Kansas City’s business and occupational license system is very complicated (p. 41-42). The Citizens’ Commission on Municipal Revenue (CCMR) has decided to continue its work with a singular focus on simplifying and improving the license system. It has identified the problem, and seems serious about a solution. Kansas City would greatly benefit from these changes that would treat businesses equally and require less work to administer.

Dedicated taxes with sunset provisions are good things. However, it is possible to go too far with dedicated taxes, and Kansas City has probably done so. For example, Kansas City previously, and unnecessarily, chose to dedicate its entire 1 percent baseline sales tax to capital improvements (p. 29-30). The committee is right to suggest that Kansas City loosen the requirements for that tax so that it can be used for more general purposes.

One of the major disappointments in the report is the refusal to take on Tax Increment Financing (TIF) (p. 18). It is difficult to see how a commission tasked with reviewing municipal revenues could overlook TIF beyond a meekly-worded warning that Kansas City carefully evaluate future TIF projects.

One of the most audacious suggestions was, to be fair, not included in the final recommendations.  The commission considered suggestions to end earnings tax refunds to non-residents for work out of the city (p. 26). Put another way, the city wants to tax the income of people who do not live in Kansas City for work they did not do in Kansas City.  The fact that the commission even considered ways to keep tax money it does not have a moral or legal right to is disturbing.

One tax idea that has widespread agreement among economists is the benefits of land taxation to fund local governments. Land taxation is fair, consistent, has very limited economic distortion, encourages investment, and is easy to collect. Kansas City is the only local government authorized to collect a land tax in Missouri. So, what does the CCMR want to do with the single-best tax that Kansas City enacts? Get rid of it, of course, and replace it with higher sales taxes (p. 36-37).

Kansas City has a tax that other cities in Missouri should envy and economists would almost universally encourage. And this is what the CCMR wants to eliminate.

The mayor wishes to enact the changes suggested in this report by putting it on the ballot later this year. I hope the city council thinks twice before replacing less harmful taxes like the land tax with broader, higher, and more damaging substitutes.

The bill originally was a relatively uninteresting piece of legislation meant to improve procedures for Missouri counties making purchases. Now, the poor thing is bloated with language addressing, among other things, Springfield School District board elections, local debt collection, economic development boards, and the creation of a Kansas City land bank.

The land bank “amendment” alone added 35 pages to SB 729. This is the third time the land bank legislation has been tacked onto an unrelated bill. First, it was attached to a bill that was supposed to improve transparency. Then it was added to a bill that was supposed to help counties manage their budgets.

This last-ditch attempt to push legislation to the finish line by any means necessary is unfortunate and opaque. We saw efforts like this last year, when legislators rolled an extensive list of bills into a 356-page behemoth that entailed the creation of hundreds of millions of dollars in tax credits. Despite that bill’s failure, it appears that land bank proponents are taking a page from tax credit proponents’ strategy manual.

If legislators intend to vote on this bill before the end of the legislative session on Friday, I hope they at least take time to read it. The land bank legislation (or “amendment”) raises a number of questions that remain unanswered:

• Why allow a government land bank to bid against private would-be buyers? Don’t we want this property to have a chance of being redeveloped privately? (141.984.6)
• Why allow a government land bank to incur debt without limitation? (141.981.6 (3))
• Why allow a government land bank to borrow against promised funds from the state of Missouri? (141.994.1)
• Why allow a government land bank the power to build, construct, lease, and furnish property? Wouldn’t that put it in direct competition with the struggling private real estate market? (141.983 (13))
• Why create a government land bank? Where is one example of a government land bank that has accomplished a significant reduction in vacant government-owned property?

SB 721 would limit the ability of cities to override the county TIF commissions. It would greatly reduce the absurd spectacles of city councils representing a few thousand people imposing their will over the objections of county TIF commissions representing a few hundred thousand people.

Yes, I would like to see these reforms moved to other parts of the state as well, especially the Kansas City area. But for now, limiting TIF in Saint Louis would be a great start. Passage of TIF reform and SB 721 would be an outstanding policy change for Missouri.

In addition to testifying and providing suggested changes to the legislation, I have also written here repeatedly about the pitfalls of creating a land bank, in light of the 40 years of failure we have experienced in Saint Louis City. If legislators — despite the evidence that land banking can lead to abuses of political power and poor decision making — still want to pass the land bank legislation, perhaps they should consider recent land banking news from other states:

The Columbus, Ohio land bank is asking the State of Ohio for money.

The fiscal note for the land banking bills (H.B. 1659 and S.B. 795), reports that passing the legislation will not cost the state money. However, the legislation itself mentions possible funding from the state several times. Columbus, Ohio provides a good example of what could occur if the Kansas City legislation is passed. The new land bank is requesting $8.2 million from the State of Ohio. A newly established Kansas City land bank could make a similar request.

The Saginaw, Mich. land bank bought a hotel, used it for police training exercises and now plans to spend up to $400,000 to demolish the hotel and build an “aesthetically pleasing parking lot.”

Regular Show-Me Daily readers know that we are not a fan of government development bets. Well, land banking takes that practice to the next level. Instead of government officials attempting to pick winners and losers by awarding tax subsidies, land banks can purchase and attempt to redevelop property. What could possibly go wrong?

Consider the case of Saginaw, Mich. In December, the Saginaw land bank purchased a hotel for $235,000. Since then, refrigerators and microwaves have been looted, and the sheriff’s department has conducted “emergency response exercises” there. The building is riddled with black mold, and the county is paying $15,000 per month for utility costs at the vacant hotel.

Government officials say that investors aren’t interested in the property, so the next step is to demolish the building and build a parking lot. The demolition is estimated to cost another $300,000 to $400,000.

The Missouri land bank legislation is modeled on Michigan’s land bank law. If legislators pass S.B. 795 or H.B. 1659, a Kansas City land bank would have the powers to make similar development bets with taxpayer money.

The Missouri Legislature passed land banking legislation in 1971, and it has been an abysmal failure. The Saint Louis land bank holds more property than ever, and pays more than $1 million every year just to mow the grass on its properties. Why repeat past mistakes?

The most recent stumbling block involved funding for the Sue Shear Institute for Women in Public Life. The Institute’s goal is to help prepare women to run for public office. There is nothing wrong with that, but should taxpayers foot the bill? In economic times such as these, it should be a relatively easy call to cut funding for programs like this one. Apparently in Jefferson City, the call was not so easy. The Shear Institute gets to keep state funding. This fracas is indicative of the problems that plague Jefferson City.

If deciding on whether to cut funding for a non-essential program like the Shear Institute can cause the budgeting process to screech to a halt, what would happen if something much bigger was on the table, such as tax credit reform? Organizations on the left and the right have called for tax credit reform, but yet there seems to be little movement to actually enact any meaningful reform (a reform, by the way, that, if enacted, would do a lot to alleviate the current budget situation in which the state finds itself).

The budget impasse has been resolved. However, this situation is indicative of the obstacles facing any reform measure that might be proposed.

Mr. Brock told me that RAM wanted to do more in Missouri, but onerous state requirements — such as requiring licensed in-state medical personnel to participate in a clinic before RAM could provide its services — had stifled his organization on several occasions. Most recently, he said, Missouri regulations prevented RAM from providing free eyeglasses to the southwest corner of the state.

Well, Missouri may be on the verge of rectifying the problem if one bill gets to a final vote. Introduced by Rep. David Sater, House Bill 1072 appears to adopt much of the same legislative language used to facilitate volunteer medical services in Tennessee, which was a pioneer of the volunteer health services law. Better still, the legislation passed through the Missouri House in March and is now close to a vote in the Senate.

Given the movement in the health insurance exchange policy field and the Senate’s earlier allowance for a grade school optometrist mandate to lapse, this session may just be a banner one for health care policy in the state of Missouri. For more information on how burdensome occupational licensing laws affect Missouri, please check out our work in the area, which you can find here, here, and here.

Well, lawmakers have done it again. The latest bill to get what I am now going to call the “Kansas City Land Bank Bump” is Senate Bill 692, a bill that was initially intended to help counties manage their budgets. This time, the bill ballooned from two pages to an impressive 93 pages. It appears that about 30 of those pages are dedicated to creating a land bank in Kansas City.

Given that a land bank created under this bill could entail unlimited amounts of debt, the addition of the land bank language to a county budget bill is almost as ironic as the previous act of desperation.

Moreover, these moves may not even be constitutional. The Missouri Constitution states that bills cannot contain more than one subject, and that subject must be clearly stated in the bill’s title. Does “decreasing county budgets” accurately describe a bill that would create a land bank? Perhaps, if SB 692 passes, a court will have to decide.

Look, if a land bank is such a great idea (and after extensive study, I do not think it is), why can’t legislators pass it on its own merits, instead of continuing to try and hide it as an amendment to unrelated bills?

