August 26, 2014

How to Attract Jobs, or at Least Not Repel Them

Public officials in Kansas City and elsewhere are eager to be seen as job creators. Almost every taxpayer-subsidized development project, every act of crony capitalism, every public project like a new $1.2 billion airport terminal, $62 million-per-mile streetcar, or convention hotel is discussed in terms of the jobs it will create. Politicians tells us, as they did in the TIF Commission hearing for the Burns & Mac handout, that the city cannot “wait for the free market,” that government must act.

But is government’s use of taxpayer dollars more successful than people making their own decisions?

Economist Enrico Moretti was interviewed on NPR’s Here and Now about his book, The New Geography of Jobs. He was asked about how successfully innovative regions are created and replicated [segment begins at 8:27]:

“[Interviewer] This is the unsettling part of your book: How do cities replicate these innovative job clusters?

“[Moretti] It’s very tough, because if you look historically where the innovation clusters are located, almost none of them [were] created by some deliberate, explicit policy. It’s really hard to engineer an innovation cluster. We talk about Seattle, but if you look at a lot of the clusters, they were all born in very random, often serendipitous, ways. So it’s really hard for policy makers to engineer from scratch.”

There is no magic formula known to bureaucrats or politicians about which companies and industries will be successful in the future. But they use public resources time and again chasing that white rabbit of jobs and growth. And unfortunately, the impact of taxing many businesses to subsidize a few is more often than not a recipe for destroying jobs, or at least keeping them away.

A better investment, as Show-Me has argued for years, is for government’s action to be broad and neutral: keep taxes low for everyone, maintain infrastructure, deliver necessary city services, and ensure quality education. Maybe those aren’t as appealing as large edifices named after politicians, but they are more successful.

August 24, 2014

Local Road Funding in Missouri

The Missouri Department of Transportation’s (MoDOT) growing funding problem has put the issue of state highway funding on the center stage. This focus on the state road system obscures the fact that most of Missouri’s streets are the responsibility, in terms of funding and maintenance, of local governments.

Missouri has more than 90,000 lane miles of local roads that are the responsibility of cities and counties, as compared to 33,000 lane miles of highways under MoDOT’s purview. While MoDOT receives most of its funding from fees placed on drivers, local roads do not. Counties and municipalities partially fund their streets with the 25 percent of state fuel taxes remitted to localities, but in most areas that is inadequate. Local governments, therefore, rely on local sales taxes, property taxes, and specially formed taxing districts known as transportation development districts (TDD) to pay for road improvements.

One source of funding localities technically could use—but do not—are local fuel taxes, even though they might be a fair and economically sound way to fund roads. Paying for streets with fuel taxes, as opposed to other forms of local taxation, also might have the benefit of limiting wasteful spending, because the Missouri Constitution stipulates that all local fuel tax proceeds must be spent on roads.

The likely reason no Missouri localities collect fuel taxes (although attempts have been made) is that the state constitution stipulates that voters approve any such measure by a 2/3rd majority. Other forms of local taxation, such as transportation sales taxes or property taxes, require only simple majorities. TDDs, semi-democratically created ad hoc taxing districts, also are much easier to implement than fuel taxes. It is, perhaps, unsurprising that while no city has a fuel tax, there are more than 170 TDDs in Missouri, collecting revenue with little accountability or oversight.

Moving forward, many of the funding problems that MoDOT faces for highways is mirrored on the local level. Counties and cities face street maintenance backlogs, and residents have noticed. Recent surveys in Springfield and Kansas City showed residents were highly unsatisfied with the state of local streets.

It is hard to tell what portion of the need arises from a genuine lack of funding and what portion is the result of misplaced priorities. However, as Missourians consider if more must be spent, they also should question how more would be raised, and whether the current methods are transparent and economically sound.

 

August 15, 2014

Kansas City Transit: Light Rail Never Sleeps

Because voters in downtown Kansas City rejected a plan for a streetcar expansion, Kansas Citians might have hoped for a short reprieve from expensive rail transit projects. But it wasn’t to be. In November, Kansas City residents will be asked to vote for a ¼-cent and 1/8-cent tax increase to implement Clay Chastain’s $2.4 billion light rail plan.

In a strange twist, the ballot language will not mention a rail plan. That’s because city leadership has fought Chastain’s rail plan for years, even going to court to prevent it from making it on a ballot. Although the city has now lost that fight, because officials and Chastain could not agree on ballot language that included the rail plan, voters will be asked to decide on tax increases for “capital improvements” and “transportation.”

City leadership has described Chastain’s plan as unfeasible, and it does not take much math to figure out why. A 3/8-cent sales tax increase would net Kansas City approximately $30 million per year. However, just the initial part of the plan (a line from downtown to just south of the Plaza) would have $1.4 billion in upfront capital costs and $11 million in yearly operating costs. Assuming that the line can be built for $1.4 billion and that no major capital costs are incurred for 25 years (25 years is also the lifespan of the taxes), the plan has a $900 million funding shortfall.

