April 7, 2014

Kansas City Streetcar Robs Poor to Pay … Rich?

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The Robin Hood of legend was renowned for robbing from the rich to give to the poor. Liberals have heralded the story as an example of social justice and ethical redistribution. Conservatives see him as a hero of the trodden-upon taxpayer, cruelly set upon by wealthy and entitled elites. It is perhaps because of this dual view that the legend has survived so long.

Officials in Kansas City crafted a bizarro Robin Hood streetcar taxing plan that takes from the poor to give to the rich.

The city has created a Transportation Development District (TDD) encompassing much of the city in order to fund a significant portion of the rail line. The TDD will levy a “special assessment” on homes, businesses, and charities within a one-third mile of the proposed tracks and a 1 percent sales tax everywhere in the district.

While we have argued that claims that streetcars cause business development are completely unproven, streetcar supporters counter that there is some evidence that the project will increase property values along the route. And indeed there is some evidence that property values will increase, especially if the city pours money into the corridor, as NextRail KC officials hope. But while values may go up, property and sales taxes are guaranteed to increase as well. Even then, those increases in value primarily benefit the property owner when selling the property. (If you rent your home or apartment, your rent will go up but you won’t benefit from any property value increase.)

In other words, some of the poorest parts of Kansas City — those already in dire need of transportation and infrastructure improvements — will be paying more in taxes so that the already developed parts of Kansas City can get new sidewalks, landscaping, streetcars, and the increased property values that go with it. Those outside the TDD will also pay more through sales tax and the special assessment levied on government property, and by however the city decides to close the $30 million to $50 million gap in financing.

Seriously, that is Kansas City Mayor Sly James’ plan.

To make matters worse, non-profit organizations along the route will pay a special assessment that will impact their ability to serve those same communities in need. Not only is the city throwing the east side into the deep end of the pool, they’re pulling up all the ladders. That is why Fr. Ernie Davis, pastor at both St. Therese Little Flower and St. James, wrote a letter to his colleagues at other churches (emphasis added):

But most frightening is the proposal to assess churches, schools and charities within the corridor. That will literally take bread out of the children’s mouths and books out of students’ hands in order to fund a streetcar…. I hope you will study the issue and to the extent that you are able, lend your support to efforts that would derail the streetcar until there is a different funding formula that would not impose such a heavy burden on those who are least able to afford it.

Here at the Show-Me Institute, we are not totally opposed to some types of charities making property tax payments. But we have never included churches in that, and our argument has always been focused on true public needs, not pricey public toys such as a streetcar.

The Kansas City streetcar robs from those who don’t have to give to those who don’t need, or even want.

March 19, 2014

A Victory For Government Accountability In Kansas City

When the Missouri Legislature considered creating a land bank for Kansas City, the Show-Me Institute was opposed. We argued in testimony before the legislature that the existing Jackson County Land Trust was as effective as any similar agency across the country. We testified that:

There does not appear to be any evidence that the Jackson County Land Trust is doing a poor job of getting vacant property back into private, productive use.

Considering the Saint Louis example, any effort in Kansas City was likely to fall prey to Kansas City politicians who might direct the city to hold onto property on behalf of favored constituents or special interests. We are glad to report that the Kansas City Land Bank has addressed these concerns. On March 3, the Board of Commissioners adopted the following resolution:

The Land Bank supplements the Code of Ethics with the additional requirement, that any Commissioner that receives a contact from an elected official or staff lobbying for or against particular application for a property held by the Land Bank shall disclose such contact to the Land Bank staff within a reasonable time thereafter, and shall disclose that contact to the other Commissioners prior to voting upon the particular application for which such contact was made.

The board also will start listing the reasons for any application rejection in the minutes so that applicants and others can understand the commissioners’ decision-making process. This is a great win for transparency in government, and we congratulate the land bank board for taking this important step.

February 21, 2014

Ask Not For Whom The Bell Clangs

It clangs not for thee, according to Kansas City Mayor Sly James.

If you are reading this, the streetcar is not for you. In a Feb. 13 interview on KCUR radio, James said the following:

We need people to understand, a lot of the folks who are against this [streetcar expansion] are people who have been vested here, they’re already here. They’ve lived most of their lives if not close to all of it [here]. We’re not building this city for them. We’re building this city for the next 75 years.

Not only is the streetcar not for people in Kansas City; voters ought to discount the views of Kansas Citians exactly because they are from Kansas City. In the same interview, James said:

And despite people’s objections, despite their willingness to look at it in some instances, when we’re out looking for talent to come to this city, they’re not looking for some place where they can drive all around town, they are demanding public transportation.