The process was not without its share of drama, of course. The hearing for the bill before the House Committee was held at the end of March, leaving the bill with little margin for error to get the required votes done before the legislature adjourns. But whatever the reason for the delay, the committee deserves credit for getting the job done. On to the full House.

I will admit that CIDs are a little less noxious than TIFs. But, no matter what grading scale, tax subsidies are not needed in Chesterfield. The market for retail shopping is plenty strong that the city does not need to turn over the taxing authority to private developers. The real issue, however, is that with projects like this, we must acknowledge that we long ago passed the tipping point where basically every major development in Saint Louis and Kansas City is subsidized by the taxpayers. When you are going forward with subsidies for things like outlet malls in one of the nicest parts of the region, the idea of a free market is basically defeated. Once you subsidize outlet malls in wealthy areas, at what possible good or service do you draw the line?

The obvious answer is that there is no line and the use of tax dollars for subsidized, politically-connected developers is just a fact of life now in much of Missouri. That is repulsive.

In our new report Rich States, Poor States, prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece or King Kong with fleas.

Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

There are many excellent analyses and anecdotes in Rich States, Poor States. From state-specific stats to broader policy discussions, RSPS serves as a fine starting point for assessing our states’ economic health.

But some RSPS history needs to be noted regarding the book’s specific discussion of Missouri’s “economic outlook” (RSPS’s forward-looking metric). Laffer and Moore’s observations about states without income taxes bears repeating — they have grown significantly in contrast to other income tax-reliant states — but from the perspective of policymakers and legislators here, the view RSPS paints of the Show-Me State is starting to diverge from the book’s own backward-looking “economic performance” metric.

How has Missouri done according to RSPS’s metrics over the book’s last five editions? Well, the state has risen to seventh from 25th of the 50 states in “economic outlook” over the last five years, even as its actual performance has languished by RSPS’s standards around 40th (roughly consistent with BEA and BLS statistics).

As the chart shows, the disparity between “where Missouri is going” and “where Missouri has been” has never been greater. I think that is a problem with RSPS’s “outlook” metric, not the policy Laffer and Moore advocated in the Wall Street Journal. More to the point, the state has continued to flail in growth, arguably in part because the state continues to cling to its income tax and tax credit system, rather than shifting to a more effective, and less destructive, taxing system that does not pick winners and losers and does not penalize income.

Unfortunately, that hugely important point could get clouded when people see Missouri’s “outlook” ranking, which only considers the impact of income taxes as fractional, evenly-weighted components among more than a dozen factors of varying real-life importance. Missourians across the ideological spectrum do not agree on much, but what they certainly do agree on is that Missouri’s economic status quo is unacceptable and is not improving. In substance, Laffer and Moore agree with that assessment, despite what RSPS’s “outlook” metric suggests.

The pathway to state growth that Laffer and Moore articulate is a clear one; Missouri is lacking only the political will and leadership to take it over the finish line. The outlook for finding that sort of political leadership, unfortunately, is decidedly more mixed, and while it remains mixed, Missouri’s economic performance will continue to suffer.

TIF allows developers to freeze taxes and invest any increase in property tax value that otherwise would go toward taxes into property development instead. Essentially, TIF costs taxing districts property tax revenue. For entities that do not rely heavily on property taxes, such as cities, TIF is not a big deal. But for taxing entities that rely heavily on property taxes, such as schools, TIF can be quite detrimental. If the TIF project in Kansas City moves forward, it could drive another vote for a property tax increase, and next time, the tax increase might not be rejected.

Two different groups want to build outlet malls (or something close to it) in Chesterfield. Both want a tax subsidy; one in the form of a Community Improvement District (CID) and one in the form of a Transportation Development District (TDD). Both allow the developer to install an additional sales tax with the shopping area. Whatever the initials, the subsidies are not necessary.

Chesterfield should act like the girl being courted instead of the wallflower. I am not one for recommending that city councils reject projects – I question whether city councils should have a right to do that in the first place. But as long as the two entities are asking for tax subsidies, and as long as the Chesterfield City Council needs to consider these projects in the first place (for zoning reasons, etc.), Chesterfield’s elected officials should refuse both of them until they agree to move forward without a CID or TDD.

The subsidies are a total joke. If there is a market for more shopping in West County, taxpayers do not need to support it. The Chesterfield City Council should hold off until one, or both, of these proposals moves forward without taxpayer assistance.

This means that when school administrators and board members consider layoffs and teacher termination, many of them may have fresh memories of serving as a teacher. Many may also have friends who continue to serve as teachers in the district. As a result, people who consider layoff and termination decisions in Missouri’s school districts may consider the impact on teachers more carefully than the long-term impact on students.

Though Missouri law technically allows for teachers to be terminated on the basis of “incompetency,” we have shown here that districts rarely fire teachers. For example, the Parkway School District, which employs more than 1,200 teachers, has terminated just five in the past 10 years. Though state law is part of the problem, school leadership certainly plays a role.

Education expert Rick Hess writes about school administrator’s lack of leadership triggering similar teacher tenure reform efforts in Massachusetts. He writes:

Given the freedom to craft sensible, quality-sensitive evaluations that thoughtfully give some weight to seniority, the state’s school boards and superintendents have . . . punted.

Hess’ observation is likely relevant to Missouri. In our collection of teacher tenure data, we have also requested some districts’ termination policies. Frequently, those policies follow state law, with little added.

So, even though Missouri law states that teachers “shall be retained on the basis of performance-based evaluations and seniority . . .” during layoffs, districts can, in practice, choose to favor teachers who have seniority.

This is why a legislative fix is needed. Missouri House Bill 1526 would require that a teacher’s individual performance be the “most heavily weighted factor” when layoffs are considered. School districts, which receive a tremendous amount of state funding, should not be allowed to make decisions that favor teachers at the expense of students.

I do not recall ever seeing such a brazen example of an elected body ignoring the will of the people. Combined with the terrible economic policy they are now instituting, the choice of the Ellisville City Council to enact this TIF is one of the worst decisions I have ever seen a government make.

Now more than ever, we need the state legislature to pass major TIF reform for Saint Louis County and all of Missouri. The ability of cities to override a county TIF commission must be removed. Furthermore, TIF districts should be required to make other taxing districts whole through alternate tax dollar arrangements. In other words, cities should share the sales tax dollars placed into the PILOT (Payments In Lieu Of Taxes) fund.

We still have many more TIFs to fight in Shrewsbury, Saint Ann, and Richmond Heights; and that is just Saint Louis County. Add in the Enhanced Enterprise Zone (EEZ) in Columbia, the Transportation Development District (TDD)/Community Improvement District (CID)  in Chesterfield, the incessant use of subsidies for every project in Kansas City and Saint Louis, and I can assure you we will be very busy. When it comes to pointing out the economic flaws in the terrible arguments for local development subsidies, the Show-Me Institute has only just begun to fight.

Now I am going to get some lunch. (Go to the 2:04 mark.)

On Wednesday, the Missouri House took an otherwise laudable government transparency bill and used it to hide legislation that would create a government land bank in Kansas City. The transparency bill, S.B. 467, ballooned from just two pages to about 40 pages with the unwieldy amendment.

Some legislators continue to push the Kansas City land bank bill forward, despite the fact that a similar land bank in St. Louis City has failed spectacularly. The Saint Louis City land bank has a history of rejecting would-be buyers, and allowing area aldermen to have outsize influence over who is allowed to purchase vacant city property.

If Missouri legislators want to throw the land bank dice again in Kansas City, they’re free to do so, even in the face of St. Louis’ failure. But, perhaps they should do that in a more transparent way.

The irony of using a transparency bill to hide another bill 20 times its size would be funny, if it weren’t so sad.

Tonight is the scheduled final vote on the use of Tax Increment Financing (TIF) for a proposed development at Manchester and Clarkson Roads in Ellisville. We know why Show-Me Institute thinks this is a bad idea for Ellisville. If this TIF can be defeated, as far as I know, it would mark the first rejection of such a proposal by a point-of-sale city. Combined with Florissant’s rejection of a TIF recently, we would be making real progress toward stopping the constant use of subsidies around Saint Louis.

Stay tuned, and follow me on twitter (@DavidCStokes) for results of tonight’s vote.

Let’s be clear: Voter fraud is real. Especially in recent weeks, the push has been on to paint “voter fraud” as some sort of manufactured controversy, but as someone who has worked in this field, I can assure you, it is not. From county officials telling poll workers that people can vote with a credit card as their ID — they cannot — to the use of absentee ballots fueling fraud, there is not only ample room for voter fraud to take place through the very structure of the voting process, but there have been cases of voter fraud suspected and prosecuted in the state just in the past few years.

Voter fraud can swing elections, especially close ones. If voter fraud constitutes 2 percent, or 1 percent, or even 1/2 percent of the vote total, how many races does that affect? How many statewide and local races have you seen decided by a point or less, and how likely is it that none of those races turned on fraudulent votes?

