July 28, 2014

Do We Need Amendment 7 To Match Federal Highway Dollars?

Representatives from the Missouri Department of Transportation (MoDOT) often warn that without more money, be it from a transportation sales tax or elsewhere, Missouri will not be able to match federal dollars for highways. Essentially, they are saying that if the state does not raise more money, it will leave eight to 10 times that amount in federal dollars on the table. However, these statements fail to clarify that: 1.) the federal dollars going to Missouri are limited, and 2.) the amount Missouri needs to match those funds is nowhere near $534,000,000 per year (the annual amount Amendment 7 would raise).

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Federal dollars for highway improvements is a fixed amount that comes for the federal Highway Trust Fund, which the federal fuel taxes mainly support. The amount that Missouri currently receives is fixed by federal obligation limitations and the proportion that the state received in the past. State lane mileage and vehicle activity mostly determined the portion the state received in the past. Simply put, the amount of money available for state highway projects is mostly fixed, and currently, Missouri does not leave any money on the table. If Missouri decided to spend an extra billion dollars this year, it is unlikely that federal money to the state would increase.

According to MoDOT’s cautious projections, in which the federal government reduces its support to Missouri, the state will begin failing to match federal funds in 2020, leaving $186 million on the table. But to meet that match (of 80 percent federal, 20 percent state) Missouri would only have to increase local revenue by just less than $50 million, nowhere near the current $534 million proposal.

If we assume that the federal government fixes the federal highway funding problems and support does not decrease, the problem of matching funds is larger. By 2022, Missouri would be leaving about $530 million of federal dollars unmatched. However, under that scenario, Missouri would only have to increase local revenue by $130 million per year to get that money.

When it comes to federal dollars, unless there are major policy changes in Washington, the amount Missouri could get for the highways is relatively fixed whether or not Missouri raises taxes. While Missouri may lose the ability to match those dollars in the future, Missouri will eventually need to raise annually between only $50 million and $130 million. If Amendment 7 passes, the federal government will not make it rain; if the amendment fails, the sky is not going to fall.

July 16, 2014

The Report The Airport Advisory Group Doesn’t Want You To See

Granted, that is a cliché title, but we can defend it. Twice, Show-Me Institute staff reached out to the Kansas City Airport Terminal Advisory Group (ATAG) about incorrect claims they were making in their presentations. We know from an open records request that they received our offer, considered it, and then ignored it while trying not to seem like they were ignoring it.

Dave Fowler, co-chairman of ATAG and a former managing partner at KPMG in Kansas City — one of the world’s largest auditing firms, — shockingly wasn’t ever concerned with the cost details. And whenever people provided financial information that did not align with the city’s talking points, it was dismissed. The affordability of the whole scheme was never seriously considered.

Until now.

Joe Miller, a policy researcher at the Show-Me Institute, has compiled all the cost data and concluded that over 30 years, it would be cheaper to renovate the Kansas City International Airport (MCI) twice than to build a new $1.2 billion terminal. Add this analysis to the many other points we’ve raised about the environmental or competitive need for a new terminal and it becomes impossible to find any worthwhile reason to tear down one of the country’s finest airports.

July 8, 2014

The Math Does Not Add Up For Murky Kansas City Streetcar Deal

In a previous post, we commented on how officials from Kansas City and the Missouri Department of Transportation (MoDOT) are hammering out a deal to divert $144 million of the proceeds from the proposed statewide sales tax to the Kansas City streetcar. According to the Kansas City Business Journal and the Kansas City Star, the plan will cap the sales tax increase in downtown Kansas City at 1 percent (0.25 percent for the streetcar Transportation Development District, or TDD, and 0.75 percent for the proposed statewide sales tax).

Source: Kansas City Business Journal

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Speaking of bad math, the cost of the projects in MARC’s chart (above) adds up to $800.4 million, not $775.7 million. So what’s getting cut? Does anyone check these things? 

On the surface, that sounds great for residents of downtown Kansas City (if not elsewhere). Previously, they were asked to pay a 1 percent higher sales tax to get the streetcar expansion. Now, they still pay 1 percent more, but they get other road and transit projects that state taxpayers fund, in addition to the streetcar expansion.

Haven’t seen a deal like that since Billy Mays died. But wait, there’s more!

