April 1, 2014

KC Streetcar TDD Will Not Raise Enough Money for Expansion

Bus IconAccording to the newest plan for the Kansas City Streetcar expansion, there is a $30 to $50 million gap between what the streetcar’s transportation development district (TDD) will raise and the actual cost of the project.

We have written before that the Kansas City Streetcar is an exceptionally expensive and inefficient transit device. We have also warned that the claims of streetcar induced development are, at best, premature. Now we learn that, according to a streetcar plan that the City Council passed last week, no one knows how Kansas City will pay for the project.

The proposed TDD includes a 1% district-wide sales tax and a new tax for properties within 1/3 mile of the streetcar track. That new property tax ranges from 40 cents per $100 of assessed value, to $1.04 per $100. One might note that the $1.04/ $100 rate is on city-owned properties, which Kansas City residents will pay through taxes somehow. The consultants who created the TDD calculate that available revenue for debt service from property and sales taxes will be $177 million, but the capital costs of the streetcar extension plan are around $515 million.

How does $177 million pay for $515 million? First, the planners assume that the city will pay the utility costs of the project from other revenue, or about $28 million dollars. That lowers the project cost to $487 million. Then, they assume the federal government covers half the plan, which, as the authors point out, is not guaranteed.  That leaves a funding gap of about $53 million. The study further reduces this gap through contributions from the city’s Mass Transportation Sales Tax, which essentially means they will divert funds from KCATA. They also plan to offset costs with rider fares (they optimistically assume revenue of $2,000,000 per year, much better than some other streetcars). With those additional funding sources, the gap is only $31 million.

Where will the streetcar get that extra $31 million? There is no answer to that. The consultants hope that increased economic activity from the streetcar will raise TDD revenue, but that is risky. Among the proposed revenue sources they claim could be used for the streetcar: various federal grants, Missouri state tax credits and grants, the city park capital improvement fund, a city gasoline tax, new TIF districts, private foundation grants, among many others.

To sum it up, a large TDD that imposes a 1% sales tax and property tax increases will not fully fund the streetcar (even with the federal government already paying for half), and the planners know it. Unless the federal government is willing to pay the balance, Kansas City or Missouri tax payers will be expensively called on in some way to make up the difference. All in all, the funding section of the streetcar plan should have been called “here be dragons.”

Don’t Forget About Homeschoolers!

School IconNew Hampshire is one of 14 states that have implemented a tax credit scholarship program for students. Essentially, these programs give tax credits to people who donate to approved scholarship funds. Families can apply to use these scholarships to send their students to schools of their choice. So what is so unique about the program in New Hampshire? It is the only program that allows families to use these scholarships to homeschool their children.

In a new case study for the Show-Me Institute, Jason Bedrick notes that more than half the scholarships awarded in 2013 were used for homeschooling expenses. And the families who enrolled in the program were, for the most part, extremely pleased with the opportunity, more than 80 percent, in fact. Homeschool families also saw more academic improvement than their private school counterparts. They appreciated the fact that they were in control, that they were able to adjust the curriculum according to their children’s needs, and that they had more options for different or harder classes. Many of them mentioned that it helped strengthen family relationships.

I have nine siblings. When I was growing up, my parents wanted to make sure that my siblings and I received an education that met our individual needs. They explored public and private schools and each of us was homeschooled at one time or another. The beauty of homeschooling is that it allows parents to tailor the curriculum for their children. Additionally, homeschooling benefits the state because it saves taxpayers money. However, for families like mine, it can be financially difficult. That is why New Hampshire’s tax credit scholarship program is particularly interesting. It could enable more families to homeschool and benefit both families and the state.

As Missouri looks at options for expanding school choice and implementing tax credit scholarship programs, it should seriously consider expanding these to include homeschooling.

March 14, 2014

Bloodletting In Clayton

For centuries until approximately 200 years ago, bloodletting was a common treatment for illness. If you were sick, you would go get a nice bleeding. We finally learned what should have been obvious: with the exception of one or two illnesses, bleeding was a terrible idea that did more harm than good. The Missouri local tax equivalent to bloodletting is the economic development sales tax.