Every vote should count, every vote should be protected, and every attempt to distort the will of the electorate with the casting of illegal ballots should be turned back. Preventing voter fraud through reasonable identification measures that we already accept to drive cars, board airplanes, and enter some government buildings is not an undue burden on voters’ rights to vote. Rather, it is a burden on voters’ rights to allow the floodgates of voter fraud and abuse to remain open.

The ruling is heartless. In essence, Judge David Lee Vincent III argues that it would be too costly to allow Saint Louis City students to choose where to go to school, because too many want to leave. So, instead of allowing those students to escape to a potentially better school, they have to stay to help perpetuate a failing system.

As Robbyn Wahby, executive assistant to the mayor of Saint Louis City aptly tweeted: “Status Quo 1-Kids 0.”

The Circuit Court’s ruling goes directly against a Missouri law that states: ”[Unaccredited districts] shall pay the tuition of and transportation . . . for each pupil resident therein who attends an accredited school in another district of the same or adjoining county.”

The judge was able to sidestep that law by citing a 2011 study that estimated that more than 15,000 students who live in Saint Louis City would transfer to a school in a neighboring county if given the chance. The survey estimated that about 8,000 of those students would come directly from SLPS, with the remainder coming from a mix of charter schools and students participating in a voluntary transfer program.

That study estimated that the total cost of paying for transportation and education for those 15,000 students would be nearly $224 million each year. With that amount coming out of SLPS’ budget, SLPS officials testified that losing that much money would put the district at such a financial disadvantage that it could not serve the students who choose to stay.

In light of that evidence, Judge Vincent views the Missouri statute requiring a district to pay tuition and transportation of students who transfer out of an unaccredited district and to an accredited one as an unfunded mandate.

Though I have some questions about the math (15,740 students at $224 million comes to $14,231 per student, which appears to be cheaper than SLPS’ per-student expenditures of $15,861), the estimated cost is a symptom of a bigger problem.

The very fact that 15,000 students in Saint Louis City want to leave for a better school should be evidence enough that severe educational reform is needed. This is not a problem we should push aside because it will take some work to solve.

It is time to prioritize the education of students over the funding of districts. If public education dollars could follow any Missouri student to any school they choose (public, charter, private, parochial, virtual, etc.), then we would not be at this impasse. A wider variety of schools could take on the students from Saint Louis City who want to leave, and ease the potential burden of new students on the public school districts refusing to let city students in.

Frankly, closing bad schools is one option worth considering. If that is what is needed to ensure Missouri students have access to a quality education, then it is the right move.

• 5.625 percent for 2012;
• 5 percent for 2013;
• 4.375 percent for 2014;
• 3.75 percent for 2015; and
• 3.125 percent for 2016 and beyond.

Show-Me Institute Policy Researcher Michael Rathbone and I have talked again and again and again (and again!) about reducing the corporate income tax, which is one of the most destructive taxes in terms of economic growth. As we have argued, eliminating wasteful economic development tax credits would make up for much of the cost of a corporate income tax elimination, assuming legislators are seeking to make the tax cut revenue neutral. SB 661 does not go quite that far — focusing only on tax reduction and not on development tax expenditures — and admittedly, the draw-down is slower than I would like, but it is a great idea and the right direction for Missouri policy.

Who knows? If Missouri starts phasing out its corporate income tax, perhaps the wastefulness of the state’s economic development tax credit system will become clearer.

This proposal is integral in determining whether the Rams stay or leave Saint Louis. But what really matters is that the CVC will not let the public review the proposal, which if accepted, could cost the taxpayers millions on top of the $24 million per year that the state, city, and county already pay for the Dome’s construction. The Rams already rejected a proposal from the CVC that would have left the public on the hook for $60 million, so it is reasonable to guess that the public’s portion of the bill in the Rams’ counter-proposal will be much higher.

CVC officials maintain that they are complying with a provision in the lease with the Rams that some information can be kept confidential. However, considering that (a lot) of public money is potentially on the line with this deal, NO decision should be made until the public has a chance to review it.

The Show-Me Institute has a long record of opposing such government “investment.” However, even if the CVC accepts the Rams’ counter-proposal, it should do so only after the people who would actually pay for the project are allowed to see the costs.

Given that Missouri Gov. Jay Nixon’s Executive Budget explicitly states that it is counting on a one-time tax amnesty to help plug the budget shortfall, it would seem that these senators’ grievances are well-grounded. As a general rule, any organization that has a budget should prepare for the worst and not count on rosy scenarios. Unfortunately, rosy scenarios seem to be the only game in town.

It is not hard to imagine WHY the state is relying on overly optimistic outlooks when it budgets. The Missouri Constitution mandates a balanced budget and thus revenue needs to be raised to match expenses or expenses need to be cut in order to match revenues. Neither option is attractive to legislators, thus, we have the current budget maneuvers.

One option to help deal with the budget, which seems to have support from both the left and the right, would be to rein in the explosion in state tax credit issuances. Every new issuance puts the state on the hook for another dollar and every tax credit redemption costs the state a dollar of revenue. The state needs to make serious changes in how it does business; tax credit reform would be a good start.

Matthes cited Independence, a suburb near Kansas City, as an example of a community that has enjoyed success with TIFs. I wonder if he was referring to the Bass Pro TIF in Independence that has failed. The city of Independence has had to kick in more than $4.1 million to cover bond payments associated with the project.

Matthes also said that ”(TIF) does prevent and eliminate blight” and “it does increase property value and tax revenue over time.” Though the Missourian highlighted a TIF in North Kansas City that is characterized as successful, it failed to mention the notorious Citadel TIF in nearby Kansas City.

In late 2011, Kansas City officials voted to pay $15 million to purchase property that had been razed and contaminated with asbestos. The Citadel site now sits vacant, and is an example of a TIF project that made an area much, much worse, instead of eliminating so-called blight.

Moreover, earlier this week, the Wall Street Journal characterized Kansas City’s downtown entertainment TIF development, the Power & Light Development, as a “budget hole.” The Journal reports that the Power & Light Development is generating less than one-third of the tax revenue needed to cover debt costs associated with the project. As a result, Kansas City is setting aside $12.8 million to make up the difference.

On the eastern side of the state, TIF does not look much better. Matthes’ statement that TIF eliminates blight and increases tax revenue over time ignores the findings of a multi-year study of TIF and other development subsidies in the Saint Louis area that those subsidies were frequently concentrated in “higher-income communities.” The same study found that retail jobs associated with TIF projects came at a cost of more than $370,000 in taxpayer dollars.

Those findings are not surprising: Years earlier, the Brookings Institution concluded that TIF in Missouri “. . . is used extensively in high-tax-base Missouri suburban areas with little need for assistance . . .”

Perhaps I am being unfair. When Matthes said that TIF has proven to eliminate blight, he may have been referring to the TIF awarded to a Saint Louis area mall. The mall was deemed “blighted” because it lacked a Nordstrom’s. I suppose, because the West County Mall now has a Nordstrom’s, one could consider the “blight” removed.

The new law will require that every part-time high school kid who parks cars in the summer to give the city $100 (assuming the fee is set at the maximum legal limit) for the right to do so. Even worse is the option for the city to declare an entire part of the city (such as downtown) a “special valet zone” and then only allow one valet company (of the city’s choosing, wink, wink) to operate within that zone. So the city is going to limit competition within the industry, which always works out great. That is why economists use valet parking as the standard example of a natural monopoly in all the textbooks, because parking is a public good that does not operate under the law of supply and demand. (Sarcasm note: parking is not a public good.)

Licensing the people who park cars as valets is a bad idea that will limit youth employment. Regulating the entire industry is a terrible idea. Limiting competition within the industry is the worst idea of all.

That is the question facing Saint Louis officials and one that may have significant implications for state education policy. At the end of the school year, the six Imagine charter schools in the City of Saint Louis will close. The Imagine Schools have had a host of financial and academic troubles, with some reports raising questions of financial misconduct.

When the Imagine schools close, they will leave 3,000 or more students searching to find a new school. The NAACP, in a letter to state Commissioner of Education Chris Nicastro, estimates that there are only 500 open seats in city charter schools. The remaining Imagine school students’ only publicly provided option is to attend a school in the city’s public school district. The problem is, Saint Louis Public Schools (SLPS) have been unaccredited for years.

Though the Missouri Supreme Court recently ruled that students in an unaccredited district like SLPS must be allowed to transfer to an accredited district, the Imagine school students are not being given the option to attend nearby suburban districts.

Recently, the Saint Louis City firefighters filed a lawsuit to allow their children into nearby accredited schools. It now looks likely that the NAACP will join the fight for expanded educational choice in the Saint Louis area.

The NAACP is strongly advocating that the Imagine students be given a chance to choose a quality school in an accredited district. Adolphus Pruitt, the local NAACP’s director, has said that litigation is likely, and that attorneys are being interviewed.