Actually, the math for that “swap” does not work. The TDD’s 1 percent sales tax was supposed to bring in approximately $30 million a year. If the city reduces that rate to 0.25 percent, it will create a funding gap of almost exactly $210 million. That’s the reason the city was originally asking for $210 million; it was not some random number (although the city is not beyond doing that).

Drop the amount that streetcar gets from the state to $144 million, and a $65 million funding gap opens up. And remember that the original plan already had a $31 million unresolved budget gap. That leaves almost $100 million up in the air, ready to come crashing down on Kansas City taxpayers. Unless there is some other very large source of funding for the streetcar, the TDD sales tax cannot be held to 0.25 percent. It would need to rise to about 0.50 percent to maintain adequate funding (but still not addressing the initial $31 million shortfall).

The underlying problem is the incredible expense of building a streetcar system. Even if the federal government and Missouri taxpayers cover massive portions of the streetcar’s cost, there’s still a significant burden for residents in downtown Kansas City. Residents in the proposed TDD, Kansas City, and state will have to decide whether the streetcar is worth it.

July 7, 2014

Kansas City’s Murky Streetcar Deal Goes Public

During the last couple of weeks, we have commented about the developing story of the closed-door dealings between Kansas City officials and the Missouri Department of Transportation (MoDOT) regarding the future of the streetcar and the proposed 0.75 percent statewide transportation sales tax. We also have pointed out how this process arbitrarily discards the regional priorities that a transparent public process created. Both of these terrible transportation policies are on the Aug. 5 ballot, so naturally Kansas City officials were worried that a whopping 1.75 percent increase in the sales tax for downtown Kansas City might end in mutual defeat.

Kansas City officials cooked up a plan that would make the tax increase a more palatable 1 percent in downtown Kansas City. They proposed a “swap” that would cap the streetcar’s Transportation Development District (TDD) sales tax at 0.25 percent on condition that the 0.75 percent sales tax passed (a total tax increase of 1 percent). In return, they called for $210 million to be diverted to the streetcar to make up for lost revenue. As we noted, that incredible amount of money could only result in virtually no money for other transit improvements or cuts to road funding. The media in Kansas City, despite ample evidence of a burgeoning deal, did not report on the story until the day before the long Fourth of July weekend.

The Kansas City Business Journal finally reported on July 3 that a deal was in the works, with $144 million going to the Kansas City streetcar, accompanied with sharp cuts to other transit and pedestrian improvement projects. That means about 18 percent of all regional transportation funds will be diverted to a questionable development scheme in downtown Kansas City, should the transportation sales tax pass.

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Both the Business Journal and the Star reported that the plan to cap the downtown tax increase at 1 percent is part of the deal, even though simply arithmetic makes this simple “swap” impossible (as a future post will detail).

This murky deal is the worst type of policy making. The “swap” essentially makes the streetcar policy and the transportation sales tax more politically palatable to those living in downtown Kansas City by making state taxpayers unwittingly pay for a massive share of the streetcar. This is the type of bargain that is only necessary because the state and Kansas City plan to spend huge sums on wasteful “transportation” projects, and only possible because a sales tax means that who pays has nothing to do with who benefits.

June 30, 2014

Blame Canada Washington!

Austin Alonzo, of the Kansas City Business Journal, recently reported that Kansas City Mayor Sly James argued that a door-to-door public outreach effort that Burns & McDonnell will conduct is necessary to meet federal guidelines:

On Monday, Mayor Sly James said the work being performed by Kansas City’s Parson & Associates LLC and Scott Hall & Associates will help the city fulfill a federal requirement to incorporate an environmental assessment into the expansion routes so the city is eligible to receive federal funding.

“If this assessment is not completed, then the city will have no opportunity to receive federal funding,” James said in the statement.

The effort is the subject of an ethics complaint that opponents to the streetcar sales and property taxes have filed, claiming it is electioneering. Alonzo followed up with the federal agency awarding the grants and found there is no such requirement.

No federal mandate requires Kansas City or its contractors to hold door-to-door meetings before part of the city votes on a proposed extension of the streetcar project, according to the Federal Transit Administration.

This is not the first time the mayor and Kansas City officials have been caught trying to blame federal regulators for forcing the city to adopt questionable policies. Steve Vockrodt, at The Pitch, just penned a piece pointing out that the EPA has never cited the Kansas City airport for environmental shortcomings:

City officials distributed a fact sheet in April 2013 that said KCI couldn’t meet U.S. Environmental Protection Agency guidelines for capturing de-icing runoff.

