June 29, 2012

So Long, Missouri

Today is my last day at the Show-Me Institute. Beginning in July, I will be working for the Mackinac Center for Public Policy, Michigan’s state think tank. While I am excited to return to my home state, I will miss Missouri greatly.

Four years ago, I began at the Institute as an intern, filing hundreds of information requests for school superintendent contracts. I have been fortunate to work with talented and principled co-workers who are passionate about making Missouri a better place to live, work, and start a business. During my time in Missouri, I have learned enough about state and local government to convince me that Ron Swanson is the ideal public official.

At the state and local government level, disinterest allows for the slow deterioration of liberty. Tax credits, for example, can be a very dry subject. But because tax credits are frequently misunderstood, or even ignored, state politicians have gotten away with handing out hundreds of millions of dollars to favored individuals and businesses. Occupational licensing might sound boring, but that is a way the state can make it needlessly difficult for individuals to work.

The same disinterest applies to city government. Few pay attention to the variety of small government meetings in Saint Louis City. But those meetings are where decisions are made to limit where we can eat, limit what we can do with our homes, and limit who can purchase vacant city propertyOfficials have even paid companies to leave the state. It sounds like a plot from an episode of Desperate Housewives, but it really is true that in Saint Louis City, you can get in trouble for using the wrong trash bins.

I hope Missourians will continue to monitor their elected officials and to ask critical questions about government action. Small and petty people will use government for their small and petty means. Even if you happen to prefer lower grass height, fewer food trucks, or would like to see one building replaced with another, it is important to remember that next time, those powers may be used to accomplish something you find abhorrent.

Instead of hoping that one political party or another prevails, I prefer that government’s power to control our lives be reduced. There are a lot of great, dedicated small activist groups here, and I hope they continue (and succeed) to reduce the size of government.

I am confident that my colleagues at the Show-Me Institute will continue to fight for liberty in Missouri, and I wish them all the best.

June 25, 2012

Please, Columbia, Learn From Saint Louis’ TIF Mistakes

On Tuesday, the Columbia City Council will hold a panel discussion about how Tax Increment Financing (TIF) works. Former Saint Louis City Mayor Vincent Schoemehl will be one of the panelists.

Schoemehl is perhaps the best person to educate Columbia residents about the pitfalls of TIF. In the early 1990s, he supported the first TIF in Saint Louis, which city-backed bonds partially financed. The project was (and is) a failure, and resulted in Saint Louis taxpayers having to help foot the bill.

Schoemehl has also been on the receiving end of TIF. He is the president and CEO of Grand Center Inc. In 2002, Saint Louis agreed to provide TIF to Grand Center, and gave the nonprofit, in the words of St. Louis Post-Dispatch reporter Jake Wagman, “broad and almost unilateral powers.” Wagman wrote that Grand Center had the power to “approve or reject building designs, dispense up to $80 million in tax incentives and acquire land by eminent domain.”

Columbia residents should also be aware of Saint Louis’ more recent adventures with TIF. Saint Louis City politicians approve massive public subsidies for large, unwieldy development projects with alarming regularity (search for “tax increment financing”). Discussions about Ballpark Village, the perpetually changing development that has yet to happen, have entailed large amounts of TIF.

Saint Louis is also home to the NorthSide TIF, one of the biggest TIFs in the country. That development would involve $390 million in TIF, if only a court would rule that the TIF agreement between the developer and the city was legitimate. Today, NorthSide property remains largely vacant.

And, do not forget the East-West Gateway Council of Governments study of the use of development subsidies in the Saint Louis region. That study found that retail jobs subsidized with TIF (and some Transportation Development District subsidies) came at a cost of more than $370,000 in public dollars per job.

As my colleague David Stokes would say, I wish someone had written a book about the decades of development subsidy failures of Saint Louis. Oh wait, historian Coin Gordon did. As Gordon wrote:

In practice, blight is less an objective definition than it is a legal pretext for various forms of commercial tax abatement . . . Redevelopment policies originally intended to address unsafe or insufficient urban housing are now more routinely employed to subsidize the building of suburban shopping malls.