When will the pressure in Saint Louis be enough to convince state legislators that a solution is needed? Saint Louis would not be mired in this situation if public funding for education could follow students to any school of their choosing. Instead, public education dollars in Missouri are tied to school districts, and subject to a convoluted and outdated funding formula. If legislators do not bring forward a solution, it seems likely that educational choice will be forced through more litigation.

It is the general assembly’s intent that this subdivision be interpreted as set forth in the Missouri cases of High Life Sales Company v. Brown-Forman Corporation, 823 S.W.2d 493 (Mo. 1992) and Brown-Forman Distillers Corp. v. McHenry, 566 S.W.2d 194 (Mo. 1978), rather than in Missouri Beverage Company, Inc. v. Shelton Brothers, Inc., 796 F. Supp. 2d 988 (W.D. Mo. 2011), aff’d, 11-2456 (8th Cir. February 28, 2012). Further, the general assembly declares that the federal court’s interpretation of this subdivision set forth in Missouri Beverage Company, Inc. v. Shelton Brothers, Inc., 796 F. Supp. 2d 988 (W.D. Mo. 2011), aff’d, 11-2456 (8th Cir. February 28, 2012) should be abrogated in favor of the preceding cases . . .

In a nutshell, the Missouri Legislature is referencing court rulings while trying to write a law instead of . . . actually writing the law. This is one of those proposed sections that make lawyers and special interests salivate and just about everyone else grimace in distaste and confusion. Unless you know what the court cases cited here do and do not say, it is almost impossible to understand how to best comply with the law. In a very real way, the law being “created” is not itself in the law. That is laziness, or worse.

What makes this particular instance especially bad is that it is fairly clear, given the apparent source of the law’s impetus, that this new, convoluted law could ultimately hurt consumers. The jumble of cases laid out above does not make that reality even remotely clear, which may very well be the point.

But whatever the reason for this proposed legislation, that it has been written in this form without clearly and unambiguously articulating what the new law will actually be as a result of this section — and relying on courts to de facto make the law through this sort of legislative reference — should be frustrating to taxpayers, policymakers, and companies alike. The legislature can, and should, do better.

The P&LD was a bet made in the 2000s that will cost the city $10 million-plus per year for years to come. Yet, the city refuses to learn its lesson. Kansas City officials persist in pursuing a massive new publicly-financed hotel project downtown and  an expensive new streetcar system that will burden local businesses with taxes they do not want. We are talking about a city with one of the worst debt loads and tax levels in the region, and the solution — with the benefit of hindsight — is more debt and higher taxes? Pair it with the ongoing border war the city has with its Kansas rivals, and it is clear that the city is not embarking on a credible development strategy, but a road to ruin.

Oscar Wilde wrote in The Picture of Dorian Gray that “there is only one thing in the world worse than being talked about, and that is not being talked about.” Kansas City is getting its press for sure, but as it does its best to keep up appearances with its spend-spend-spend strategy, it ratchets up the risk of debasing its tax resources, wrapped within that thin, debt-laden facade. On the outside, things may look good. On the inside, the city is almost assuredly disfiguring itself, one act at a time.

For instance, stores in Missouri that are on the border with other states attract business from people shopping here in order to take advantage of the state’s low excise taxes. Show-Me Institute intern Amy Lutz recently wrote an op-ed that details the impact such a tax hike could have on interstate commerce.

Also, an increased tax on cigarettes would disproportionately harm the poor. The Post-Dispatch article mentions that raising taxes is an effective method for getting people to quit smoking. Do increased cigarette taxes result in significantly fewer smokers? If smoking is bad for us, and it is OK to increase taxes on that, where does it end? What next, enormous taxes on sugar to finance heavy broccoli subsidies? What about an obesity tax? Isn’t there something offensive about government micromanaging our lives?

The updated map draws a 200-foot no-parking-zone around every brick-and-mortar restaurant in the Downtown Vending District, which runs roughly from 18th Street east to Interstate 70/55 and from Cole Street south to Chouteau Avenue.

The trucks also are not allowed within 200 feet of other types of street vendors or within several blocks of Busch Stadium, America’s Center and the Edward Jones Dome. A previous version of the map included suggested areas where food trucks could park; the new version does not.[...]

“Like any new industry or trend, as soon as everyone jumps in, the regulations follow, which often makes sense. In this case, I think the city is over-regulating,” Pi Pizzeria owner Chris Sommers said. “They do need to protect existing businesses, but the 200-foot rule plus the silly Cardinals and Convention Zones are too much.”

You can find the new map here. As we’ve noted in the past, creating special protections like these runs afoul of good policy and the facilitation of greater consumer choice. The city’s new map accentuates and enhances these ongoing mistakes.

For instance, why in the world does Starbucks need protection from taco wagons? Starbucks sells coffee and pastries. That has nothing to do with the food that, for example, Seoul Taco sells.

Why can’t a mobile sandwich shop like Taste-D-Burger set up shop on a block where a bevy of sandwich shops — upscale and down — are already competing against one another, and many for years?

Why is there a halo around this storefront when The Crack Fox doesn’t even open until 3pm, well after the food truck lunch rush?

And here’s my favorite: Why does Papa John’s, which can deliver pizzas across the food truck map, get protections around its brick-and-mortar store, and get de facto protections for its delivery routes around the brick-and-mortar stores of others?

I have to disagree with the owner of Pi’s assessment that the city needs to be “protecting” existing businesses. There are blocks upon blocks of downtown real estate where lunch is served in permanently-located restaurants well-within the 200 foot halos the city has constructed around neighboring shops — permanent locations that are almost certainly greater threats to each other than the food trucks themselves. But even if you wanted to make sure taco joints weren’t being displaced by mobile taco stands parking on their doorstep, the present regulation is far too over-broad to equitably accomplish that goal.

A food truck taco stand couldn’t sell tacos within 200 feet of a storefront that’s closed at lunch, for Pete’s sake. That’s a policy that Saint Louisans will have a hard time digesting.

The vote last night was 5-2, with the newly victorious anti-TIF mayor and one city councilmember (who also ran for mayor opposing the TIF) voting against it.

I predict the Ellisville charter rules on referendum and recall will quickly become very important in Ellisville if the TIF passes — along with Missouri TIF-related case law involving referendums from this lawsuit.

A new Walmart is opening in Jefferson County. Yes, it got a TIF. The property taxes will now be frozen for all the other taxing districts. So, someone please explain to me how the school district is going to pay for educating the kids in the 180 new homes that are part of the project, when those homes will not be paying the necessary marginal taxes for the schools. Oh yeah, the school district will seek to raise taxes on everyone else . . .

Meanwhile, in more positive news, Florissant officials are set to vote next week on approving a development for a Walmart that is being built without a TIF. The Florissant City Council rejected a TIF last year, but the project is going forward because this particular plan makes economic sense. I commend Florissant officials for their discipline, and hope this serves as an example to cities throughout Missouri. This is a good opportunity to remind people that I have nothing against Walmart – just the subsidies that usually accompany it.

Finally, here is the Show-Me Institute’s latest study on the basic structure of TIF.

According to the St. Louis Post-Dispatch, Richmond Heights has been entertaining proposals since 2003. Things looked great back in 2006, when the Richmond Heights City Council found a serious suitor in Michelson Commercial Realty and Development. But three years later, Michelson still could not get the financing together even with Richmond Heights officials pledging $46.2 million in TIF. The project was scrapped and Michelson pulled out of the 86 contracts it had signed to purchase all the homes and businesses in the affected area. All told, four separate development plan proposals just like Michelson’s failed.

The (eternally) pending developments have sent the neighborhood into a state of disrepair. Richmond Heights City Manager Amy Hamilton told the Post-Dispatch prior to the City Council’s latest vote that more than 35 properties are in “poor or severely deteriorated condition, and the majority of these properties are owned by land speculators.” Hamilton blames speculators and absentee landlords for the degradation, but more likely, Hadley Township property owners are responding to the incentives the city has offered. Who would really invest significant time and money in home improvements while the city unsuccessfully plots deal after deal to snatch up their properties?

And what do Richmond Heights taxpayers get for all their trouble? With Menards, they get yet another big-box home improvement store on South Hanley Road. If the market really drives Menards, Lowe’s, and Home Depot to locate within a half mile of each other, that is great. But it should not be government’s role to plan the local economy. More importantly, however, taxpayers get to finance $19 million of Menards’ $56.1 million development and $26.6 million of Pace’s $125 million development. (Bonus!)

This really is TIF at its worst.

Blight is not benign. It can lead to eminent domain abuse. As long as it is this easy to blight a property, no home or business is safe. This is the fear of CiViC, the citizen group that has arisen in Columbia, Mo., to resist the EEZ being considered there. The group fears the city’s blight declaration will lead to eminent domain abuse.

EEZs are in red (zone boundaries as of 2011)

Consider: the definition of blight for the purpose of establishing an EEZ is exactly the same as the definition of blight for statutes explicitly granting eminent domain privileges. The implication is it can be just as easy to declare blight for eminent domain as it has been to declare enhanced enterprise zones in more than a third of the state.