“The current terminal infrastructure does not allow the airport to meet the EPA’s new standards for capturing deicing fluids, which require capturing about 30 percent of the run-off,” the fact sheet reads. “The new single terminal will capture nearly 100 percent of the runoff and resolve Environmental Protection Agency issues the airport is currently facing.”

But there is no such EPA guideline.

Two EPA officials contacted by The Pitch could not identify any published guidelines that call for the capture of 30 percent of de-icing fluids.

And let us not forget the recently ended bid for the GOP convention, in which Mayor James argued that it was necessary to spend hundreds of thousands of dollars, in secret, just to keep up.

The Show-Me State’s Harry Truman once famously quipped, “The buck stops here.” But in Kansas City, Mayor James and Kansas City government officials point the finger elsewhere and the bucks don’t stop at all.

June 27, 2014

Kansas City To Spend 27 Percent Of All Regional Transportation Funds On Streetcar

In a recent article, the Midtown KC Post reported that Kansas City officials reached an agreement with the Missouri Department of Transportation (MoDOT) to fund the proposed streetcar expansion with proceeds from a proposed 0.75-cent statewide sales tax. Under the agreement, the streetcar’s Transportation Development District (TDD) sales tax would be reduced to 0.25 percent. In return, MoDOT would provide $3 million a year in funding for the streetcar.

But anyone who has read the streetcar’s financial plan knows the math for that “swap” does not add up. The streetcar TDD’s sales tax is supposed to bring in almost $30 million a year. If it is reduced to 0.25 percent, the TDD would only raise $7.5 million per year. With an extra $3 million a year from the state, that leaves almost $20 million per year in lost revenue unaccounted for, or $200 million over 10 years. Because the streetcar needs every dime (and then some) of that sales tax money, where is the extra $200 million going to come from?

The answer to this conundrum lies in Resolution 140500, which Kansas City Mayor Sly James introduced on June 19. It proposes spending an incredible $210 million of the 0.75-cent statewide sales tax revenue to fund the streetcar expansion. To get just how incredible of a request that is, consider that the Kansas City region is only supposed to receive a total of $776 million for all of its road, bridge, transit, rail, port, aviation, and greenway projects. In the plan that the regional planning agency (MARC) released, that is almost every dollar the region planned to spend on transit. That original plan had $32 million for the streetcar, but millions more for improvements throughout the entire region.

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This money grab for what is essentially a development scheme for downtown Kansas City should enrage not only residents in the Kansas City region, but taxpayers throughout the state. For parts of the Kansas City region not called downtown Kansas City, it essentially means no new funds for more cost-effective transit solutions or other more pressing projects. For the state as a whole, it underlines the incredible waste of a transportation sales tax supposedly needed to fix MoDOT’s highway funding problems. That 4 percent of all sales tax revenue raised over 10 years would go to support an incredibly expensive want with dubious development potential makes the proponents of the sales tax, who constantly argue that our infrastructure is crumbling, look like chicken littles.

If reports are accurate, MoDOT may already have made an agreement with Kansas City to divert this vast sum of statewide sales tax revenue, completely upending the open process through which MARC developed its regional plan and entirely contradicting MoDOT’s preliminary list of projects (which Kansas Citians have been asked to fruitlessly comment on) for the Kansas City region. That should indicate to Missourians just what kind of policy the transportation sales tax would create: wasteful, opaque, and catered to special interests.

Lovely Rita’s New Meters

Yesterday, I attended a town hall meeting that the Saint Louis Treasurer’s office hosted regarding citizen feedback on the parking technology field tests in downtown Saint Louis and the Central West End. The city is running these tests in order to modernize parking operations in the city. The vendors included T2 Systems, Aparc Systems, Xerox, and Duncan Solutions. All of the vendors gave impressive demonstrations.

The city should go state-of-the-art with its technological upgrades, no half measures. People have told me, and I agree, that it is annoying to have to go to a centralized meter, pay, wait for a printout, and then go all the way back to the car to place the printout. It is an added pain to go refill the meter when there is heavy rain or snow outside. If the city upgrades its meters, it should either have a meter at each individual space and/or allow people to pay through a smartphone app. At the town hall, all of the vendors stated that they will allow people to pay through a smartphone.

There also should be some flexibility in regards to charging different prices based on the time of day. During busier times, the prices for parking should increase. During quieter times, prices should be lower. This would allow the city to properly react to the demand for parking and hopefully reduce congestion.