Government does a terrible job planning the economy, whether it is a Soviet five-year plan or retail TIFs (tax increment financing) in Saint Louis County. Municipal government can improve the local economy by doing the things it needs to do well: police, fire, local roads, etc. It does not need to “develop” our economy, especially because “economic development” in Missouri is synonymous with taxpayer subsidies and corporate welfare.

Clayton, the Saint Louis County seat and the region’s other downtown, is considering an economic development sales tax, along with three other tax increases, on the April ballot. Doing four tax increases at once (four!) is crazy, but the point of this post is just the economic development sales tax.

Clayton has been careful in its use of tax incentives and other economic development tools in comparison to other Saint Louis County municipalities, which admittedly is a very low bar. Clayton deserves credit for that. So I can’t understand why it would propose raising a tax to do more of something it should not do in the first place: government planning of the local economy.

Clayton officials likely would claim that the intention for the new tax funds is not more use of subsidies or more local planning, but a continued focus on business recruitment, retention, etc. I believe them, and in the short run, I am sure that would be true. But, in my opinion, the increased use of, and funding for, government economic development activities will almost certainly be followed by heavier use of various subsidies and tax incentives. Cities such as Clayton should be moving in the opposite direction with less or zero use of these types of programs, not increasing taxes to do things they should skip from the start.

More to come on these four tax increase proposals next week.

December 3, 2013

$150 Million Incentive Package. 8,600 Jobs Paying $75,000 Each. State Income Tax of ~6%, Repaying the State … $39 Million?

Those jobs and salary numbers are according to what a legislator told KSDK Channel 5 News in Saint Louis last night; the station’s story is below. So how exactly will the state of Missouri make back up to $111 million each year under this plan?

November 20, 2013

New Terminal Already Costing Kansas City Taxpayers

On March 30, the Kansas City Star reported that according to Aviation Department Administrator Mark VanLoh,

Building a new terminal would not require general taxpayer funds. Instead, bonds would be paid by airport passengers, airlines and other users of the facility.

Now we learn from the Kansas City Business Journal that general taxpayer funds will be used after all. On Nov. 19, Austin Alonzo reported on the latest airport advisory group meeting:

During the meeting, Fowler announced that the board will “engage” New York-based transportation consultancy firm Frasca & Associates LLC as its independent consultant.

After the meeting, Fowler said Kansas City will handle the consultant’s contract, which could be worth as much as $100,000. More information on that choice and what the firm will do for the KCI Advisory Board will be revealed at the group’s next meeting.

Why are general taxpayer funds being used instead of airport funds? Apparently VanLoh cried poverty, saying the Aviation Department does not have the money. Mind you, the airport had the $117,000 to pay public relations firm Global Prairie to tell us how great an idea the new terminal is. The Aviation Department found the money to conduct the multi-year study that is now being considered. They even had the cash to loan Kansas City $10 million (at a modest rate of interest).

Terminal supporters may argue that the Aviation Department should not have to pay for a consultant to review Aviation Department claims. (After all, we at The Show-Me Institute have been investigating the matter for months at no public expense.) But even if you accept that argument, if the new terminal plan goes forward it, will put the airport into even more debt than the new terminal will generate in revenue. And that debt, we argue, could result in Kansas City making up the difference from the general taxpayer funds, as it has with Power & Light, The Citadel and this current airport consultant. Residents will certainly pay the high costs through airline tickets, parking, or reduced options at MCI.

The people of Kansas City do not want a new terminal. MCI’s biggest tenant, Southwest Airlines, says the proposed plan is too expensive and unnecessary. In most places, that would be enough to settle the issue, but in Kansas City, it just increases the cost (see also: streetcar).

September 3, 2013

New CATO Report: Cracking The Books

CATO_Cracking_The_Books

The CATO Institute recently released a report, “Cracking the Books: How Well Do State Education Departments Report Public School Spending.” Researchers at CATO scoured the websites of each state’s department of education. They did not judge how much money each state spent, rather how well each state reported those expenditures. Missouri’s Department of Elementary and Secondary Education (DESE) did not fare well in the report, receiving an “F-” and a ranking of 42nd.

