St. Louis resident Jim Roos, in front of the offending sign. Photo by the Institute for Justice.

Good news for Saint Louisans: That “End Eminent Domain Abuse” sign that you can see at the intersection of Hwys. 44 and 55 is here to stay. In a partial free speech victory, the U.S. Supreme Court declined to hear the appeal of a circuit court ruling that struck down portions of Saint Louis City’s sign code for violating the free speech clause of the First Amendment.

For those of us in the Midwest, this is great news. This means that government cannot regulate signs and murals based on their content. And, as a result, the St. Louis Post-Dispatch reports that the offending portion of the city’s zoning code may have to be rewritten.

This is also a meaningful victory for anti-eminent domain activists in Saint Louis. Jim Roos, the plaintiff (pictured above), has had more than his fair share of struggles with city government. Using eminent domain, the city took 24 different properties from Sanctuary in the Ordinary, or managed by Neighborhood Enterprises, a nonprofit that provides low-income housing that Roos founded.

In protest, Roos painted the large “End Eminent Domain Abuse” sign on another property threatened with eminent domain. As a result, the city hit Roos with a citation, and said that a permit was required. He applied for a permit, only to be denied.  We wrote about this issue in 2011, in a post aptly titled, “Using Your Property to Criticize Us for Taking Your Property? You’d Better Believe That’s Illegal.”

Fortunately, Roos  and the Institute for Justice, a nonprofit libertarian public interest law firm, continued to challenge the city’s zoning code, leading to the partial free speech victory today.

Those of us in the 8th Circuit (Missouri, Arkansas, Iowa, Minnesota, Nebraska, North Dakota, and South Dakota) can take solace in knowing that our First Amendment rights are a little more secure. However, as Michael Bindas, the Institute for Justice attorney who represents Roos, pointed out, “Unfortunately, citizens in some other federal circuits do not enjoy the same protections that Jim’s case secured.”

Hopefully this case will help give victims of eminent domain abuse the courage to stand up and complain about it. Of course, the best victory for property owners would be for laws that allow eminent domain abuse to be repealed.

You can learn more about Jim Roos and the Institute for Justice here.

As a sunburn-prone person who rarely watches MTV, I am not exactly a big fan of Jersey Shore. But, I am a big fan of personal liberty, and if Snooki and her friends choose to tan themselves to an unnaturally orange hue, I will not try to stop them. After all, they are not trying to prevent me from slathering on sunscreen.

But, concerns about personal liberty do not appear to be stopping the Missouri Legislature from taking a stand against fake tans.

Missouri House Bill 1283, sponsored by Rep. Jay Barnes (R-Dist. 114), would make it a crime for anyone under the age of 15 to use a tanning bed. This legislation is not just about commercial tanning beds: The way the bill currently reads, it would be a Class C misdemeanor for a 14-year-old to use her parents’ tanning bed. If she tanned at a commercial tanning facility, the company would be subject to a $1,000 fine.

But wait. What if she has her parents’ permission to tan at a tanning facility? According to Barnes’ anti-tanning bill, her parents could be charged with a crime.

There are many things we do that are hazardous to our health, with and without our parents’ permission. The Missouri Legislature should not be preoccupied with trying to write laws to force us to do whatever they think is “right.”

The St. Louis Post-Dispatch has reported that the City of Saint Louis will be entering into an agreement to sell 1,200 parcels to NorthSide Regeneration, a company that has proposed an enormous development of the city.

Some might say that the agreement is a validation of the city’s strategy to hold property for development. But even though political points may be gained by trumpeting development before it occurs, development of these parcels has not actually happened.  As one writer put it, “…until development occurs on a large portion of the land, the strategy will only have proven that after three decades, the city has found someone else to mow the yard.”

Indeed, while the prospect of selling 1,200 city-owned properties is great news for the city and its residents, this single development will not remake Saint Louis, even if successful. The city has dug itself into an incredible vacancy hole that would require almost another nine developments like the NorthSide one — just to take care of the vacant property that the Saint Louis land bank, also known as the Land Reutilization Authority (LRA), owns. And this proposed development took years to come about.