However, no matter the appeal of state-of-the-art technology, the city needs to balance that against the costs of the upgrades. Added parking convenience is one thing, but the city should not break the bank for it.

Overall, it is good to see the city looking to upgrade its parking systems. With all that we can do with digital technology, it is about time parking meters join the 21st century.

June 26, 2014

Tell Taxpayers Where Their Money Went

The Republican Party has eliminated Kansas City as a potential host city for the 2016 convention, and with it went any reason for keeping the details of the bid a secret. In April we wrote:

The mayor of Kansas City, Mo., disclosed that the city is ponying up another $65,000 to woo the 2016 Republican convention. Jackson Co., Mo., Wyandotte Co./Kansas City, Kan., and Johnson Co., Kan., also are chipping in an additional $65,000 each. This $260,000 total is in addition to the $100,000 that Kansas City, Mo., already spent. We participated in a KSHB TV story about the spending and asserted that taxpayers ought to be told what is being promised in their name.

At the time, the mayor and the convention committee refused to tell taxpayers how much money the city was spending, where it was going, or how much more was promised. According to the Kansas City Star:

The Star filed a Sunshine Law request with the city and the Kansas City Convention Visitors Association asking for information from the proposal on the potential public cost of the convention.

Both declined, citing state law — and a concern about revealing details of the bid to competing communities.

“We will not be addressing specific questions related to the Finance section of our response,” said an email from Julie Sally, a spokeswoman for the Kansas City convention task force.

City spokesman Chris Hernandez also declined to provide the requested information, as did Mike Burke, the attorney for the KCCVA.

Now that there is no risk of compromising the bid, the city and the KCCVA should reveal what commitments they made, where the money went, and to whom. Their economic impact projections for the convention were pretty wild, too. We would like to see who generated those, and how.

June 18, 2014

Thank Obamacare: Buchanan County, Mo., Tops List For Insurance Rate Hikes On Men

Last year, Forbes published a story about how much insurance rates were expected to rise across the country because of Obamacare. Today, Avik Roy and his crew published their follow-up. The study has bad news for just about everybody, but our own Buchanan County appears to have been hit especially hard by the President’s signature legislation. (Emphasis mine.)

Our new county-by-county analysis was led by Yegeniy Feyman, who compiled the county-based data for 27-year-olds, 40-year-olds, and 64-year-olds, segregated by gender. We were able to obtain data for 3,137 of the United States’ 3,144 counties….

Among men, the county with the greatest increase in insurance prices from 2013 to 2014 was Buchanan County, Missouri, about 45 miles north of Kansas City: 271 percent. Among women, the “winner” was Goodhue County, Minnesota, about an hour southwest of Minneapolis: 200 percent. Overall, the counties of Nevada, North Carolina, Minnesota, and Arkansas haven experienced the largest rate hikes under the law.

Amazingly, that 271 percent figure conceals something else about Buchanan that is just jaw-dropping. If you use Forbes’ national rate navigator, you discover that a 27-year-old man in Buchanan County can expect an individual insurance policy rate increase of — get this — 411 percent.

This is “affordable”? How can any politician tell his or her constituents with a straight face that Obamacare is working, or that we need to help the Feds implement this disaster in Missouri? Missouri needs market-based insurance reforms, not Obamacare and its Medicaid expansion. Our people deserve better than this raw deal.

June 16, 2014

User Fees Are A Better Way To Fund State Roads

In his latest Kansas City Star column, Dave Helling argues that it might be correct that everyone should pay for Missouri’s highways and bi-ways, not just the people using the roads. His argument is that we all benefit in some way, therefore, all of us should pay.

This argument is doubly flawed. First, in a user-pay system, the individual who doesn’t drive still pays for the road through the cost of the products he or she buys. This is factored in as companies have to take into account the cost of gas used to ship their goods; that cost varies based on the amount of highway required to move that good. Paying for the highway through user fees places a large direct cost on shipping companies and frequent drivers (who benefit greatly) and a tiny cost on those who do not drive but purchase shipped goods. Additionally, by paying for the shipped good based on its actual transport costs, user fees promote long-term economic prosperity because they encourage local products and efficient supply chains.

Second, all goods, services, and factors of production have indirect benefits. Take the example of a sandwich shop. Sure, those who eat the sandwiches benefit the most from the shop, but we all benefit from the new employment, the productivity of well-fed customers, and neighborhoods with vibrant businesses. So why make shop customers pay? Missouri could open sandwich shops, give the food away, and support the stores with general taxes.