Light Rail Icon

Supporters of the plan hope that 60 percent or more of the necessary funding will come from the federal government and private donations. However, because the city leadership and MARC back a streetcar, not light rail, plan, the federal government might not give the project much support. Even if the federal government does provide funding, it would be unlikely to exceed 50 percent of total capital costs, not nearly enough to cover the shortfall. Bottom line, it might not be financially possible to implement the rail plan even if the proposed sales tax increases pass.

But imagine that everything breaks in the plan’s favor. Say the tax increase passes, the federal government provides 50 percent of the capital costs, and more than $200 million in private support materializes. After all that, Kansas City would have one light rail line from the Plaza to downtown. Hardly a transportation revolution worthy of $1.4 billion. But for some rail supporters, that does not matter. The initial rail line is a part of a larger dream; a dream that involves many more lines and billions more taxpayer dollars. Voters get to decide whether this plan, at least, is finally put to bed.

August 12, 2014

That Burns & McDonnell TIF And Vandalism

Earlier this year, the Kansas City Council voted to use tax dollars to subsidize a project for Burns & McDonnell, one of the nation’s largest engineering firms. The Tax Increment Financing (TIF) site — a property featuring a former synagogue and school but otherwise dominated by a large parking lot — is literally next to the company’s world headquarters. We wrote at the time the TIF was being considered that the subsidy would be a poor use of limited public resources, especially for a successful firm that could certainly afford to expand and build upon a vacant property adjacent to its own.

Of course, Burns & Mac got its taxpayer subsidy, in part because of the “vandalism” that had occurred inside the empty buildings. In a hearing before the Kansas City TIF Commission, Scott Belke, the consultant who prepared the blight study, said, “This is one of the most vandalized buildings I’ve seen in my 29 years of work.” Thus, TIF supporters argued, the site and buildings needed to be remediated … with taxpayer support.

Belke admitted in questioning that he has never failed to find a site blighted, and that’s no surprise; we at the Show-Me Institute have been unable to find any case in the entire state of Missouri where a consultant has not considered a proposed TIF site blighted.

So, how were the buildings remediated? They … were bulldozed.

B&Mdemolition

Why was vandalism even considered a reason for blight if the entire structure was going to be razed anyway? Burns & Mac was never going to inhabit the synagogue; the building’s condition was, in practice, irrelevant to what Burns and Mac’s plans were for it: destruction. The only reason the building’s condition was an issue was because it was a foothold for the company to steer taxpayer dollars to its project, through TIF. That’s a cynical and objectionable path to getting city taxpayer money, but that’s business as usual in Kansas City.

Some people believe in the power of TIF, and perhaps it has a role to play in some development projects. But in Kansas City and elsewhere in Missouri, TIF is so frequently used and abused — and not even in legitimately blighted urban areas for which TIF was intended — that the whole enterprise has become a farce: a farce, as in this case, that enriches wealthy developers at the cost of city taxpayers.

August 7, 2014

Kansas City Streetcar District Fails To Win Support

On Aug. 5, voters in downtown Kansas City rejected a Transportation Development District (TDD) that would have funded a half billion dollar streetcar expansion plan (60 percent to 40 percent). The city’s streetcar plan was expensive and had little transportation merit, making this result welcome news for those who support sound transportation policy in the Kansas City area.
Light Rail Icon

The Kansas City streetcar plan required the approval of a TDD to provide local funding. Because voters rejected the formation of the TDD, the project lacks local funds and, thus, cannot proceed. But this is unlikely to be the last we hear of plans to expand the streetcar. Some Kansas City officials have made it clear that they view this election as just a setback for their vision of an extended streetcar system. The mayor stated:

“It’s very possible either way, but we’re not going to just roll over and let it go…We’ve got to continue to look for options to get the job done.”

That might mean a newly drawn TDD or some other tax increase that will provide enough local funding to apply for federal grants.

However, for the time being, the election has halted any streetcar expansion plans. Let’s hope the ultimate result of the election is a renewed focus on efficient transportation policy for all of Kansas City.

Gas Taxes And Funding MoDOT

In the aftermath of the transportation sales tax (Amendment 7) defeat, former supporters are still on a misinformation campaign. They claim that Missouri’s roads are in dire straits (they aren’t), and of course, that a sales tax was the only good option. They claim increasing a user fee such as Missouri’s gas tax, which is the sixth-lowest in the nation, is not possible. Bill McKenna, one of the principle supporters of Amendment 7, stated:

“You’ve got to realize how much money [the Missouri Department of Transportation] MoDOT needs,” he said. “You’re not talking 2 cents. You’re talking 16 to 20 cents.”