Clearly, it is time to reform the definition of blight and separate it from the use of eminent domain. This separation has been granted to farmland, and it should be extended to all types of property.

Perhaps because these handouts consume so much of our state budget, our government does pay some attention to where the money is going. As such, Missouri ranked high as one of the states that is “leading the way” in the Pew Center’s study.

While tax credit transparency is a laudable goal, it has accomplished little. Many of our state politicians call for tax credit reform, and then support tax credit programs soon thereafter. Consider Missouri Gov. Jay Nixon, who made news last year when he told journalists that it was time for tax credit reform. And yet later that year, he urged legislators to pass expansive tax credit legislation.

Our state may have a somewhat transparent tax credit system, but taxpayer dollars continue to be misused. Just last week, Missouri Journal reported that Brown Shoe received $2.4 million in jobs training tax credits this year — and is laying off 132 workers. Missouri Journal has also reported that Ford Motor Co. received $1.85 million in job training tax incentives, despite plans to lay off more than 1,000 Missouri workers temporarily. This would have been surprising, if it had not happened before: Despite issuing many of its employees pink slips, Liberty Mutual remained eligible for job creation tax credits.

And, regular Show-Me Daily readers certainly are familiar with the state-level reviews of tax credits with a 2010 audit report that found that the state Department of Economic Development had inflated some job creation numbers associated with tax credit awards, and another 2010 state audit report that found that tax credits are more expensive than advertised. The Governor’s Tax Credit Review Commission report had all kinds of strong recommendations for tax credit reform, but those have, perhaps predictably, not been implemented.

I wonder, if Missouri is considered to be “leading the way,” what is going on in states that Pew considers to be “trailing behind”? It seems we have all kinds of accountability problems with our tax credit programs.  Sadly, transparency seems to have given our politicians enough information to provide tough talk about reform, but not the gumption to implement it.

There is an exception for small breweries (those that produce less than 10,000 barrels a year) owning wholesalers that sell only those breweries’ beers. My question is, why is the state interfering in beer distribution in the first place? Is there a great harm that the state needs to address? Is there anti-competitive behavior occurring? I have not seen an argument being made for this bill on its merits. However, I can see a potential negative. Middlemen, such as beer distributors, succeed when they add value to the process. Such middlemen can be important components of economic organization, but that is only if they add value to the process; state officials should not mandate them into existence.

While there are some legitimate roles for the government in regulating alcohol sales (i.e., age restrictions), the provision that would be created in this proposal is not one of them. If brewery officials do not think it is to their benefit to own or have a financial interest in wholesalers, they will make that decision. However, I do not see why the state should involve itself even more in the market with a mandate for the distribution system of a certain product. SB 876 is another example of the state meddling in areas that are best left to the market.

There are still workplaces in St. Louis County that legally allow smoking. . . . let’s truly eliminate second-hand smoke in the workplace. It’s better for all of us.

Saint Louis County recently passed an expansive anti-smoking ordinance; the law includes exemptions for bars and casinos. The owners of those establishments felt that if smoking was not permitted, they would go out of business. I attended one of the hearings when the Saint Louis County Council was considering the partial ban. Several bar and restaurant owners told officials they feared their businesses would close or they would have to lay off employees if customers were not allowed to smoke.

Well, it turns out that more than $7.5 million in federal stimulus money is funding those radio ads and advocacy efforts to eliminate exemptions. According to the Recovery.gov website, federal stimulus money has gone to Let’s Face It’s anti-exemption campaign. In its report to the federal government, Let’s Face It noted that it hopes to “place amendment on council agenda,” “remove exemptions from current ordinance,” and  ”increase the number of County municipalities that enact smokefree [sic] policies that exceed the comprehensive County-wide policy. . .”

The group has also partnered with the St. Louis Rams, and ran anti-smoking advertisements during the Rams’ Dec. 18, 2011, home game. In its report to the federal government, Let’s Face It claims to have created 38.16 jobs associated with this campaign. Some of those jobs are associated with $2 million that went to Fleishman-Hillard (four jobs) and $175,000 that went to the St. Louis Cardinals (actually, no jobs are claimed to be created with the money directed to the Cardinals).

The Show-Me Institute has made the case that customers (and employees) have the freedom to choose what bars and restaurants they frequent. The argument that customers or employees are somehow trapped at a venue that allows smoking is a smokescreen, at best.

But federal funding of advocacy efforts goes even further. If the anti-second-hand smoking argument is a good one, then why aren’t private associations and nonprofits stepping up to make the case? Why does the federal government have to fund an advocacy campaign?

What is next, Fannie Mae funding an organization that advocates for land banking legislation? Or federal stimulus money being used to fund similar advocacy campaigns throughout the United States against soda?

We have reached absurd levels of tax incentive parrying on the western side of the state. Teva’s current location is an 8-minute drive down the highway from its new location at the corner of College and Nall. As the crow flies, that is a move of fewer than 4 miles.

View Larger Map

It is clear that Missouri’s economic development status quo has been neither effective nor efficient, so I would propose a new plan: Do not participate in the taxpayer-funded tax incentive bidding wars that have companies being traded like baseball cards and have seen the state hemorrhaging tax dollars over the last decade. Simply state the reason why companies should stay in, and come to, Missouri clearly for all companies who want to find a predictable, business-friendly, and stable economic environment to set up and maintain shop.

How about ending the corporate income tax? I have noted in the past that swapping development tax credits for a wholesale elimination of the corporate income tax would be a far better approach to developing the state’s economy. As my colleague Michael Rathbone has noted, only three states in America do not have a corporate income tax or a gross receipts tax. Corporate income taxes are among the worst taxes you can institute if you are looking to pursue policies that promote economic growth. The transition could be accomplished in no small part by scrapping a development plan that has failed for more than 10 years.

Stop picking winners and losers. Missouri and Kansas officials are playing a game of economic futility when they chase companies and escalate the “targeted” tax incentive bidding wars. Both states need to wise up, but especially if Kansas continues on its path, Missouri needs to change the game — and not play on the old terms anymore.

The issue is not going away forever. The supporters are continuing their effort to cap interest rates. I admire the desire to protect borrowers from abusive lending, but there is a better way than capping interest rates.

Interest rate caps at this rate will not only prevent high interest rates; they will eliminate payday loan shops in the state. Consequently, payday borrowers will probably not be able to acquire credit.  A better way to help borrowers is to make cheaper credit available. Do something similar to what this group is doing, and donate money to banks to offset losses from high-risk, short-term loans — thereby bringing down the interest rate.

For an excellent, succinct analysis of payday loan shops and regulations, click here. For more detailed commentary on the topic, see here and here.

This may have a marginal positive impact, allowing school districts more time to weed out ineffective teachers before they gain tenure. But frankly, I am skeptical that this provision will do much. Many of the school districts we highlighted on this blog earlier this week that had terminated just one or no teachers since the year 2000 also reported low non-renewals of teachers who have not attained tenure status.

For example, the Belleview School District, which reported not terminating a single teacher since the year 2000, reported only three non-renewals. The DeSoto School District, which reported terminating one teacher, reports zero non-renewals since the year 2000. The Potosi School District, which employs about 170 teachers and has not terminated a single teacher since the year 2000, reports 10 non-renewals.

However, I do think a provision in the Teacher Multiyear Contract Act may give school districts the latitude needed to terminate poor-performing teachers when needed. Under existing law, if a school district needs to lay off teachers due to budgetary concerns, the district is required to lay off its newest teachers.

The Multiyear Contract Act would change that. The legislation states:

Seniority or years of service shall not be used as criteria for reduction in force; effective teacher performance shall be the deciding criterion.

This provision would allow districts facing financial distress to keep the best teachers — not those who have stayed on the longest. This would certainly help struggling school districts prioritize providing a good education to students, instead of being required to provide employment to those who have been there the longest.

At first, I thought this legislation was a bad idea. After all, it will certainly make it more expensive to operate a food truck. The bill would require every food truck (and restaurants and warehouses that store food truck supplies) to pay $100 each year to the Missouri Department of Health and Senior Services.

Costs associated with complying with the proposed licensing law could result in some food trucks closing or increasing their prices. Some would-be food truck entrepreneurs may even be discouraged from ever trying to open a food truck company in Missouri.

This law would also require food truck operators to list, on their applications, the location of all warehouses or restaurants that supply their food and where they repair and store their food trucks. Perhaps some restaurant owners or food truck operators who have the right connections could get a sense of how best to undercut their competition with this information.

Food truck operators would even have to make sure that records of the “specific locations of the specific itineraries” for the food trucks are readily available for inspection. Could food trucks that announce their lunchtime locations, like @PiTruckSTL, @falafelwich, and @whereschacha, submit those tweets as the required “itineraries”?

This law does sound bad for food trucks.