According to St. Louis Magazine, the NorthSide development was in the works since at least 2003, and no comparable large-scale development has taken place in Saint Louis. If we are pinning our hopes on more developments like NorthSide, we have to wait another 40 years. How much land will the city have amassed by then?

As part of the Show-Me Institute’s review of the operations of the LRA, we collected a great deal of data to see how frequently the agency was accepting and rejecting offers to buy its vacant property. We found that the LRA rejected formal offers to purchase more than 2,200 different parcels between the years 2003 and 2010. That is certainly a larger number than the 1,200 parcels being discussed as part of the NorthSide deal.

Some may be curious as to whether offers in recent years to purchase LRA property were rejected in the NorthSide footprint.

The map below shows all offers to purchase LRA property, with larger marks indicating higher-value offers. Between 2003 and 2010, offers to purchase more than 300 different properties within the NorthSide boundary were rejected.

However, to make the situation complicated, offers to purchase more than 280 properties in the area were accepted. While some offers were rejected because the agency was holding the property for “planned unified development,” others were accepted.

What I find more troubling is the city’s bad (but recently abandoned) habit of holding property off of its public for-sale list. Up until the publication of Show-Me Institute research, almost half of LRA property was not advertised for sale. This was due in part to agency staff members and area aldermen designating property as “Class C,” meaning that it was not “suitable for public or private use.” In practice, that designation made it more difficult, if not impossible in some cases, for people to purchase vacant property. Below is a map showing parcels not advertised for sale in red, with LRA parcels advertised for sale in green. The NorthSide boundary is included for reference.

We only have records for formal, written offers to purchase LRA property. It is impossible to know how many would-be buyers were discouraged from buying property in the NorthSide footprint as a result of the LRA’s practices.

The failed Citadel Development in Kansas City. What would such a development spearheaded by a land bank look like? Photo by Josh Smith.

On Feb. 8, I testified in Jefferson City before legislators who are considering a bill to create a land bank in Kansas City. I was there to talk about the track record of a land bank that we already have in Missouri. You may know it as the Saint Louis Land Reutilization Authority (LRA). According to our research, the LRA has frequently rejected offers to buy vacant city property, and has practices that seem to invite political favoritism.

The bill being considered, House Bill 1659, would grant a Kansas City land bank the powers that the LRA currently enjoys, and more. I wonder why Kansas City needs a land bank, given the lack of successes that we have seen in Saint Louis. In fact, there already is a government entity that deals with vacant land in Kansas City. The Jackson County Land Trust currently takes ownership of tax-delinquent properties that fail to sell at tax auction, and works to sell them.

It may seem confusing, but the actions of a land trust can be drastically different than those of a land bank. A land trust generally does not attempt to acquire property for development nor does it take an active role in deciding what the best use of the property might be. A land bank can do both of those things.

As we have seen in Saint Louis and elsewhere, city government can do a very poor job when it comes to identifying successful future developments. The LRA is an example, as is Ballpark Village in Saint Louis. The failed Citadel Development in Kansas City (pictured above) provides perhaps the starkest, most recent example.

HB 1659 would require that all property the Jackson County Land Trust holds within Kansas City be transferred to the Kansas City Land Bank. During the House hearing of HB 1659, the bill’s co-sponsor, Missouri Rep. Michael Brown (D-Dist. 50), stated that this legislation would only involve property for which there are “plans.” Does Kansas City really have plans for all 2,800 parcels within its boundaries that the Land Trust currently holds?

Brown also noted that the Jackson County Land Trust is having difficulty returning property to private, productive use. Yet, in August 2003, the Kansas City Star reported that, since 2001, the Jackson County Land Trust had sold more than 1,100 properties for more than $1 million. This is a faster rate of sale than what we have seen in Saint Louis.

The land trust owns approximately 3,200 parcels, with approximately 2,800 in Kansas City. According to the last state audit that examined the Land Trust’s operations, the trust held 3,087 parcels in August 1999. By comparing that number to the land trust’s current holdings, it appears that, in the course of selling and acquiring properties by default, the land trust has added just a little more than 140 parcels to its inventory during the past decade.

For comparison purposes, the LRA has added more than 800 parcels to its inventory. The LRA has acquired about six times as much property as the Jackson County Land Trust, and from a parcel base less than half the size of Jackson County.