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The logical conclusion here is a planned economy, which Helling and others making this argument would not support. But placing aside the polemics, there are good economic reasons that disconnecting the user of a good from the cost of that good is bad policy. Governments will have no way of ascertaining the economically efficient supply of highways for drivers (much less indirect benefits), likely resulting in a highway system that is simultaneously wasteful and inefficient. The lack of user fees on driving will subsidize the activity, leading to more waste and negative externalities such as congestion, more urban sprawl, and ultimately higher costs for the Missouri Department of Transportation (MoDOT).

Some goods and services (police, public parks) that the government provides may require general taxes for support. However, where possible, it is both fair and economically efficient for users to pay. That is the basis for Missouri’s state road spending right now. To change this model away from user fees will unfairly subsidize heavy road users and damage Missouri’s economy in the long run.

June 6, 2014

Ballpark Village Crushing It . . .

It seems that state and local development officials hit a home run when they decided to subsidize the construction of Ballpark Village. Yet, as I mentioned in my post last month, other local businesses feared that while Ballpark Village would do well, they would suffer losses. Their fear is now turning into reality.

Ballpark Village 2

As reported in the St. Louis Business Journal, bars and restaurants are taking serious hits to their sales. For example, Paddy O’s, a popular bar for pre-game and post-game activities, is expecting to draw $1.3 million in revenue this baseball season, a far cry from the $2.5 million they received last year. The Flying Saucer, another restaurant located near Busch Stadium, is looking at a 20-25 percent drop in business. These reports are anecdotal, but they fall in line with what economists find when they examine subsidies for similar types of developments, such as sports stadiums. While the subsidized development might do well, in many cases, it comes at the expense of other businesses in the area. Little to no actual wealth is actually created.

The government should not be subsidizing private developments. Even the ones that actually do well, such as Ballpark Village, just end up shifting consumer spending from one location to another. Instead, the government should be focusing its spending on areas that can benefit the public at large, such as public safety.

June 2, 2014

Kansas City’s War On The Future

With all the political rhetoric floating around Kansas City, one would think the city is embracing high technology and forward-looking, well, everything. A closer examination reveals just the opposite. The city is using 19th-century politics and policymaking, and hoping for 21st-century results. It is as anachronistic as those future-looking movies of the past.

width= What old-timey look at the past would be complete without a monorail light trail streetcar? Kansas City politicians are determined to employ 19th-century fixed rail transit, thinking wrongly that it will solve our problems. We’ve written extensively about why rail is bad for Kansas City. You can read about it here.

The most jaw-droppingly insipid claim is that such policies will draw the creative class. Never mind that there is no research to back up this claim — Kansas City already is rapidly becoming a fact-free city. In fact, a vocal proponent of streetcars who claimed to speak for millennials just announced that he is leaving Kansas City for the East Coast to seek greater opportunities. This supports the writings of my Show-Me Institute colleague: the so-called creative class goes where the jobs are, not to streetcars or airports.

Meanwhile, city officials view actual future-looking technologies such as those that Lyft and Uber provide with hostility because officials are mired in 19th-century protectionist cronyism. How are Kansas City officials going to react to the inevitable arrival of driver-less Google cars? Demand that cars undergo a background check? Require that each one contain a detailed street map? This is not forward-thinking; in fact, it’s not thinking.

Speaking of Google, Kansas City Mayor Sly James and others love to extol Google Fiber, as if Kansas City, Mo., won that national bidding war to bring them here a few years ago. We didn’t. We lost to Kansas City, Kan. We were just lucky enough to be next door. Kansas City, Kan., won because they demonstrated small and efficient government, not heavy-handed regulation and federal money.

In looking to create density downtown, city officials are falling over themselves to offer up any sort of taxpayer subsidy, handout, or corporate welfare package to bring density — sometimes just to move jobs two blocks. Yet they are unable or unwilling to deliver basic services to the rest of the city. This is not forward-thinking, it is urban cannibalism.

If Kansas City officials are serious about building a brighter future, they need to shed the city’s knee-jerk tax-and-regulate policies and start doing the few things a city can do well: maintain the streets and parks, fight crime, provide quality education, and do so while keeping taxes low. Then the city won’t need to pick winners — because the winners will come to the city on their own.

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