Among other things, DESE was marked down because the website is “somewhat difficult for the layperson to navigate.” Heck, I would say it is somewhat difficult for someone immersed in education policy to navigate. As the report notes, “There is a link to ‘School Finance’ under the ‘Financial & Admin. Services’ dropdown box on the main menu, but the expenditure data is not located there, nor at the ‘Financial Reports’ or ‘Data & Reports’ links on the menu bar.” That is certainly confusing.

The CATO report brings to light several other areas that could be improved:

  • Allow per-pupil expenditures over time to be adjusted for inflation.
  • Provide data on capital expenditures.
  • Provide data on total salary expenditures.
  • Provide data on pension contributions.
  • Provide data on employee benefits.

I think the CATO suggestions are reasonable. If implemented, they would be of tremendous help to Missourians who want to track where our tax dollars are going. Government agencies don’t always respond well to criticism. Nevertheless, I hope the folks at DESE will take this criticism seriously and look for ways to improve their presentation of data.

July 24, 2013

The Kansas/Missouri Economic Border War, In A Graph

Via the U.S. Bureau of Labor Statistics, who does it look like has been winning the battle lately?

Stay above the line and you gained jobs; drop below the line and you’ve lost them. And to be clear, the Kansas City, Kan./Kansas City, Mo., designations here are references to the Metropolitan Statistical Areas that compose the Kansas City metropolitan area; indeed, the data used here is appropriately broad and provides a fuller picture of Kansas City’s regional economic picture by including other large Kansas and Missouri cities along and around the border — from Overland Park to Platte City and beyond.

In the past, we’ve talked about how jobs have moved, or simply disappeared, from Kansas City’s city center in the past decade. These BLS figures provide further meat to those bones, showing that when it comes to job creation and growth, the advantage right now appears to be very much in Kansas’ favor. The question is, how long will Missouri let that undesirable status quo remain?

July 5, 2013

Of Course: Health Law That Will Ship Jobs Overseas to Be Overseen by… An Overseas Company

Reported on the Fourth of July, no less. As it turns out, the British are coming…

WASHINGTON — Racing to meet an October deadline, Obama administration officials said Thursday that they had awarded a contract worth as much as $1.2 billion to a British company to help them sift applications for health insurance and tax credits under the new health care law.

The company, Serco, has extensive experience as a government contractor with the Defense Department and intelligence agencies, and it also manages air traffic control towers in 11 states and reviews visa applications for the State Department. But it has little experience with the Department of Health and Human Services or the insurance marketplaces, known as exchanges, where individuals and small businesses are supposed to be able to shop for insurance.

A billion dollar contract to a foreign company with limited experience in the health care industry? What could go wrong?

Of course, it remains to be seen how Serco will be able to determine tax credit eligibilities since the tax credits themselves are partly dependent on… the employer mandate,.

The IRS both delayed the imposition of penalties and “suspend[ed] reporting for 2014.” As the American Enterprise Institute’s Tom Miller observes, without that information on employers’ health benefits offerings, the federal government simply cannot determine who will be eligible for credits and subsidies. Without the credits and subsidies, the “rate shock” that workers experience will be much greater and/or many more workers will qualify for the unaffordability exemption from the individual mandate. …

All of these tax credit details matter to Missouri taxpayers. According to Daniel Kessler, a senior fellow at the Hoover Institution, insurance rates for many Missourians could rise a whopping 89% in 2014 because of the Affordable Care Act. To make matters worse, the question of whether tax credits can even be issued in Missouri and many other states is already unclear. Under the text of the law, tax credits flow through state exchanges only; Missouri, as well as a majority of the country, will have federal exchanges. The Affordable Care Act not only raises costs for most, but indeed, the law may be written in such a way that even its cost-mitigating provisions won’t apply to most of the country, Missouri included. Assuming Serco could determine whether tax credits can be issued to anyone, it may end up that only a fraction of the country would qualify for the tax credits outlined in the law.

It’s pretty cynical of the government to dump news of its health law outsourcing on a holiday — and of all holidays, a patently American holiday — to ensure fewer people found out about it. And it’s a sad commentary not only on the unpopularity of the law itself, but of the kind of political leadership slowly and sneakily implementing it. What a massive mess.