But, then I read the provisions of the food truck law that require inspections. Did you know that food trucks would have to provide “samples of food, drink, and other substances…as often as may be necessary” to inspectors to determine if the food is “unwholesome?” Or, that inspectors would be granted “access…to the interior of all mobile food units…at such times as the department considers necessary?”

Department inspectors could have access to Pi Pizza, Falafelwich, Cha Cha Tacos, and a litany other of food trucks as often as “necessary.” They might be able to participate in ridealongs if they demand to have access to the interior of a food truck while it drives.

You know, this legislation does not sound so bad. Where do I sign up to be an inspector?

By the way, check out our video about city regulation of food trucks.

It would have compounded the mistake if the Ellisville City Council had voted for it one day after a new mayor and city council were elected.  Mayor-elect Adam Paul and the new city council will be sworn in April 18.  Properly, the ball is now in their court.

The Show-Me Institute is in the process of researching the impact of Missouri’s existing teacher tenure laws. We have made hundreds of information requests to school districts throughout the state to discover just how many teachers have been terminated in the past decade. Generally, we are seeing few — and in some cases no — teacher terminations. Clearly, some of these school districts continue to employ bad teachers.

I have listed teacher termination statics that we have received from school districts that fall within Engler’s Senate district. Three districts report that they have not terminated a single teacher since the year 2000.

Senator Kevin Engler’s Area:

Arcadia Valley R-III: Reports terminating one teacher since 2000.

Belleview School District: Reports that the district has not terminated any teachers since 2000.

DeSoto School District: Reports terminating one teacher since 2000.

East Carter County R-II: Reports terminating one teacher since 2000.

Potosi R-III: Reports that the district has not terminated any teachers since 2000.

Van Buren School District: The superintendent writes that “There were no teachers [since 2000] that were asked to leave, terminated, or were fired by the district.”

Legislators should remember that the purpose of public education is not to employ as many teachers as possible; it is to provide education to Missouri students. As we have pointed out on this blog, we must acknowledge the uncomfortable truth that not all teachers are above average. A consistent finding in academic studies is that teacher quality matters. In fact, a study by Eric Hanushek of Stanford University found that students can learn three times as much from a good teacher than they do from a bad one.

Restricting school districts’ ability to fire bad teachers ensures that some Missouri students are receiving a poor education. As shown in the school districts from the area Engler represents, some districts rarely terminate teachers. Is this practice the best for Missouri students?

They might not, though. In which case, Ellisville’s city charter thankfully allows for a referendum on ordinances. Here is the link (section 9 on page 24). Ellisville has about 6,700 registered voters, so if the city council passes the TIF ordinance tonight, opponents would have to file a petition within 10 days. After that filing, opponents would have a month to gather about 670 signatures to force a referendum. That referendum would allow the ordinance to either go to a vote of the people or require another vote of the city council, which would be the new city council that was elected yesterday. Because just about that number of people (667) voted for the anti-TIF, victorious mayoral candidate, I would think getting the signatures is certainly doable.

There are several other key questions here, but it could be a very interesting couple of weeks in Ellisville.

Stratospheric municipal taxes overlaid with an even higher state tax burden? This will not turn out well.

But yesterday, the St. Louis Post-Dispatch, the Star’s cross-state peer, spectacularly one-upped the Kansas City paper. The law constrains Missouri legislators on how much they can tax and spend each year, and Missouri is billions of dollars below the limit. How much of that difference would the Post-Dispatch like to spend?

All $4 billion of it.

A lot of folks purchased Mega Millions lottery tickets last week dreaming about what they could do with $640 million. Imagine what $4 billion would do for Missouri.

Let’s be clear: That is a radical tax hike proposal, tucked into what is otherwise an uninspired editorial about state and local governing responsibilities. Combined state and local tax rates have stayed roughly the same for decades in Missouri, but the Post-Dispatch would have those rates hurdle skyward to provide more public services and somehow, some way, improve the economy above the status quo.

Even the suggestion that raising taxes and then spending more would help the state makes no sense by the newspaper’s own standards. State and local tax rates have actually increased slightly since 1980, the apparent “good ole days” implied in the editorial, from 8.6 percent then to 9 percent today. The newspaper cannot even claim that plummeting tax burdens are the reason Missouri is suffering economically, because, by its own metric, taxes have actually increased over the last 30 years.

The proposal is mostly academic here in Missouri, as taxpayers and policymakers would blanch at the thought of such a hike, but the suggestion is still troubling. If implemented, the plan would have awful real-world implications — giving families less to spend and taking capital out of the market for use in less productive government programs. It is a roadmap to ruin, and yet the Post-Dispatch apparently does not see it.

“Imagine what $4 billion would do for Missouri”? No, imagine if lawmakers took their cues from Missouri’s newspapers. What a nightmare that would be.

The Show-Me Institute has presented several ideas that would help Missouri jump-start its economy. Shouldn’t the state take a serious look at alternatives before adding another drain on the state’s revenue?

Why are tax hikes even on the table? Legislators have not even cut all waste and low-priority programs from the state budget, never mind bigger ticket items such as higher education and medical programs for the blind. Considering that the Missouri House passed an appropriations bill that includes funding for the Missouri Wine & Grape Board along with ethanol subsidies (and that is only for the Department of Agriculture), the state has plenty of places to cut.

The Star editorial is not all bad. It does call for reigning in tax credits, which the Show-Me Institute has pushed for repeatedly. However, it also calls on raising the cigarette tax. The Show-Me Institute has written on this issue and the situation is the same now as it was then; raising taxes on cigarettes is not the cure for what ails Missouri.

Missouri needs a healthy environment so its economy can thrive. That does not just mean low taxes; it also means lowering regulatory burdens. Doing so will ensure that the state receives enough revenue so that all PROPER functions of government have enough funding to work effectively.

This program sounds great for property developers, but what about everyone else? Shouldn’t Saint Louis concern itself with rejuvenating the entire city, not just a few old properties? Here is an idea: eliminate the earnings tax. It would be like a tax credit for everyone. It might even attract more businesses to the city, bringing economic growth.

For Show-Me Institute material on eliminating the earnings tax, click here and here.

Two different stories on Aerotropolis are now circulating. The first came out Tuesday and dealt with efforts in the state legislature to once again drive state tax credits to the project. It looks like House leaders may try to tuck Aerotropolis back into an economic development package that the chamber is preparing.

The second story was published this morning and is the more fascinating of the two. It reveals that Saint Louis County may apply $3 million in casino tax revenues to support the Aerotropolis project. If true, the funding source would certainly be apropos, given that Aerotropolis almost certainly is a gamble. Over the last year, Audrey Spalding and I (as well as Chrissy Harbin) have discussed at length the merits (or lack thereof) of Aerotropolis, a project that originally clocked in at a cool $480 million when it was first proposed. That figure is worth keeping in mind as proponents of the Aerotropolis plan pine for state money. Taxpayers have been told that Aerotropolis “needed” a half billion dollars to take flight; then $360 million; and then just $60 million. Maybe Aerotropolis should not receive any money from taxpayers?

This also may be a case of life imitating art, as this Show-Me Institute PSA (narrated by our own Rick Edlund) makes clear.

No doubt, a plethora of interest groups are still actively campaigning to resurrect Aerotropolis, but proponents have still failed to make the case that 1) the Aerotropolis plan will work, and 2) public money is required to resolve some market failure standing in the way of the project’s success. Last year, it looked like private parties just wanted to gamble with the public’s money. “A game changer at $480 million! A bargain at $360 million! Just $60 million will do the trick! How about $3 million?”

It sounds like we have a problem gambler on our hands. Maybe the best thing to do is to simply cut them off.

The tax increase is needed, according to supporters, in order to (among other things) pay for the operations of a new building the district purchased in 2010. The school district says their projections on revenue were off, but it is not their fault:

“It was so unprecedented. At that point and time, it was hard to imagine that kind of downturn,” said Susan Dielmann, district spokeswoman.

That statement is referring to a choice made in late 2009/early 2010, and it is just crazy. By that time, it was apparent to many people that we were in for a long and difficult economic recovery, and the idea “everybody just assumed the economy would be terrific by 2011″ is preposterous. From USA Today in late 2008 (emphasis added):

Others are gloomier. They expect continued job losses and depressed consumer and business spending throughout the year because of tight credit conditions. The resulting damage to the consumer and business psyche will change the very nature of the economy for years to come.

Many families within the Ladue School District send their children to private schools. So, it should hardly surprise people that many taxpayers within the district who do not, will not, or never did use the public schools are opposed to a dramatic tax increase to pay for something the district probably should not have bought in the first place.

On the other hand, someone once did a study demonstrating that high MAP scores have a positive effect on property values within the Ladue School District, so there is no denying that if the tax increase is necessary to maintain the quality of the schools that the taxpayers will recover a portion of those taxes via property values and sale value. However, it is hardly obvious that the new tax dollars are required to maintain the high district rankings and educational quality. Supporters of the proposal obviously think it is, and opponents think it is not. I do not live in the Ladue School District so I cannot say, but the relationship between per-pupil expenditures and school achievement is far from exact. (Clayton and Ladue certainly spend a very high amount per student and are terrific schools, but there are plenty of counter-examples.) 