That’s a significant tax increase, but former Amendment 7 supporters seem to have different estimates. Missouri Sen. Mike Kehoe (R-Dist. 6), who introduced the Senate version of Amendment 7, said the gas tax would have to increase by 20 to 25 cents a gallon. Luckily for Missourians, these numbers appear to be disconnected from any real assessment of MoDOT’s needs.

Auto Icon

According to MoDOT Director Dave Nichols, MoDOT needs a $485 million construction budget to maintain Missouri’s highways. This year, MoDOT’s construction awards are greater than $720 million. MoDOT assumes that the federal government will scale back its support in the future, leaving MoDOT with less than $485 million by 2017. That scenario may not come to pass, but if it does, MoDOT’s construction budget would fall to $325 million, about $400 million less than today and $160 million less than the ability to maintain the roads. If the federal government continues to maintain current support, Missouri officials only need to ensure that the state has matching funds, necessitating less than $130 million in extra revenue.

The amount the Missouri fuel taxes would have to increase is nowhere near sales tax supporters’ claims. Last year, Missouri sold more than 3.9 billion gallons of fuel. Therefore, to raise $400 million, the state would have to raise the fuel taxes 11 cents. That maintains current spending ($300 million more than maintenance only) under dire circumstances. If the federal government does not reduce funding, a 5-cent increase likely would be sufficient to maintain matching funds. Missouri officials also could increase the diesel rate more than the regular gasoline rate, a practice in place nationally and in many states to account for the disproportionate damage trucks do to highways. McKenna’s 20-cent increase would raise $705 million for MoDOT and Kehoe’s 25-cent increase would raise $882 million (remember, Amendment 7 would have raised $397 million for the state highway system).

The defeated transportation sales tax proponents’ fuel tax estimates are exaggerated, much like their claims about the imminent collapse of the Missouri highway system.

August 6, 2014

Amendment 7 Defeated

Yesterday, Missouri voters rejected Amendment 7, the proposed statewide transportation sales tax (59 percent to 41 percent). Using a sales tax to pay for highways and bridges is bad policy, and the state of Missouri is better off having rejected this unfair, economically unsound proposal.

Winners And Losers At A Glance    The Votes County By County   St. Louis Public Radio

From St. Louis Public Radio

However, this defeat of Amendment 7 is just the start of creating a sustainable funding source for the Missouri Department of Transportation (MoDOT). In the very near future, the department may not have enough funds to maintain the existing state highway system. A deteriorating highway system would be damaging for both residents and the state economy. It is time for policymakers and opinion leaders in the state to convince Missourians not just about the amount of money MoDOT needs, but also about the proper and most efficient way of raising revenue for those needs: user fees. Whether that means raising the gas tax or implementing tolling, the basis of good policy is an informed, not a frightened, electorate.

While these future challenges remain, yesterday was a defeat for poll-driven policy and a victory for Missouri.

August 3, 2014

The Kansas City Streetcar Expansion: Policy Breakdown

Voters in a section of Kansas City will go to the polls on Aug. 5 to decide whether the city should form a Transportation Development District (TDD) to raise money for a $471 million streetcar project. The arguments for and against this project are as follows:

o   Opponents: The idea that streetcars create development is tenuous at best. Streetcars are nearly always coupled with subsidies to developers and corridor improvements that may be the prime factor for any development. In addition, that subsidized development might have been diverted from other areas in the city. Many examples of streetcar development in Kansas City are, on closer inspection, fatuous. For instance, a company (whose owner publicly supports the streetcar) moved from one part of the proposed streetcar line to another two blocks away, and this was counted as streetcar-induced development.

  • Proponents: Streetcars will increase transit usage. Most people prefer rail and fixed transit to buses, so the streetcar can expect high ridership. In addition, the streetcar’s improvements to the overall transit network will increase transit ridership across the city.

o   Opponents: Streetcars are among the most wasteful methods of boosting transit ridership. As their capacity and speed is not significantly better than a bus, even popular streetcar lines do not carry many riders. Furthermore, as the Kansas City streetcar will run on routes that multiple bus routes already serve, we can expect a good deal of streetcar riders to be former bus users, not new transit riders. The Kansas City streetcar will duplicate, rather than complement, the existing bus network. This means minimal system-wide mobility improvements, and hence, little new system-wide ridership. With a cost of more than $470 million (which could pay for more than 100 buses), the transportation benefits of streetcars are not worth the cost.

o   Opponents: Kansas City needs new jobs that will enrich the city, not jobs that act as a drain on the public purse and the taxpayer.

Put simply, streetcar proponents argue that streetcars drive economic development, improve public transportation, and create jobs, while opponents counter that development claims are unproven, that the costs of the project far outweigh any transportation benefits, and Kansas City needs jobs that bring money into, not extract money from, the city.