For more on the revisionist TIF history that has been spouted in Columbia, click here.

June 20, 2012

Michigan’s Mamtek: Yet Another Reason Missouri Should Abandon Film Tax Credits

Apparently Missouri representatives failed to show at the annual Association of Film Commissioners International Show in Los Angeles. Jerry Berger writes that at the show, exhibitors tout state and local film tax incentives in the hopes of luring film production.

“The payoffs can be fantastic,” Berger writes, sounding, not surprisingly, like a former film industry public relations employee.

Well, maybe for film producers. The Show-Me Institute has shown that film production jobs have not increased in Missouri since the state began offering its film production tax credit; that Missouri’s film tax credit has subsidized questionable expenditures; and that state taxpayers have helped fund the production of  saccharine films.

Other studies have found film production tax credits lacking when it comes to job creation, and there have even been instances of outright fraud associated with state film tax credit programs.

If that is not enough to sway those who love the idea of taxpayer-funded film production, consider the case of Allen Park, Mich.

Michigan’s film tax credit program inspired the City of Allen Park to spend nearly $40 million to turn an old building into a film production studio; the state kicked in nearly $3 million.

Today, no films have been made, the promised jobs have not been created, and some estimate that the bonds the city sold to support the project will take 28 years to pay off – costing taxpayers $100 million. The city also has experienced a severe downgrade in its credit rating.

Sadly, Allen Park sounds a lot like the City of Moberly, Mo., and its failed development bet with tax credits and local subsidies. The latest news is that the CEO of Mamtek paid himself $30,000 each month with bonds taken on by the city.

State and local officials have better things to do than to fly to Los Angeles to lure film production teams to Missouri with taxpayer dollars. Why not consider Missouri Gov. Jay Nixon’s Tax Credit Review Commission’s recommendations for tax credit reform? The commission recommended that many of  Missouri’s tax credits be capped or eliminated, including the film tax credit.

June 15, 2012

More Than Puppy Love 2: A Better Film Than Winter’s Bone?

On Tuesday, I spoke with Mark Reardon on KMOX about Missouri’s film tax credit program. Though he agreed with me that it is pretty indefensible for taxpayers to subsidize hotel stays and large living allowances for well-paid actors and directors, Mark pointed to critically-acclaimed films that have received the credit (Winter’s Bone and Up in the Air) as examples of success.

Sure, Winter’s Bone received $260,000 under Missouri’s film tax credit program. And the film did receive great reviews. But the state actually paid more to the film More Than Puppy Love 2, the (apparent) sequel to More Than Puppy Love, a 2002 film that IMDB users panned. One wrote that “This just might be the worst movie ever made.”

I do not know what reviewers said about More Than Puppy Love 2, because I could not find any references to it. But I do know that state taxpayers paid more than $285,000 to have that movie made here in Missouri. I wonder if the puppy used in the film was counted as one of the “jobs” associated with the production of More Than Puppy Love 2There have been more dubious job claims made when justifying film tax credits.

If you love film, or anything else creative, the last thing you should want is for it to receive taxpayer funding. Some of the best works of art, films, and books are controversial — as they should be. Censorship and the funding of saccharine works begins when taxpayer dollars allow politicians and bureaucrats to get involved in deciding what is, and what is not, art.

June 14, 2012

Legislators Who Opposed Corporate Welfare Receive Low Grades

The Missouri Chamber of Commerce has released its 2012 voting scorecard. State legislators are graded based on how they voted during the past legislative session on the “most important issues.” The Chamber did not post what those issues were, so it is difficult to discern how grades were awarded.

But several Missouri state legislators who received low grades happen to be strong supporters of free-market policies and/or opponents of corporate welfare.

Take Rep. Jay Barnes (R-Jefferson City). The Missouri Chamber gave him an ‘F’.’ I certainly do not agree with everything that he proposed during the 2012 legislative session (nor do I agree with everything that any other lawmaker discussed in this post has sponsored). But Barnes sponsored several bills in the wake of the Mamtek scandal that were designed to limit the Missouri Department of Economic Development (DED) and local governments from irresponsibly awarding large subsidies to corporations.