What evidence is there that the Land Trust is doing a poor job of getting property back into private ownership? It appears, purely from a numbers perspective, that the Land Trust has done an adequate job of selling property. And yet, based on our review of the past eight years of its operation, the Saint Louis LRA has struggled – due to political and structural issues – to get vacant property back into private, productive use.

Shouldn’t the Missouri Legislature require evidence showing that the Jackson County Land Trust is inadequate and that creating a land bank is in the best interests of state taxpayers and Kansas City residents before passing HB 1659?

Rep. Brown stated during the hearing that “We don’t know all the wonderful things that could happen with this land bank.” Perhaps we do have a glimpse, thanks to Saint Louis, of the failures that could occur.

Last week, Ben Barnes, a Show-Me Institute intern, wrote about the teacher tenure reform bill that Missouri legislators are considering. Reforming teacher tenure may seem like an abstract concept, but the consequences of our current law are very real.

Eric Hanushek, of Stanford University, found that a good teacher can help a student learn one and a half years of material during a single academic year while a bad teacher might only be able to help a student learn half a year’s worth of material. In other words, a good teacher can help a student achieve three times as much educational growth as a bad teacher. A push for teacher tenure reform is not just about holding teachers accountable, it is about creating a way for school districts to get rid of ineffective teachers in order to help students learn more and from better teachers.

It appears that teaching is one of the most secure jobs in the state of Missouri. According to national data, few Missouri teachers are terminated in a given year.

But, I am curious about specific school districts, not just an estimated average across numerous schools. For school districts throughout the state, what number of teachers were terminated during the past 10 years? Are most dismissed teachers new to the profession (and have not yet achieved tenure), with very few being dismissed after achieving tenure? We are still doing research on this issue, but the preliminary data looks like teaching has an extraordinary level of job security.

Consider the following:

• In the past 10 years, the Cape Girardeau School District, which employs approximately 350 teachers, has terminated just two tenured teachers.

• During the same time, the Parkway School District, which employs more than 1,200 teachers, has terminated five.

• The Springfield School District, which has more than 1,600 teachers, has terminated fewer than 10 teachers in the past five years.

• The Van Buren School District, in its response to a Sunshine Law request, noted that “no teachers …were asked to leave, were terminated, or were fired by the district” during the past 10 years.

• The Shelby County R-IV School District has not terminated any teachers during the past 10 years.

• The last time the Gilman City R-IV School District terminated any teachers was during the 2002-03 school year. That year, two teachers were terminated.

Perhaps Missouri is inundated with high-quality teachers to the point that, over a 10-year period, some school districts have termination rates of as little as 0.4 percent. But, the case may be that poor teachers continue to teach at school districts that cannot (or will not) terminate them for performance reasons. And this means that some Missouri students will continue to receive a low-quality education.

Instead of keeping on the best and the worst teachers, it is time let school districts encourage the worst teachers to find new jobs, while rewarding the best teachers with pay boosts. Missouri House Bill 1526 is certainly a step in the right direction.

In yesterday’s St. Louis Post-Dispatch, Frank LoMonte writes that teacher tenure reform might result in public school journalism teachers being punished for helping students report on contentious topics.

LoMonte writes:

But there can be no debate on how ending tenure will impact the teaching of journalism in public schools. It will effectively end it.

As a graduate of the University of Missouri’s journalism school, I cannot help but sympathize with LoMonte’s fear. But I am not sure that it is grounded in much reality.

Free speech is already limited in schools. LoMonte does not mention this, but high school newspapers are not forums for free speech. The U.S. Supreme Court (in a case that originated in Hazelwood, Mo., no less)  ruled in 1988 that school administrators could censor drafts of the high school newspaper if they can demonstrate that there is an educational purpose for the censorship. Currently, students cannot freely report on any topic they wish.

Administrators already can (and do) punish journalism teachers. LoMonte lists several ways that journalism teachers can be punished for encouraging students to question the operations of their schools. He writes that teachers can be fired, demoted, or transferred as punishment. But arguing that these options will become available if teacher tenure reform is passed is incorrect. Demotion and transferal are already available to school administrators if they want to punish teachers. Firing is as well, though it is very difficult.

