank in St. Louis City has failed spectacularly. The Saint Louis City land bank has a history of rejecting would-be buyers, and allowing area aldermen to have outsize influence over who is allowed to purchase vacant city property.

If Missouri legislators want to throw the land bank dice again in Kansas City, they’re free to do so, even in the face of St. Louis’ failure. But, perhaps they should do that in a more transparent way.

The irony of using a transparency bill to hide another bill 20 times its size would be funny, if it weren’t so sad.

In a sad move, a Saint Louis Circuit Court judge has ruled that Saint Louis Public Schools (SLPS) does not have to pay for students to transfer to a better district, despite the fact that the district has been unaccredited for years.

The ruling is heartless. In essence, Judge David Lee Vincent III argues that it would be too costly to allow Saint Louis City students to choose where to go to school, because too many want to leave. So, instead of allowing those students to escape to a potentially better school, they have to stay to help perpetuate a failing system.

As Robbyn Wahby, executive assistant to the mayor of Saint Louis City aptly tweeted: “Status Quo 1-Kids 0.”

The Circuit Court’s ruling goes directly against a Missouri law that states: ”[Unaccredited districts] shall pay the tuition of and transportation . . . for each pupil resident therein who attends an accredited school in another district of the same or adjoining county.”

The judge was able to sidestep that law by citing a 2011 study that estimated that more than 15,000 students who live in Saint Louis City would transfer to a school in a neighboring county if given the chance. The survey estimated that about 8,000 of those students would come directly from SLPS, with the remainder coming from a mix of charter schools and students participating in a voluntary transfer program.

That study estimated that the total cost of paying for transportation and education for those 15,000 students would be nearly $224 million each year. With that amount coming out of SLPS’ budget, SLPS officials testified that losing that much money would put the district at such a financial disadvantage that it could not serve the students who choose to stay.

In light of that evidence, Judge Vincent views the Missouri statute requiring a district to pay tuition and transportation of students who transfer out of an unaccredited district and to an accredited one as an unfunded mandate.

Though I have some questions about the math (15,740 students at $224 million comes to $14,231 per student, which appears to be cheaper than SLPS’ per-student expenditures of $15,861), the estimated cost is a symptom of a bigger problem.

The very fact that 15,000 students in Saint Louis City want to leave for a better school should be evidence enough that severe educational reform is needed. This is not a problem we should push aside because it will take some work to solve.

It is time to prioritize the education of students over the funding of districts. If public education dollars could follow any Missouri student to any school they choose (public, charter, private, parochial, virtual, etc.), then we would not be at this impasse. A wider variety of schools could take on the students from Saint Louis City who want to leave, and ease the potential burden of new students on the public school districts refusing to let city students in.

Frankly, closing bad schools is one option worth considering. If that is what is needed to ensure Missouri students have access to a quality education, then it is the right move.

The Columbia Missourian has published an overview of the statewide use of Tax Increment Financing (TIF), a development subsidy that is growing in popularity. The article provides a detailed overview, and the Missourian has posted excellent data online. Unfortunately, Columbia City Manager Mike Matthes, in his comments, seems to be fond of revising TIF history.

Matthes cited Independence, a suburb near Kansas City, as an example of a community that has enjoyed success with TIFs. I wonder if he was referring to the Bass Pro TIF in Independence that has failed. The city of Independence has had to kick in more than $4.1 million to cover bond payments associated with the project.

Matthes also said that ”(TIF) does prevent and eliminate blight” and “it does increase property value and tax revenue over time.” Though the Missourian highlighted a TIF in North Kansas City that is characterized as successful, it failed to mention the notorious Citadel TIF in nearby Kansas City.

In late 2011, Kansas City officials voted to pay $15 million to purchase property that had been razed and contaminated with asbestos. The Citadel site now sits vacant, and is an example of a TIF project that made an area much, much worse, instead of eliminating so-called blight.

Moreover, earlier this week, the Wall Street Journal characterized Kansas City’s downtown entertainment TIF development, the Power & Light Development, as a “budget hole.” The Journal reports that the Power & Light Development is generating less than one-third of the tax revenue needed to cover debt costs associated with the project. As a result, Kansas City is setting aside $12.8 million to make up the difference.

On the eastern side of the state, TIF does not look much better. Matthes’ statement that TIF eliminates blight and increases tax revenue over time ignores the findings of a multi-year study of TIF and other development subsidies in the Saint Louis area that those subsidies were frequently concentrated in “higher-income communities.” The same study found that retail jobs associated with TIF projects came at a cost of more than $370,000 in taxpayer dollars.

Those findings are not surprising: Years earlier, the Brookings Institution concluded that TIF in Missouri “. . . is used extensively in high-tax-base Missouri suburban areas with little need for assistance . . .”

Perhaps I am being unfair. When Matthes said that TIF has proven to eliminate blight, he may have been referring to the TIF awarded to a Saint Louis area mall. The mall was deemed “blighted” because it lacked a Nordstrom’s. I suppose, because the West County Mall now has a Nordstrom’s, one could consider the “blight” removed.