Rep. Paul Curtman (R-Pacific), who was given a ‘D,’ also sponsored some good legislation aimed at limiting corporate welfare. Curtman sponsored a bill that would require two-thirds of area voters to approve local property tax development subsidies. He also sponsored one of my favorite bills, which would allow people to enter some professions that require a state license without obtaining a license, as long as they do not advertise themselves as being licensed. Do we really need to license interior designers, private investigators, and cosmetologists?

Sen. Jason Crowell (R-Cape Girardeau) was awarded a ‘C’. In my book, Crowell deserves an A+ for taking strong stands against tax credits. Various state departments award hundreds of millions in tax credit dollars every year, frequently with little to show for it. Some state tax credits have been created for just a single company. Crowell has filibustered against these handouts, and during the 2012 legislative session, sponsored a bill that would subject tax credits to the state budgetary process. He also sponsored a bill that would limit tax-delinquent developers from receiving property tax subsidies.

Rep. Jeanette Mott Oxford (D-St. Louis) was awarded the lowest grade. She has introduced bills with which I disagree. But Oxford’s “Good Jobs First” bill would have gone a long way to help bring more transparency and accountability to Missouri’s corporate subsidy programs.

I hope that Missouri legislators continue to fight bills that increase corporate welfare, as well as continue to try and roll back some of our existing corporate welfare programs, regardless of grades received from the Missouri Chamber of Commerce.

June 11, 2012

Missouri Employees To Receive Same Raise, Regardless Of Performance

The St. Louis Post-Dispatch reports that state employees earning less than $70,000 per year will receive a 2 percent raise, starting in July. About 54,500 state employees will get the increase, and the total impact on the state budget is estimated at $45.5 million.

The narrative being used to sell this raise is that most Missouri employees have not received a raise for years. After reviewing state employee data posted on the Missouri Accountability Portal, I agree. It is true that some employees really have had exactly the same salary for years.

But awarding tens of thousands of employees the same pay increase, without considering performance or whether those employees have been some of the lucky few to receive raises, is irresponsible. Though some have not had a raise, many employees have received raises in recent years. Many of these wage increases (some associated with promotions) are larger than the touted 2 percent raise.

A better move would have been for Missouri legislators to award each state department a lump sum to use on employee pay as needed. If the department is having trouble motivating or retaining its employees, outstanding employees could be given more substantial raises. If the department desperately needs another employee, the money could be used to hire someone.

Furthermore, it can be quite difficult to fire public employees. It is likely that some of the employees among the 54,500 should not be awarded a raise, even a small one of 2 percent.

Employees should be rewarded for performance, instead of being awarded a small pay boost because legislators feel sympathetic.

June 8, 2012

It Is Time To Increase Public School Transparency

In the past three years, the Missouri State Auditor has chastised public school districts for irresponsible spending, excessive pay for administrators, awarding a no-bid contract to a school board member, failing to collect on a real estate deal, and awarding a hefty car allowance to a district superintendent.

Given that state and local property taxpayers spend billions on Missouri’s public education system every year, taking a closer look at how school districts spend money is certainly warranted.

One way to do this could be to set up a transparency site like the Missouri Accountability Portal (MAP). MAP is a site where anyone can look at (or download) recent data for state tax credit issuances, state employee pay, and state spending. The general public can use it to learn how state money is being spent, reporters can use the data to find material for an article, and policy analysts can even use it to examine the amount of tax credits issued under a certain program over time. In fact, one school board member is trying to set up a school district transparency site that would follow this model.

Posting detailed school district expenditure data, even if only for Missouri’s largest districts, could help ensure that the general public has better information to monitor how public education dollars are spent. This provides more detailed information about a district’s spending than the school-level and district-level data that the Missouri Department of Elementary and Secondary Education posts.

In 2011, the state auditor suggested that the Kansas City Metropolitan School District reconsider its $800 per month car allowance for its superintendent. But the Kansas City district is not alone.