The following cases that LoMonte recounts are deplorable:

Teachers like Darryl Adams, who was stripped of his journalism duties after his principal questioned his loyalty for refusing to censor an editorial critical of the school’s random student searches. Teachers like Teri Hu, who was reassigned — and whose students were threatened with discipline — after the newspaper accurately revealed that the school was out of compliance with district regulations on the use of teaching assistants.

But they are all possible under Missouri’s existing teacher tenure law.

Journalism teachers are a small fraction of the total teaching force in Missouri. Perhaps some marginal number of journalism teachers will be fired if teacher tenure reform passes. And, perhaps their firings will be due to encouraging students to pursue meaningful and contentious journalism. I agree that this is a disturbing possibility. But many of our smallest districts likely have no student paper. Elementary, middle, and high school math teachers, for example, certainly outnumber journalism teachers significantly.

In life, there are always difficult trade-offs. And we have to consider whether preserving the jobs of a few good journalism teachers is worth keeping teachers who have a track record of failing students in the classroom.  I would argue that illiterate students and students who cannot do simple arithmetic are problems that we need to address first.

Student speech exists outside of the classroom. Sadly, LoMonte ignores the possibility that students can exercise their right to free speech openly and outside of the classroom. When I was in high school, I was part of a group of students that started a monthly print newspaper during our free time — because we knew that the student paper could, thanks to that Supreme Court decision, be censored.

We wrote about high school dropouts, janitors who had been hired despite having a criminal record, and other topics that likely would have been tough to have printed in the official school newspaper. Given the rebellious nature of most teenagers, and the ease of online publishing, I trust that students will continue to express their right to free speech, even if they cannot do it within the pages of a district-financed paper.

The St. Louis Land Reutilization Authority (LRA) met today to consider offers to purchase vacant property. The LRA, part of Saint Louis City government, is the largest owner of vacant property in the city.

Our research showed in 2011 that the LRA had a track record of frequently rejecting offers to buy city property, often for no discernible reason. The agency would cite “lack of aldermanic input” when rejecting offers, or plans for “future development” that would fail to materialize.

I have written here about improvements to the LRA’s practices that were made in the wake of the publication of our research and the resulting media attention.

This month’s meeting went pretty well – most offers to purchase property were accepted or countered (meaning the LRA asked for a higher purchase price or change in contingencies). However, I still cannot help but think that Saint Louis City aldermen still have outsize influence over whether the agency accepts or rejects offers to purchase property.

An offer from Transformation Christian Church and World Outreach Center to purchase four properties illustrates this well.  LRA staff members recommended that the church’s offer be rejected. However, former Alderwoman Irene Smith (ward 1) spoke on behalf of the church during the meeting and managed to sway the commission. It seemed that the decision of whether to sell the property hinged on whether the area alderman was supportive of the sale.

Smith, speaking to the commission, noted that the church had spoken with Alderman Sam Moore, saying that after “swapping” some property with him, he had agreed to provide a letter supporting the sale of LRA property to the church.

But LRA Chairman Mark Wells initially would not recommend moving to sell the property, saying that “Based on the information we got from Alderman Moore, I think more discussion is needed.”

Smith responded: “We’re taken aback by that. We sat down with Alderman Moore.”

Ultimately, the commission moved to counter the church’s offer instead of rejecting it. And I am glad — the church has a history of purchasing, maintaining, and rebuilding LRA property.

But, I wonder: If the church has a track record of being a strong community resource and has the funds to buy the vacant city property, why does it matter what the alderman thinks? The LRA does not have to consider the input of an area alderman. The agency’s authority was established under state law, and the LRA law does not suggest that the agency consider the input of any political officials. Saint Louis government has implemented this practice by choice.

You can download the LRA’s meeting agenda (with a few of my notes) here.

Two failing charter schools in Saint Louis City will be closed at the end of this school year. You may remember the St. Louis Post-Dispatch’s somewhat sordid saga of Imagine Schools that was recently published.

It might sound harsh, but this is exactly what is supposed to happen with charter schools: We should let the good ones flourish and try to replicate their success, and close schools that are not meeting students’ needs.

Just because a school is a charter school does not guarantee student academic success. It is important to close failing schools, whether they are traditional public schools or charter schools. Nobody benefits from keeping open a school that is failing its students.