June 20, 2013

Dr. James Shuls on Missouri Viewpoints with Mike Ferguson

Show-Me Institute Education Policy Analyst Dr. James Shuls joins Mike Ferguson’s Missouri Viewpoints to talk about Common Core. Watch the complete half hour show at Missouri Viewpoints.

June 16, 2013

Real Estate 101

If you were a real estate agent with nearly 8,000 properties for sale, what would you do?

You might be thinking, “Well, duh. I would sell them. Cha-ching!” Seems really simple, but the St. Louis Land Reutilization Authority (LRA) does not appear to have that same mindset.

When I met with Michael Allen, founder of the Preservation Research Office (a private historic preservation and architectural research organization) he remarked at how little advertising the LRA does for its properties. Compared to real estate agencies, LRA advertisement is practically non-existent.

Shouldn’t the LRA function in the same way as real estate agents if its goal is to sell property?

According to Janet McAfee Real Estate’s Marketing Director Chuck Roper, the Multiple Listing Service (MLS) is the primary source of real estate listing information for approved brokers in Saint Louis. LRA-owned properties, however, are very rarely listed in the MLS.

Besides the MLS, there are a variety of other ways to make information available about properties. Newspaper and magazine ads, online ads, listings on real estate websites, social media, direct mail…you get the picture. The LRA does none of these things. You could drive by an LRA property that is for sale and have absolutely no idea. Two LRA staff members gave me different replies about whether they post “For Sale” signs. One said they are put up on “selected properties.” But the other simply said, “Nope, we don’t do that.”

With the LRA, the onus is all on you, the potential buyer, to figure out the entire process to purchase a home. You have to know that the LRA exists, what it does, find its list of properties, set up your own inspection of the house, and then begin the application process.

Every year that goes by, the city pays more and more to maintain these properties. They sit vacant, collecting no property tax. With 8,000 vacant properties, the LRA cannot afford to have the attitude that these properties can sell themselves. Any real estate agent will tell you that couldn’t be further from the truth.

February 18, 2013

Letter Grades: A Hallmark Of Childhood

The Springfield News-Leader recently published an article that stated, “It’s a hallmark of childhood — the grade card, hopefully stamped ‘A’ or ‘B’ and not the dreaded ‘F.’ But the ways schools grade their students may soon be the way they are graded themselves.” Legislation has been proposed which would assign each school a letter grade based on the evaluation system currently in place in the Missouri Department of Elementary and Secondary Education.

According to the News-Leader, there are numerous opponents of grading schools, including superintendents, school district personnel, and the Missouri PTA president. In fact, the PTA president states that A–F grading “doesn’t address any problems at all. It’s just another way of identifying the problems that we know are there.”

The fact is, A–F grading does help address problems. The first problem it addresses is transparency. Currently, it is very difficult to see how an individual school is performing in comparison to other schools or a benchmark level of performance. A letter grade will solve this problem in a way that is easy for the average parent to understand.

Assigning letter grades to schools also encourages those schools to improve. The A–F grading system in Florida has been evaluated a number of times and the results show that the stigma of receiving an “F” grade encourages schools to change practices and to improve. Rouse, Hannaway, Goldhaber, and Figlio wrote in a National Bureau of Economic Research paper:

In sum, we find that schools receiving an “F” grade are more likely to focus on low performing students, lengthen the amount of time devoted to instruction, adopt different ways to organize the day and learning environment of the students and teachers, increase resources available to teachers, and decrease principal control, as was expected given the increased oversight built into the A+ Plan.

Assigning A–F grades is not just a way to single out or label low-performing schools. It is a way to motivate schools to improve instructional practice and to strive for excellence.

January 30, 2013

Changing Children’s Lives: A Rally for School Choice

Crowds of parents and students rallied at Union Station in Kansas City to celebrate school choice, as part of the National School Choice Week Whistle Stop Train Tour. Students sang, danced, and cheered as speakers drove home the message that students are all different — but they share one thing in common. They all deserve a quality education.

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