Even if the tax increase maintains or improves the school quality, some of that property value increase will be offset by lower values due to the higher taxes. That study also demonstrated the positive effects that low taxes can have on property values. I do not pretend to know how the exact relationship (MAP scores vs. tax rates) would work out going forward. The gains from education quality (if the higher taxes lead to that, which is far from certain) may outweigh the loss from higher taxes. But I do predict that, if this passes, more residents in the Ladue School District will appeal their property tax assessments to try to capture some of the real estate decline and offset the higher tax rate. That will limit the effectiveness of the tax increase.

Election day next week is going to be very interesting in the Ladue School District. I fail to see how a tax increase this substantial is going to benefit the people of the district. The 49 cents per $100 of assessed valuation comes out to an average property tax increase of $766 within the city of Ladue itself. (Hat tip to here for that number, though the rest of the piece is awful.) This is a lot of money to correct a mistake.

Well, yesterday the Education Committee told Missouri families where it stands, voting to not send the bill to the full Senate for further consideration, meaning the bill is effectively dead — for now, anyway. The House is still considering substantially similar legislation, and there are technical pathways through which this legislation could be resurrected or otherwise attached to other bills, and thus reconsidered. I will be on the lookout for all such activities, but the good news is that the prospects for the bill are now very bleak.

Kudos, Senators. There are more effective and efficient ways of promoting eye health for Missouri’s children than through the mandate contemplated here. The Committee made the right decision.

What could go wrong?

Councilman Russ Johnson has filed a resolution that would direct City Manager Troy Schulte to apply for a Federal Transit Administration grant to study extending the proposed streetcar line to the Country Club Plaza and University of Missouri-Kansas City area.

The current proposal has the line running a 2.2-mile route from River Market to Crown Center. The second leg would add a little more than three miles.

City officials apparently feel they need to go straight to ludicrous speed with this crazy train proposal, but basically all of the same objections apply to the new plan as the old. Kansas City’s streetcar plan attempts to satisfy a market demand for transit that does not exist along the proposed route and will cost at least — and now, potentially far more than — $100 million to get off the ground. In addition, despite city promises, the plan will make the city less competitive, not more competitive, with a spike in local taxes.

Is this really what Kansas City needs to be investing in right now? The Kansas City Star’s Yael Abouhalkah recently noted that Kansas City has the second-worst debt service burden among the largest cities in the region and one of the highest tax burdens. Why would the city aggravate concerns that are already making it less competitive, and why on Earth would they double down on such a plan?

First, is PPACA severable — that is, if one part of the law is unconstitutional, may the rest of the law remain, or must the entire law be thrown out? Readers can find extended coverage on the severability issue here.

Second, is PPACA’s Medicaid expansion constitutionally permissible? Congress’ broadening of Medicaid’s eligibility rules affects not only the federal budget but the budgets of the states, which, along with the federal government, fund state-managed Medicaid programs. By expanding the pool of who can receive Medicaid, Congress is raising the states’ costs; the states’ contributions to the program would have to increase to pay for the greater number of beneficiaries. That is bad news for already tight state budgets. Medicaid is a “voluntary” program technically, but practically, states have come to rely heavily on the federal dollars associated with the program. Foregoing PPACA’s Medicaid expansion provisions also probably means foregoing those federal dollars.

Therein lies the issue: Do PPACA’s revisions to Medicaid, which expand the program’s eligibility requirements, constitute permissible federal pressure on the states stemming from Congress’ spending power, or does it go beyond “pressure,” constituting “compulsion” in violation of the 10th Amendment? For those following the arguments at home, listen for whether and how the justices use the word “compulsion” during the hearing. If the Court believes the changes to the law are “compulsion,” it may be inclined to say the Medicaid expansion goes too far, violating the 10th Amendment.

The Court is expected to rule on this week’s oral arguments in June or July.

If both the governor’s and legislature’s actions indicate anything, there is seemingly nothing else to cut in the budget and thus the state is faced with the Scylla of higher education cuts and the corresponding tuition increases they entail, or the Charybdis of cutting health programs, specifically a program for the blind who do not qualify for Medicaid. However, despite proposed cuts in these programs, there are still egregious examples of programs that clearly have no business being funded but still receive taxpayer dollars.

I have previously blogged about programs such as the Missouri Wine & Grape Board and Missouri ethanol subsidies. According to the House Budget, the Missouri Wine & Grape board receives an appropriation of $1,826,275 while the state will appropriate $9,850,000 to various ethanol and biodiesel programs. Before fighting about whether to cut higher education or programs for the blind, shouldn’t state officials eliminate funding for programs like the two mentioned above?

Modern jurisprudence has increasingly allowed the federal government to regulate commerce that is not of an obviously interstate nature. The issue here is that PPACA goes further and regulates the non-purchase of a good or service. Rather than simply regulating the manner in which the health insurance market will operate, PPACA requires that everyone in the country buy something, or be fined. Under this paradigm, market participation would no longer be required for regulation under the Commerce Clause; instead, and in a very real way, the feds would subject you to a purchase requirement merely for being a living, breathing American.

That is a problem. Having a health insurance plan makes sense, but compelling Americans to buy a health insurance plan through heavy-handed federal coercion is awful policy and arguably unconstitutional. Reading into the U.S. Constitution a federal right to demand purchases from its citizens would eviscerate many of the limits on government power enshrined in that document.

If the federal government can require individuals to purchase health insurance, what can’t the federal government require us to purchase? Ilya Somin, a law professor at George Mason University who has filed a brief with the court, contends that if PPACA passes constitutional muster, then Congress could pass “a broccoli mandate, a car-purchase mandate, really any other mandate that you’d want.” Where is the line against such coercion drawn if not by the plain meaning of the Constitution?

Proponents of PPACA have dismissed the suggestion that the federal government would impose a “broccoli mandate,” arguing that the federal government would never try to expand a mandate to purchase goods and services into such areas. But Americans should not have to entrust their freedoms to the word of politicians and bureaucrats, well-meaning or not.

There is no “just trust us” clause in the Constitution. The Constitution is the check that keeps capricious leaders from doing capricious things, and should remain so.

Each day will focus on a different aspect of the law being challenged. The order of oral arguments, according to the Washington Post, is as follows:

• Monday: The Anti-Injunction Act (AIA)
• Tuesday: The individual mandate
• Wednesday: Severability, Medicaid expansion

The first session will deal with whether the penalty for not obtaining health insurance is a tax. Under the Anti-Injunction Act, the government typically must levy a tax before it can be challenged. If the Court finds that the PPACA penalty is in fact a tax, the earliest anyone could challenge it would be after it is imposed, which would be 2015 — the year after the mandate goes into effect. Such a ruling might frustrate PPACA supporters and opponents alike, as the law would remain in limbo for several more years, or until Congress changes the law.

Both the government and the states now agree that the penalty is not a tax, and although it is not especially likely that the Court will conclude that the AIA would prevent the Court from reviewing the law at this time, it still could happen. Moreover, the AIA issue, despite its questionable merits, does have a certain appeal. If the Court wants to avoid a highly-charged election-year ruling, this issue would provide a handy escape hatch for the Court.

However, in February 2011, Wyandotte County and a wrecking company destroyed the property. Munoz is suing for damages.

The story seems like a shocking outlier. But, just months ago, there was a similar demolition east across the state line, in Missouri.

Show-Me Daily readers may already be familiar with the Jackson County Land Trust, the government entity that deals with vacant land in Kansas City. State legislators have criticized the Land Trust for not selling much property. But, in at least one case, the Land Trust sold a property to a buyer, only to have to deal with the consequences when Kansas City accidentally demolished the property.

During its January 2012 meeting, the Land Trust noted that:

. . . an elderly non-English speaking gentleman purchased 3914 E. 46^th Street from Land Trust. Unbeknownst to the buyer, about 30 days subsequent to his purchase, the city demolished the structure on the property. . . . the buyer is interested in 3227 Garfield as a potential alternative and that the buyer may be approaching Land Trust for resolution.

Sadly, when local government gets enthusiastic about demolishing properties in an attempt to mitigate “blight,” property owners can lose their homes. An example in Montgomery, Ala., provides another cautionary tale. There, homes were bulldozed for ordinance violations. To add insult to injury, property owners were then billed for the cost of the demolition.

Is it too much to ask for local government to do a little more due diligence before knocking down someone’s property?

But wait, there is more. This tax credit has the potential for $6 million in new tax credits each year, which means that Missouri revenue could fall by as much. An amount of $6 million might sound insignificant, but this year, Missouri’s 60-plus tax credit programs are expected to dig an $835 million hole in state revenue. That $6 million figure is just less than half the average redemptions per tax credit program. Combined, these programs add up. Could this tax credit be the proverbial straw that breaks the Missouri budget?