August 1, 2014

Amendment 7: The Policy Breakdown

As the vote on Missouri Amendment 7 approaches, proponents have gone to the newspapers, airwaves, and television screens to argue for the necessity of a 0.75 percent statewide transportation sales tax. Their main arguments, and opponents’ arguments in responses, are as follows:

The Missouri Department of Transportation (MoDOT) will not have enough money to maintain the current highway system by 2017, and the infrastructure is in immediate need of repair. Many of the state’s roads and bridges are currently in poor condition.

o   Opponent Argument: Missouri’s state highway system has specific needs, such as improving I-70 or replacing deficient bridges. However, the system is not crumbling. In fact, the Reason Foundation and the Chamber of Commerce Foundation have ranked Missouri’s highway system among the best in the nation. Missouri just completed a decade of unprecedented spending on the highway system, adding lanes, repairing bridges, and smoothing roads. The highway system is in better shape than it has been in decades and MoDOT’s funding problems are not evidence that the system is about to collapse.

  • Proponent Argument: A 0.75 percent statewide sales tax is a reasonable method of paying for roads and bridges.

We all benefit from transportation, so we should all pay. Many products are exempt from the sales tax, shielding the poor. In addition, gas taxes and tolling either cannot or are too unpopular to implement.

o   Opponent Argument: A statewide sales tax is an unfair, economically unsound way to pay for highways. Those who drive little will pay as much or more for new roads as truckers and people with long commutes. Using sales taxes to pay for roads subsidizes driving, which increase congestion and pollution. All Missouri consumers, even the poor, can expect to pay much higher taxes from this 17.75 percent state sales tax increase. Furthermore, user fees, such as higher gasoline taxes or tolls, can continue to provide adequate funding for MoDOT, as they have already done for decades. Spending more time educating Missourians about the best way to fund highways, and less time heralding the imminent collapse of Missouri’s roads and bridges, might demonstrate that gasoline taxes and tolls are more popular solutions.

Sales tax proponents essentially argue that Missouri’s transportation is in crisis and that a .75 percent statewide tax increase is the only reasonable and available solution to that crisis. However, skeptics of the proposed amendment counter that Missouri’s highway system is not in a crisis situation and there is time to select fair and economically sound policy solutions to MoDOT’s funding problem.

July 30, 2014

Video: Missouri Roads – Better Than You’ve Heard

We have written many times that Missouri needs to invest in its transportation infrastructure. However, the need for timely and adequate funding does not mean that Missouri’s state highway system is about to crumble.

Check out our new video on the condition of Missouri’s highways and bridges:

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).

Auto Icon

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 21, 2014

Amendment 7: The Tax That Keeps On Taxing

According to current projections, the proposed Missouri Amendment 7, or 0.75-cent transportation sales tax, would raise $5.4 billion for roads, bridges, and other projects over the next 10 years. The Missouri Department of Transportation (MoDOT) has been active in promoting a list of those projects, showing how it would spend the largess. But what is less publicized is that many projects on that list receive the sales tax funds contingent on local governments also bringing money to the table. In many cases, projects approved for state sales tax money require local governments, and their taxpayers, to provide tens or even hundreds of millions of additional dollars.

Take the example of the Saint Louis area. The City of Saint Louis is set to get $25 million for a streetcar that goes from downtown to the Central West End. That might not be such a bad deal, if it were not contingent on Saint Louis coming up with an additional $271.5 million to complete the plan. The sales tax will also provide $40 million to the city for bus rapid transit, but only if Metro can come up with an additional $40 million. In return for $20 million for an I-64/22nd St. Parkway interchange (mostly to the benefit of the Northside Redevelopment Project), the city and developers have to provide an additional $8.9 million. All told, in return for $270 million in state sales tax money, the City of Saint Louis has to find an additional $323 million from other funding sources. That’s $1,016 for every man, woman, and child living in the city.

The story is similar in Kansas City. The city will get $144 million for the streetcar, contingent on it finding the rest of the half billion needed to make the project happen. While Kansas Citians have long been aware of, and been familiar with plans to fund, the streetcar, this is not so for other projects. Kansas City will receive $24 million for a bike path from Pleasant Hill to Kansas City, if it can find $48 million locally. For those counting, that’s a $72 million bike path. Altogether, projects that the sales tax would fund require $459 million in additional funding from the Kansas City area.

The result of these policies is that after taxes have gone up statewide, purportedly to save our “crumbling” highways, local governments may have to increase taxes even further to secure funding for projects on MoDOT’s list. Amendment 7 is the tax that keeps on taxing.

Older Posts »
A project of the


Search Show-Me Sunshine docs @

Top Posts

Show-Me Data


Archives

Categories

Powered by Wordpress