Got that, Kansas City taxpayers? The streetcar is not for you, it is for others, either in the future or those who live somewhere else. You’ll just be paying for it. Planning ahead for city growth and seeking to attract new citizens are noble goals. The problem is that nothing in the research about streetcars indicates that it accomplishes either.

February 7, 2014

An Open Letter To Streetcar Supporters

At the recent meeting of the Kansas City Save the Trolley Trailsupporters of an expanded streetcar system dismissed assertions from the Show-Me Institute, which are backed by research, that construction of fixed rail does not drive economic development. This is important because it appears that economic development is the raison d’être for the streetcar. One Kansas City City Councilmember told the Kansas City Business Journal:

“The stated goal of this project is economic development. That’s the dominant goal,” [Russ] Johnson said. “The dominant goal is not to have a lot of people ride it. The dominant goal is to develop the city.”

During remarks at the meeting, supporters, including Kansas City Mayor Sly James, presented as evidence of economic development the construction that has already taken place downtown. However, this employs a logical fallacy — post hoc ergo propter hoc. Municipalities often claim credit for development simply because it occurred after their policies were enacted, but it is disingenuous.

Below is an incomplete list of studies that demonstrate that economic development is not a result of fixed rail. We encourage everyone to read these, and we encourage streetcar supporters to provide contrary evidence that stands up to scrutiny.

  • “The Great Streetcar Conspiracy,” Cato Institute, June 2012. Randal O’Toole has written extensively about the topic. If one questions this research because it comes from the libertarian Cato Institute, there are plenty of other sources.
  • The Atlantic Cities published an article which makes clear that evidence for economic development due to streetcars is lacking. The author writes:

But while the Portland streetcar was the anchor or at least the featured element of this growth, it wasn’t responsible for this boom by itself. Rather, it was part of a broader development plan in which zoning, public-private investment, street upgrades, and other renewal efforts also played considerable roles.

The literature regarding empirical measurement of actual changes in economic activity, such as changes in retail sales, visitors, or job growth, is almost nonexistent for streetcars. Indeed, this lack of empirical data was cited by many of the streetcar system survey respondents described in this report.

The same report also addressed the notion that streetcars attract the creative class:

Although occasionally the literature forecasting economic benefits for proposed streetcar systems posits that streetcars will attract more “creatives” to the area, this idea cannot be substantiated.

Taken together with earlier evidence that the social costs of rapid transit are higher than those for buses, the results suggest that it may be difficult to justify rapid rail investment on the basis of a benefit-cost analysis. In the absence of local economic development around stations, the benefits of rail are limited to those that might occur at the regional level. Future work should seek to quantify these benefits.

. . . the increase in property values and economic development are subsidized benefits and may not be greater than the subsidy costs. Both citizens and local officials should have an understanding of the costs of light-rail transit relative to the potential benefits. Given the size of costs relative to the benefits, the creation of light-rail transit systems or the expansion of existing systems in American cities may be difficult to justify.

Indeed, building commercial-grade rail lines through 100-plus-year-old neighborhoods is difficult to justify. Study after study indicates no support for the city’s “dominant goal” of economic development. If streetcar boosters are aware of research that supports the claim that streetcars themselves — and not the tax-subsidized construction that goes with them — results in economic growth, we are eager to learn of it. Presumably, everyone else cited here would welcome seeing the research as well.

January 30, 2014

Streetcars Are Not Economic Development

Over the weekend, KCPT’s current events program Rukus (starts at 4:33) quoted a Show-Me Institute blog post (Streetcars Will Waste Your Money and Your Time) which points out that there is no evidence that fixed rail removes cars from the road or drives development. It read:

We know from previous studies that rail transit does not remove cars from the road. And we know that it is not the rail lines themselves that drive economic development but rather the additional tax incentives that governments hand out along rail lines.

Kansas City Star editorial board member Yael Abouhalkah interrupted Woody Cozad’s comments on the quote to ask, “Proved by what?” For that, we refer him to the links above. Abouhalkah went on to say, “They just had two downtown without incentives.” He never explained what he was referring to, but we suspect it refers to two hotels that Abouhalkah wrote about in August:

Yes, it can be done: Someone can build a hotel in the Kansas City area without a taxpayer subsidy.

Hallelujah.

…It puts new development along the planned two-mile streetcar line, near the Kauffman Center for the Performing Arts, and near the Power Light District and Sprint Center.