In my study of Missouri school superintendent compensation, I found that 26.1 percent of districts surveyed provided superintendents with a car allowance, a car, or an annuity. Indeed, 17 school superintendents in Missouri received a car allowance of more than $500 per month, with a few school districts providing more than $800 each month to superintendents for their vehicles. Years later, there are likely other school districts paying $800 or more for superintendent car allowances.

With a transparency portal, reporters or the general public could find information like that easily, and before an audit is warranted. Transparency might discourage board members and administrators from awarding outsize benefits or spending frivolously.

With better technology, making it easier every day to share information online, school district transparency portals are something to consider.

June 6, 2012

Sorry, Film Directors: Taxpayers Should Not Have To Pay For Your Luxury Hotel Rooms

Film director Jennifer Lynch told KSDK Channel 5 that Saint Louis is the perfect place to shoot her film, “A Fall From Grace.” The film is about a “homicide detective tracking a serial killer along the Mississippi River who burns his victims.”

But the problem, Lynch says, is the lack of financial incentives available for movie production in Missouri. Though the state still offers the film production tax credit, Missouri Gov. Jay Nixon shut down the Missouri Film Commission in 2011, and the Missouri Accountability Portal shows that no film tax credits have been issued for 2012.

From KSDK:

Missouri actually has $4.5 million to use for tax breaks, but the Department of Economic Development doesn’t have anyone to recruit out-of-state productions.

“It hurts the city, it hurts the state and it ultimately hurts us because we’re forced to go elsewhere for monetary reasons,” said Lynch.

One way to answer the question of whether a lack of film tax credits hurts the state is to look at what film tax credit money has subsidized in the past.

The 2009 film “Up in the Air,” which starred George Clooney, was filmed in Saint Louis, and was issued $4.1 million in tax credits from the state. Under Missouri’s Film Production Tax Credit program, movie productions are reimbursed for a portion of their expenses.

In 2010, the Show-Me Institute requested documentation from the state Department of Economic Development (DED) that showed what expenses associated with the film tax credit program were deemed eligible for partial reimbursement. The documents we received are now posted online.

Below are some expenses that the production of “Up in the Air” incurred and the DED deemed eligible for the Film Tax Credit program:

* More than $11,000 in living allowance money for Director Jason Reitman.

* $5,600 for George Clooney to stay at the Chase Park Plaza.

* More than $8,500 in living allowance money for Vera Farmiga.

* More than $11,000 in living allowance money for Executive Producer Michael Beugg.

If having state taxpayers fund living expenses for high-paid actors and directors while working on “Up in the Air” is not concerning enough, recent reports have found state film tax credit programs lacking.

If Lynch really thinks Saint Louis is the best place to film her movie, then make it here. But if tax credits are necessary, I would prefer she stay in East Saint Louis.

P.S. Lynch is not the first person to think that using film tax credits to subsidize a movie about a serial killer is a good idea. Jack Donaghy ran with that in 2011.

May 31, 2012

Help Wanted

Looking for work in Columbia? If job promises are to be believed, it may be time to give the overly subsidized IBM service center in Columbia a call.

You may remember the IBM facility from news accounts in 2010, when the Columbia Missourian reported that state and local government had lined up an impressive subsidy package for IBM. It entailed more than $30 million in state and local tax subsidies, including a big exemption on local personal property taxes, and millions in state tax credits. The City of Columbia actually bought IBM’s building for $3 million and is leasing it to the company for just a $1 a year, meaning that the company is not paying property taxes on the building.

In exchange, IBM promised to bring  800 new jobs to the facility within three years, and is required to bring in at least 600.

According to the latest reports, IBM had 349 employees at its Columbia service center during the last months of 2011. But company officials promise that they are on track to have 800 new hires by the end of 2012. In order to hire the remaining 451 employees, IBM should be hiring at least one new employee every day, including weekends and holidays.