For more on the Imagine closings, check out our latest Show-Me video below.

It is no secret that Missouri Rep. Scott Dieckhaus (R-Washington, Mo.) is not a fan of Missouri’s teacher tenure law. Last year, he filed legislation to require annual teacher evaluations. Under that bill, the public school teachers who perform best would receive four-year teaching contracts, and those performing the worst would receive single-year contracts. If poor teachers failed to improve, they could be terminated.

There also was good news for some teachers in Dieckhaus’ 2011 legislation. The proposal called for the best teachers to be paid at least twice as much as the poorest-performing teachers. While this may seem like common sense (why not pay the best teachers more, as a reward for their effort?), it runs contrary to the current system of paying Missouri public school teachers.

The 2011 legislation did not pass. However, Dieckhaus is considering submitting tenure reform legislation again this year. The bill is not yet available, but I have listed two areas of reform that are needed to help improve student academic achievement in Missouri. Our priority should be educating  children, not rewarding those who happen to have been teaching for the longest period of time.

Let’s pay good teachers more: In Missouri, teachers are paid under what is known as a “teacher salary schedule.” Broadly, teachers who have more years of experience and higher levels of education are paid more (here is an example). At many school districts, these are the only components of teacher pay — teachers who teach difficult subjects, at-risk students, and teachers who have the best track record of helping students learn do not get a pay boost.

Teachers who do a poor job of teaching students can actually earn more than the good teachers if the poor teachers have a higher education level and/or more years of teaching experience.

Dieckhaus told the St. Louis Post-Dispatch in 2011 that ”It’s time we move away from paying people based on how long they’ve been teaching and what piece of paper they have hanging on the wall.” I certainly agree.

Paired with the issue of teacher compensation is the question of how to deal with teachers who have a track record of failing to teach students. Right now, those teachers can stay at a district for years, if not indefinitely.

Let’s help school districts get rid of bad teachers: State law awards teachers “indefinite contracts” if they have taught at the same school district for at least five years. These “permanent teachers” can be terminated, but only through a lengthy process. If a school district terminates a teacher (after going through all of the notification requirements specified by state law), that teacher can appeal the termination, triggering a court case. If the teacher wins in court, the school district must pay that teacher all of the compensation he or she would have received had he or she stayed at the district during the period of appeal.

I suppose that if you are trying to discourage teacher termination, the above makes sense. But, as a state, our concern should not be to hire and keep on as many teachers as possible. We should instead be concerned with how to provide quality education to students. Allowing failing teachers to continue to teach students does nothing to help students, and may be hurting them.

It is an uncomfortable truth, but one we must acknowledge. As U.S. Secretary of Education Arne Duncan put it, “We can no longer pretend that all teachers or all principals are from Lake Woebegone where everyone is above average.” Many academic studies have shown that teacher quality matters. Eric Hanushek, an education economist at Stanford University, has shown that good teachers can teach students three times as much as bad teachers — in a single year. Improving student academic achievement can be achieved in part by attracting more good teachers to the profession, and encouraging the bad teachers to leave the field.

I hope that the 2012 teacher tenure reform legislation can help enable school districts to have more autonomy when it comes to rewarding good teachers and terminating the worst teachers. When the full text of the bill becomes available, I will post my take on it here.

The St. Louis Post-Dispatch editorial board is urging Missouri Gov. Jay Nixon (D) to stall the awarding of state tax credits. Why? Missouri is facing an estimated budget shortfall of $500 million, a number very close to annual state tax credit awards. As the Post editorial points out, tax credits for corporate welfare have grown unabated while funding for schools has been cut.

Tax credit reform is difficult. We saw that during the last legislative session, and during the Tax Credit Review Commission’s hearings (beneficiaries of state tax credits tend to fight hard to keep their credits). And those interested in benefiting from a new tax credit program seem to fight almost even harder to establish a new program.

Perhaps more difficult for politicians is the fact that tax credit reform does not cut cleanly along party lines. Some Republican legislators strongly support tax credit reform, while others oppose it — just as some Democrat legislators strongly support reform, while others oppose it (or even advocate for the creation of new programs).