First, we at the Show-Me Institute share Abouhalkah’s enthusiasm for anything built in Kansas City without taxpayer subsidies and we are pleased he is highlighting the matter. The problem in the piece is that this development has nothing to do with the streetcar, aside from possibly diverting it from another location in Kansas City. According to Abouhalkah’s own newspaper, the developers’ interest predated the streetcar (emphasis added):

Rob Schaedle said the firm’s first interest in Kansas City was in 2009 when it considered redeveloping the old 21-story Federal Reserve Bank of Kansas City building at 925 Grand Blvd. Though it admired the historic structure, the firm decided to pass on converting it into a hotel.

But we liked the market,” Schaedle noted and in August of this year bought the property of its new project for $4.5 million.

Abouhalkah and other streetcar boosters are simply claiming credit for any development that occurs after plans to build a streetcar. This is the most basic of logical fallacies: post hoc ergo propter hoc. But this is not uncommon. In a study of economic development programs across Missouri, my colleague, David Stokes, quoted researchers who wrote:

“The best case is that incentives work about 10 percent of the time and are simply a waste of money the other 90 percent.” The authors then relate that, in their experience, “it is not unusual for public officials to attribute all new employment to incentive programs.”

Streetcars will not improve the economy of Kansas City. The economic development handouts, amounting to corporate welfare, will be the engine that drives any development, and even nine times out of 10, that is  “simply a waste.” As time goes on, it will be increasingly difficult to determine exactly what prompted development, but rest assured that everything will be credited to the streetcar.

January 20, 2014

Streetcars Will Waste Your Money And Your Time

Paul Jacob writes in his blog This is Common Sense:

Transportation scholar Randal O’Toole regales us with the fix that California’s overlords have put themselves in. Merely assuming that dense city living decreases commuting, California’s legislators cooked up a law requiring local governments to increase population density.

But it turns out “transportation models reveal that increased densities actually increase congestion, as measured by ‘level of service,’ which,” O’Toole informs us, “measures traffic as a percent of a roadway’s capacity and which in turn can be used to estimate the hours of delay people suffer.”

This should be no surprise to Kansas Citians, who are familiar with official calls for increased urban density and the streetcar system that they believe will bring it. An effort to raise private money for the streetcar (so far, $3,775 of their $10 million goal) says that streetcars:

. . . provide high-quality transit service that promotes compact, walkable, higher-density development.

A firm hired to help build the streetcar system offers as a potential benefit, “Increase[d] population and economic density to the urban core.” Streetcar booster and former Kansas City Mayor Mark Funkhouser claimed that a rail system “produces density, which is key to efficient land and resource use.”

We know from previous studies that rail transit does not remove cars from the road. And we know that it is not the rail lines themselves that drive economic development but rather the additional tax incentives that governments hand out along rail lines. We know that the people of Kansas City have voted down streetcars every time a legitimate election has been held. And judging by the effort to raise private funds yielding only three-ten-thousandths of 1 percent of their goal, Kansas Citians still don’t support it.

But just as in Kansas City, California politicians continue undaunted. O’Toole writes:

The gist of the new standards of “regulation”? “[T]hey ignore the impact on people’s time and lives: if densification reduces per capita vehicle miles traveled by 1 percent, planners will regard it as a victory even if the other 99 percent of travel is slowed by millions of hours per year.”

If you doubt that city leaders care more about spending taxpayer money than respecting taxpayer time and convenience, consider the plans to build a $1.2 billion airport terminal.

December 13, 2013

Using Questionable Data To Back City Planning

A recent report from the Pew Charitable Trust called for increased affordable housing in cities across America. As the Atlantic reports, the authors suggested:

Solutions like requiring developers to include affordable housing units in new projects and developing metropolitan-wide transportation are politically unpopular. But they are a necessary part of any effort to restore economic mobility and the American Dream.

While everyone supports economic mobility and the American Dream, there is not adequate evidence to back the authors’ call for more regulation and transportation subsidies.

According to the report, “Mobility and the Metropolis: How Communities Factor Into Economic Mobility,” income segregation in a city leads to low economic mobility. This is important for Missouri cities such as Saint Louis, where income segregation is high and income mobility is low. The authors of the study would have Saint Louis expand transit and entice developers to build mixed-income housing. However, the track record of Saint Louis-area transit-oriented development has been less than ideal, as exemplified by a subsidized apartment complex near the Richmond Heights Metrolink station. A closer look at statistical models of the report calls their entire conclusion into question.

Without getting into too much detail, the problem with the report is that their model only finds an effect from income segregation when they don’t include other relevant explanatory factors. For instance, analyze New York City, which has among the highest income segregation (A) and lowest economic mobility (B) ratings. The report would have you believe that A contributes to/causes B, so improving A improves B. But what if (C), the dominance of financial services or legal professions, causes both A and B in New York City? Then fixing A will have no practical impact on B. In the complicated areas of income segregation, we must account for many possible factors like C.