The IBM service center in Columbia could be a promising lead for those looking for work. After all, when all the state and local subsidies are accounted for, Missouri taxpayers will have subsidized IBM’s Columbia operation to the tune of nearly $40,000 for each job. Collecting a paycheck from the company is one way to try and recoup your tax dollars.

May 29, 2012

Too Little, Too Late?

The St. Louis Post-Dispatch reports that regulators have granted banks increased flexibility to rent foreclosed homes that they cannot sell. This is great news. Private banks now have more options that can help put vacant homes to productive use, and people still (understandably) wary of purchasing a home can choose to rent one instead. Hopefully this will result in fewer vacant properties and more people in homes.

However, this ease of regulation comes just a little late. The housing market crisis began years ago. Part of the federal government’s response was to throw hundreds of millions of dollars in taxpayer money at the problem. In February 2010, the U.S. Department of Housing and Urban Development (HUD) awarded more than $223 million to help establish land banks in Michigan. More than $40 million went to a land bank in Ohio. The Saint Louis land bank, the Land Reutilization Authority (LRA), has used federal money to acquire property.

It would have been nice if the federal government had eased this regulation earlier, and before so much money was dumped into a program that has not been proven successful. After all, the Saint Louis land bank, which is the oldest standing land bank in the U.S., has not succeeded in getting vacant property back into private, productive use. Since its creation, the land bank’s holdings have quintupled, and Show-Me Institute research found that the land bank had a habit of rejecting nearly half of all formal offers to purchase its property.

There is a real risk that land banks set up in Michigan, Ohio, Indiana, New York, and other states will end up where the Saint Louis land bank has: Holding many properties indefinitely, and plagued by processes that favor political insiders. Much of the blame for this expensive and unproven expansion of land banking rests squarely with the federal programs and funding that encouraged it.

Reducing regulations associated with renting vacant, foreclosed homes is a good first step to dealing with the glut of foreclosed property. A next good step would be for the federal government to cease funding land banks.

May 25, 2012

Another Judge Rules Saint Louis’ Red Light Camera System Unconstitutional

Once again, a Saint Louis City judge has found that the city’s red light cameras are unconstitutional. Yesterday, Judge Theresa Counts Burke sided with a ruling in February that found that the City of Saint Louis’ red light camera system violates due process. Missouri Sen. Jim Lembke (R-Dist. 1), a long-time critic of red light cameras, brought forth the case.

Saint Louis City’s system violates due process because  tickets sent to alleged violators do not contain information about a court hearing date or the right to contest. That means, attorney Bevis Schock (a Show-Me Institute board member) told KMOX, that “. . . there’s no way the defendant, the person receiving the notice, understands that there’s a right to a hearing.”

Hopefully this ruling will help bring about the elimination of red light cameras in Missouri. In our state, red light cameras have not been shown to increase safety. But they are popular, perhaps because they can help a city raise a great deal of revenue from traffic tickets.

This latest ruling throws the continued operation of red light cameras in Saint Louis City into question. One Saint Louis attorney has said that he would advise family members to not pay red light camera tickets because the penalty for the ticket appears to be just threatening letters from a company in Texas.

In related news, at the most recent Columbia City Council meeting, city officials reported that the installation of red light cameras had resulted in more than a four-fold increase in tickets. The city has issued more than 3,500 tickets since the cameras were installed in September 2009, compared to an average of about 330 tickets before the cameras were installed.

And earlier this year, Kansas City found that red light cameras in its city had not increased safety, as promised. In fact, the study found that both accidents and fatal accidents had increased at a majority of intersections where red light cameras are installed.

For more information about the policy questions regarding red light cameras, watch Show-Me Institute Policy Analyst David Stokes’ recent vlog on the Saint Louis red light camera issue, or check out our “Policing By Camera” panel discussion with Lembke, Saint Louis Alderman Antonio French, and Redditt Hudson of the American Civil Liberties Union (ACLU).

May 23, 2012

What Is The Matter With Columbia?

The demolition of the Regency Hotel site. Photo by Timmy Huynh of the Columbia Missourian

The demolition of the Regency Hotel site. Photo by Timmy Huynh of the Columbia Missourian.

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.

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