I disagree with the Post’s rosy optimism that Nixon will act responsibly. Our governor has a history of waffling on tax credit reform, something my colleagues at the Show-Me Institute have documented repeatedly. He also seemingly likes to travel to announce the “creation” of jobs under questionable state tax incentive programs. Personally, I would pin tax credit reform hopes on legislators.

Did you know a single committee might have the power to vote to halt some tax credit programs this year?

According to state law, “…no new tax credits, except the senior citizens property tax credit…shall be issued or certified…unless the estimate of such credits have been reviewed and approved by a majority of the senate appropriations committee and house budget committee.”

If a majority of either the Missouri House or Senate committees referenced vote to not approve one or more of the more egregious tax credit program estimates (and there are several), then perhaps no money would be issued for those programs this year.  Under this scenario, the daunting challenge of convincing many legislators who may have constituents and contributors who benefit greatly from tax credit programs seems to be reduced.

It is time for legislators to put the needs of Missouri taxpayers ahead of their own political concerns. Concerns about party politics should not dictate the budget solutions pursued in 2012.

The state is facing a budget shortfall of hundreds of millions — perhaps approximately $500 million. Defunding a few of the more wasteful tax credit programs could certainly help address that. And it may be easier to do than some may think.

Just in time for holiday travel, the National Transportation Safety Board (NTSB) recommended banning the use of cell phones while driving. The news came when the NTSB completed its investigation of a tragic accident that occurred in Missouri in which two people died and another 38 were injured.

This provides the perfect narrative for what some might consider to be very compelling and policy-minded journalism: A tragedy has occurred and a cell phone was involved. Shouldn’t there be a law against that?

Consider this line from the New York Times’ series of articles on the subject: “With virtually every American owning a cellphone, distracted driving has become a threat on the nation’s roads.” Indeed, in September 2009, the newspaper wrote that it was time to crack down, saying that “…texting at the wheel is a national hazard that calls for a firm federal response.”

This weekend, I heard an interview on National Public Radio with Matt Richtel, the author of several Times articles regarding the dangers of cell phone use while driving, discussing whether he considered himself to be an advocate. Richtel provided the standard journalist line, saying that he just thinks it is important to ask tough questions.

Well, here are two more.

1. Traffic fatalities, crashes, accidents, etc. have declined dramatically. If driving is safer than ever, why is there such concern?

The argument I hear again and again (most recently when I sat in on Donnybrook) is that banning cell phones while driving is about safety. However, Missourinet reports that this year, traffic fatalities are headed for a 62-year low. The same trend is seen on the national level. Fatality, injury, and crash rates have all declined substantially since 1990.

If fatalities, crashes, and injuries are down, then I hardly think that we are experiencing a “national hazard” that warrants an outright ban on cell phone use while driving. Of course, there have been accidents where cell phones were clearly the cause. However, with traffic accidents and fatalities down during the same time period that cell phones became popular, cell phone use is clearly not as dangerous as some fear.

And, even if an action comes with a small amount of risk, that does not mean we should pass a law to ban it. In fact, driving with children in the car may be more distracting than those pesky cell phones. Should we ban driving with children? Are we in the midst of a national driving-with-children epidemic?

2. How could this possibly be enforced? And, do we really want to create another vague reason to stop and question citizens?

How on earth could a ban on cell phone use be enforced? Would a police officer be able to pull you over if you look down briefly while driving? How could the officer discern whether you are talking on a hands-free phone or merely singing along to the radio?

The New York Times should know better than to advocate for additional vague ways for police to stop and question individuals. After all, the Times did an excellent study of a “stop, question, and frisk” policing policy. The newspaper found that after a drastic decline in violent crimes in New York City, the number of stops the police made increased dramatically.

Knowing that police officers can sometimes abuse their ability to stop, question, search, and detain individuals, why would anyone advocate for more vague reasons to stop and question people? Driving dangerously is already illegal. What more do cell phone ban advocates need?

Indeed, the last thing I want to see after the passage of federal legislation that allows for the indefinite detention of U.S. citizens on U.S. soil is another vague reason that police can use to stop and search citizens.

The solution is not to ban cell phones.