However, the report promotes a simplified model that only shows a relationship between income segregation and economic mobility without including enough alternative variables. The report did not even mention that their model demographic variables did not show that income segregation was associated with economic immobility. Despite this shortcoming, both the report and media coverage have used the report to make irresponsibly expansive policy recommendations.

This over-hyping of statistical data can be all too common in the social sciences, so Missouri policymakers and citizens have to be vigilant. It is easy to twist data to justify government intervention if no one challenges the strength of the result.

July 29, 2013

What Should Crestwood Do?

The Crestwood Tax Increment Financing (TIF) proposal is dead, at least temporarily. Joining it in death is Crestwood Mall, also perhaps temporarily. City officials in Crestwood did the unthinkable and actually questioned the basis for giving large sums of public money to private developers. In return, the developer has reacted to not getting millions of dollars of other people’s money by closing Crestwood Mall (a.k.a. Crestwood Court), and pulling out of talks with the city. That is fine — it is what I would expect.

Perhaps more surprisingly, the city’s urban planning partner, PGAV, has stopped working with Crestwood because, for once, a city didn’t do exactly what PGAV told them to do. Here’s hoping that this example of a city listening to its residents and voters instead of its planning consultants gains a lot of traction.

From a municipal finance perspective, Crestwood’s solution to the closure of the mall is straightforward: join the sales tax pool. As of 2010, Crestwood was receiving $189 per capita for its general sales tax, while the pool cities received about $116 per capita. However, the $189 number has probably gone down a lot since then, and is certainly going to go down fast now that the mall has closed. Joining the sales tax pool is the answer for city finances, both short-term and long-term. Would some services have to be reduced and some taxes raised? Perhaps. But responding to this situation by trying to resuscitate a failed mall with a huge TIF would be insane. Just look at Northwest Plaza to see how that simply will not work.

From the perspective of what to do with the space, that is going to require a commitment to patience and a faith in free markets. Just look at our recent (and now very timely) video about the rejected TIF in Olivette as an example of how good things can and will come without huge incentives if you give it time.

I went to Crestwood Mall plenty when I was younger. I remember its glory days. Those days are not coming back. Reacting to the closure with some huge tax subsidy and more corporate welfare won’t work either. No matter how grandiose the planner’s dreams may be, it does not justify taking other people’s money to give out more corporate welfare. Crestwood officials deserve great credit for their judiciousness so far. Here’s hoping it holds.

July 22, 2013

New Show-Me Institute Video About Olivette TIF

In 2000, Olivette officials debated a major tax subsidy for a new retail center. The subsidy was in the form of Tax Increment Financing (TIF) and the proposal was put before the voters. It was defeated in a referendum, and today, it remains one of the only examples of a defeated TIF in Missouri. Back in the late 1990s, the TIF supporters made all the same arguments we hear with every TIF: “This is the only way to revitalize our community” and other such falsehoods. Recently, the Show-Me Institute decided to investigate what happened in one of the few places where an enormous TIF was rejected.

The area that was supposed to be razed, with “help” from eminent domain, using TIF in 2000 is doing just fine in 2013. There are new homes and new businesses, all without subsidies. Most importantly, the residents and the neighborhood are still in good shape. That situation was not made any easier 15 years ago, when the entire community was in fear of being bought out (or taken) and torn down for a Walmart.

Check out our newest video about the Olivette TIF proposal here. Communities are strongest when individuals are empowered, not government planners and subsidized developers.

June 28, 2013

The Figure Skating Method For Building Demolitions

“I usually drive by the properties, and give them a score on a scale from 1.1 to 1.9. It’s kind of like judging an ice skating competition.”

This is how Saint Louis City’s demolition specialist described the process of identifying vacant buildings for demolition during a meeting with Saint Louis housing and demolition employees.

Problem properties have long been an issue in Saint Louis, and preservationists question whether some buildings that get demolished are in that bad of condition.

Preservationists fear that knocking down existing houses that could be rehabbed speeds up the process of out-migration and neglect. Michael Allen, of the Preservation Research Office, says, “As many as half the buildings demolished in St. Louis were actually sound under the city’s building code.”

Is Allen’s assessment accurate? It’s hard to know. While the city’s demolition process involves ranking buildings on a scale to determine which are priorities for demolition, there is no specific criteria for each ranking. The demo specialist just drives by and conducts a quick assessment.

Let me be clear: I’m not accusing the demo specialist of doing a poor job. He could be an expert at determining a building’s condition, and only need a quick glance to make a decision.

But this method does leave the process open to influence. Without documenting criteria that determines the need for demolition, what prevents an alderman, developer, or other interested party from getting the buildings in his/her area to the top of the list? Or conversely, out-of-favor aldermen and developers could have high-priority buildings moved to the bottom of the list.

The City of Saint Louis could improve transparency and accountability to its citizens by implementing standards that determine demolition priorities. Or, better yet, make the process easier for private citizens to buy demo-ready properties and tear the building down themselves.

June 13, 2013

CID Lives

If your future dream involves a shopping excursion to the Crossroads Art District in Kansas City, it may cost you a little bit more thanks to a proposed Community Improvement District (CID) for the area. CIDs are another example of the alphabet soup of special taxing districts in Missouri. Sing it with me:

“Is this a CID? Or is this an EEZ? Or is this a TDD? I thought it was old KC? Or just another subsidy…”

On the ladder of subsidies, CIDs are at the lower end of noxiousness. Nonetheless, as someone else (I don’t recall whom or where) said (paraphrasing here), “CIDs represent an admission that local government has failed in basic responsibilities.” Stepping into a void left by poor public services with new private activity is one thing. Stepping into the void with new, additional taxes and rules is quite another.

Along with all the other special taxing districts and subsidies, CIDs represent a constant growth in the public sector to do basic things that used to be better delineated between public or private responsibilities.

Police protection? Public. Better driveways to your own store? Private. Pretty flowers to beautify your shopping center? Private. Now we have turned these latter areas into semi-public responsibilities supported by tax dollars, be they TIF, TDD, or whatever.

I am pleased to read that there may yet be some serious opposition to the Crossroads CID proposal, as reported by Tony’s Kansas City. It should be far more difficult than it is to get these special districts established. Sometimes CIDs can focus on legitimately public interests, and you can argue that is the case here. (If it stays focused on security.) But often these types of districts easily morph into taxpayer-funded expense accounts for businesses that lack the proper oversight of tax dollars (like the Lake Lotawana CID). And the more you have of them, the harder it is to monitor all of them.

I hope the residents and business owners of the Crossroads district think long and hard about this latest tax proposal. I think their goals can be accomplished through private action (like the education campaign they have been waging) instead of new taxes.

April 26, 2013

Part Five: The Smallness Of The Potentially ‘Hip’ Core

In Part Four, I wrote about how the number of jobs in Saint Louis’ “central core” fell dramatically in the last decade. The Brookings Institution found that in the 3 miles surrounding Saint Louis’ business district, the city had lost almost 28,000 jobs from 2000 to 2010. Of the job growth the region did experience, those jobs predominantly materialized far outside the city center.

Kansas City feels Saint Louis’ pain. Like Saint Louis, Kansas City has undertaken a series of urban redevelopment plans of its own that, again, have focused on attracting the “hip” class to the city center, oftentimes with significant tax incentives. And as has become commonplace, the hip have come, but the jobs have not.

A report released [...] by the Brookings Institution said that in 2010 just 16.9 percent of the area’s jobs were in the core, defined as within three miles of Kansas City’s downtown. That’s down from 20.5 percent in 2000.

Dragged down by the Great Recession, the raw number of jobs in the central core also shrank from 180,000 in 2000 to 140,000 in 2010, according to the study.

For areas between 3 and 10 miles from the city center, the number of jobs also dropped. But between 10 and 35 miles from the central business district? As in Saint Louis, the total number of jobs rose — and in Kansas City’s case, they rose significantly.

The chart below, created by the Kansas City Star, tells the decade-long tale.

Indeed, all of the regions in Kansas City were buffeted by the Great Recession. Notably, the 10- to 35-mile band was still shy of its intra-decade high as of 2010. But the downtown Kansas City job figures tell a pretty unambiguous tale: jobs have been falling in Kansas City’s central core. Like Saint Louis, population in downtown Kansas City rose over the decade, but . . . (emphasis mine)

. . . new residents hadn’t translated directly to job creation in the core by the time the Brookings information was compiled.

Since then, “we’re seeing some small businesses locate in the Crossroads and the like, but they don’t employ that many,” said Jeff Pinkerton, economist at the Mid-America Regional Council. “And we haven’t had any major employer move downtown recently.

“The fact is that jobs follow rooftops, and housing is growing in the suburbs.”

As has been explained before, “the hip crowd” does not typically have much in the way of jobs coattails. Unfortunately, it seems, Saint Louis and Kansas City know this all too well.

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