I do not condone texting while driving. I also am not a fan of eating while driving, or letting your adorable pet distract you while driving. Though it would make an excellent point and is legal, I do not recommend that you hold a banana to your ear and pretend to talk to it while driving.

I was in a nearly fatal car accident when my family first moved to Michigan. The culprit? Ice. Should driving in Michigan be banned from October through April? Obviously not. Instead, I support independent groups working to inform drivers about dangerous winter driving conditions. Similarly, efforts to educate drivers about the dangers of distracted driving may end up saving lives.

But an outright ban? It is an overreaction to a tragedy.

A Missouri House committee heard testimony Wednesday from the soon-to-be former director of the Missouri Department of Economic Development (DED), David Kerr.

Kerr’s testimony follows testimony from Moberly officials on Tuesday. A key point of Kerr’s testimony was that it would be a poor use of time and effort for the DED to double check the claims that every business makes when seeking incentives. Kerr said that if every business seeking incentives is treated as a criminal, fewer businesses will come to Missouri. I think that if a background check would deter a CEO with a history of passing bad checks from applying for tax credits, it might be appropriate.

There are two broad issues that legislators and the general public should consider in light of Mamtek. The first is that government officials (and others) mistakenly believe that with the right subsidy package and safeguards, they can eliminate all or nearly all of the risk associated with using public dollars to subsidize a private business. Any business can fail, due to its own negligence, or due to factors beyond its control. Public financing for a project cannot guarantee success, though it may prop up a business that otherwise would not be profitable without taxpayer money. Furthermore, as we may see in Moberly, no matter how many safeguards are used, the result may be that taxpayers are left holding the bag.

The second issue that may be at the heart of the Mamtek debacle is the fact that people and businesses will strive to get the largest benefit for the least amount of effort. That behavior has been seen in Missouri with gaming the requirements of the Missouri Quality Jobs tax credits and the general tendency of companies trying to access as many subsidy programs with a single project. It also has happened in China, where shoddy construction work on a high-speed train may have resulted in at least 39 deaths, along with corruption charges and the misuse of public funds.

As an outside observer, I don’t know whether any of those involved (Mamtek, the DED, current and former top state officials, etc.) deliberately misled anyone. There are ongoing criminal and civil investigations that may determine that.

However, the testimony that the House committee has heard so far sounds bleak, particularly the state’s investigation of the Mamtek company. The Columbia Daily Tribune posted the House committee information packet on Mamtek, and portions of it are riveting.

For example, one point of contention is whether Mamtek ever had an operating plant in China, as the company claimed in its project summary. The company wrote:

As of December 2009, Mamtek had moved from development into manufacturing and sales. We have completed both an 18-ton pilot production line and a full-scale, fully-functional [sic] 60 ton line (metric tons per annum). Each step and detail in the manufacturing and operational processes have been verified independently by the international patent firm Perkins Cole (page 27 of the House committee packet).

And then, Michael Wise, the patent attorney of Perkins Cole, a company closely affiliated with Mamtek, allegedly told the Moberly Economic Development Corporation that he had seen the plant himself, and that it had been operational for several years (page 43).

But yet, in April 2010, attorney Edward Li, a Chinese trade consultant for the Missouri Department of Agriculture, wrote to state officials to say that construction of a plant in China began in 2008, but was never completed (page 5).

Greg Havener, at the DED, wrote in an email with the subject “RE: BUILD PROJECT RUSH”  that he couldn’t find much information about Mamtek. “There is little on Google, oh well it will be a ’thin report,’ “ he wrote (page 41). That email was sent on June 3, 2010, days before state incentives for Mamtek were approved.

Oh well, indeed. It is my prediction that while the future of Mamtek is uncertain, and while the financial future of the city of Moberly and its 13,000 residents is uncertain, the future of the DED is not.

In the private sector, if a business makes a $40 million mistake, it suffers dire consequences. For many businesses, that kind of mistake can result in bankruptcy. If no substantive reform is implemented at the DED, its operations will continue as usual. In the past, that has meant tax credits awarded to voided projects, inflated job and investment numbers, and vast amounts of taxpayer dollars going to incredibly inefficient programs.

I hope this episode will lead to major changes at the DED. If a more thorough investigation on each development package leads to fewer development handouts, that is a good thing.