PPACA’s negative economic effects only compound the problems of a slow recovery in which young people in particular are hurting financially. The official unemployment rate in the United States is 8.3 percent, but for people ages 16-25, it is almost double that, at 16.5 percent. The Wall Street Journal describes the situation as “Generation Jobless,” and while college graduates have better opportunities than non-college graduates, they are still making less and saving less than if they had graduated in better economic times. There is no doubt that people of all ages are suffering, but unemployment during some of the most important wealth-building years could be disastrous when today’s young adults are ready to retire — both personally and for the country.

Unfortunately, PPACA only worsens the situation because it raises taxes. Yesterday, Americans for Tax Reform highlighted the (at least) four tax hikes contained in PPACA which hurt young people. The first two are especially troubling to me: the “excise tax,” for not buying a government-approved insurance plan; and the “medicine cabinet tax,” which prevents people from using flex accounts and Health Savings Accounts to pay for non-prescription, over-the-counter medicine. The former penalizes people for not purchasing a government-approved health insurance plan; the latter reduces choice and flexibility with one’s personal health dollars.

Young people are less likely to draw deeply on prescription medication benefits or other health care services than older and less healthy policyholders. The result? The government forces young people to pay for insurance plans that they do not need and will not use, and prevents them from taking full advantage of HSAs — health care dollars they would control and manage as part of their own personal budgets. Essentially, the government is forcing young people to subsidize the health care of others during some of their most economically fragile years.

That is bad policy and bad news for young people. PPACA may be marketed as “reform,” but it harms young people, who already are hurting economically, by raising costs and reducing choice.

Sen. Jason Crowell (R-Dist. 27) made waves when he spoke out on Wednesday against gimmicks that legislators are using to avoid tough budgetary decisions. The Columbia Missourian reports that Crowell blocked a vote that would extend the amount of time the legislature has to replenish the state’s “rainy day fund.”

Crowell also argued that the proposed state budget counts on uncertain sources of revenue ($70 million that is estimated to be received from delinquent taxpayers), and one-time sources of funding (a $40 million settlement that the state has not yet received).

In a very passionate speech, Crowell stressed the need for tax credit reform, something he has called for repeatedly. Crowell has sponsored several bills to subject tax credits to the appropriations process. Tax credits currently are not subject to appropriations, meaning that tax credit money (which has consistently been more than $500 million in recent years), comes straight out of state coffers, without consideration of whether the state can afford the expense.

During the hearing, Crowell asked Sen. Kurt Schaefer (R-Dist. 19), the budget chairman,  ”When are you going to pick Mizzou over Jeff Smith? That’s what this is all about, Senator.”

Crowell was referring to a developer who the St. Louis Post-Dispatch editorial board has called out for benefiting greatly from the state’s Low Income Housing Tax Credit, and alluding to the cuts that have been made to state higher education. These are the kinds of trade-offs that could be considered if tax credits were subject to appropriations; instead, legislators continue to passively give priority to tax credits.

Indeed, St. Louis Public Radio reports that Crowell promised to filibuster uses of one-time funding unless serious overhauls of the tax credit system, prison spending, and state pensions are considered.

Good luck.

So many people showed up that the fire marshal prevented several people from entering. I was there to testify and I had to stand outside until my name was called due to the crowd. (At which point I was allowed in, gave my testimony, and had to go back outside.) By our estimate, 10 people spoke on this issue and nine were opposed to the TIF proposal. There were several score more people who did not speak. But judging by audience reactions, a large majority of them were opposed to the TIF plan as well. The residents who spoke against the project did a terrific job. It really seems that Saint Louisans might be waking up to the TIF scam that cities, developers, and planners have been putting over on us for two decades. Not all cities, not all developers, and not all planners, of course, but a good number of each.

The Ellisville City Council has a great opportunity here to listen to their residents, practice solid economics, and reject this proposal. It would be great for their city and great for our region if they did so, and it could lead to major improvements in TIF policy throughout Saint Louis. Sometimes, it just takes one to lead . . .

Since 2005, the Land Trust has sold more than 1,700 properties for more than $1.5 million. Due to a data error, Callahan and other legislators were presented with incorrect information that made the Land Trust appear to have sold very few properties in recent years.

The correct sales data, which the Land Trust itself provided, is listed below. You can also download a spreadsheet of all addresses sold (and purchase prices) here:

2011: 200 properties were sold

2010: 137 properties were sold

2009: 154 properties were sold

2008: 181 properties were sold.

A big part of the narrative that is being used to advocate for the land bank legislation in Jefferson City is that the existing Land Trust is not selling enough property.

The truth is that the Land Trust sales rate in recent years is as good as, if not better than, the sales rate of any land bank I have researched — including the longest-standing land banking experiment in the United States, the 40-year-old Saint Louis land bank.

Indeed, the very land bank that proponents hold up as the gold standard of land banking (the Genesee County Land Bank in Michigan) continues to amass property. Where, exactly, is the story of success that land bank proponents hope to replicate in Kansas City?

I will admit it: I just do not understand why legislators are in a rush to create a land bank in Kansas City. Why pass legislation that would create an entity similar to what has a long-term track record of failure in Saint Louis? Why create a land bank that could incur unlimited debt with the power to say “no” to people who want to buy vacant, city property? And, why cast aside the Land Trust, which cannot discriminate when selling property and has a reasonable sales record?

This new tax is a bad idea for a lot of reasons, many of them that Saint Charles County Executive Steve Ehlmann has explained well here:

He says his constituents shouldn’t pay higher local taxes to help revamp the federally owned monument and the park surrounding it.

I think he is right, and I say this as someone who thinks the residents of Saint Charles County should pay more in other instances. For example, I think the people of Saint Charles and other counties outside of Saint Louis City and County should be given a choice on either imposing the zoo-museum property tax within their areas or have to pay admission fees to visit those attractions.

But this proposal is crazy. It is possible for this tax increase to pass in Saint Louis County and Saint Charles County, but not in Saint Louis City, which would result in tax money being collected only outside of Saint Louis City but spent entirely within the city. The arch may be a wonderful regional asset, but it should be paid for the way other federal properties are – with federal tax dollars, user fees, and in a case like this, charitable donations. If there are not enough federal tax dollars available to pay for it, then user fees and donations can be increased, perhaps creatively — or perhaps the project should just not be done.

The legislation has out-of-state advocates. Dan Kildee, the head of a nonprofit that has advocated for land bank legislation in numerous states, is quoted in the Star extensively. Kildee told the Star that a land bank could acquire abandoned property in order to keep it out of the hands of private speculators. This statement ignores the fact that if a land bank is acquiring property because it thinks a better buyer will come along in the future, then the land bank itself will be acting as a speculator.

We have seen this model fail in Saint Louis. The Saint Louis land bank, also known as the Land Reutilization Authority, has existed for more than 40 years. In that time, it has amassed about 10,000 parcels of vacant land. My research showed that during the past eight years, the Saint Louis land bank rejected almost half of all formal offers to purchase its property. The most common reason for rejection was that the property was being “held for future development.” Sadly, the hoped-for development rarely materializes.

Instead of taking heed of the 40-year-old failure in our own state, legislators are willing to bet Kansas City’s future on glorified accounts of a land bank’s operations in Michigan. That land bank, the Genesee County Land Bank, has been trying to sell vacant property for less than a decade. When I have testified about the failure in Saint Louis, legislators and lobbyists quickly state that Saint Louis is “different” than Kansas City. Why, exactly, is the short-term record of a land bank that is more than 500 miles away more relevant than the long-term failure of a land bank in our own state?

In all three indicators, Missouri compares poorly to other states and the country. According to data from the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS), Missouri under-performs when compared to the U.S. as a whole in all three categories. Missouri ranks 48th out of 50 states in state GDP growth, 45th in per-capita real GDP growth, and 45th in total employment growth. In fact, when one compares Missouri with the three best and three worst performing states for each indicator, Missouri’s performance nearly mirrors that of the bottom three states (and in the case of state GDP, Missouri IS one of the bottom three performing states). Missouri’s troubles also cannot be blamed on the most recent economic troubles. Over a period spanning from1997 to 2010, Missouri consistently under-performed the national average and was close to the bottom in all three indicators.

Considering how Missouri is ranked relative to the rest of the country, the question should be asked, “How about a new line-up?” The Show-Me Institute has conducted research on ways Missouri can improve its economic standing. Given Missouri’s current situation, how much worse can the state do if it considers implementing some of these suggestions?

It is absolutely NOT a coincidence that this development without TIF is being done in a pool sales tax city. Cities in the sales tax cities gain from development wherever it occurs. Because they share their sales tax collections with the pool – which is then redistributed back based on population – they have no incentive to kick out their own people and give away the store (pun intended) with tax subsidies. A point-of-sale city (which keeps the bulk of its own tax collections) would have given away their first-born mall as soon as the developer mentioned the idea in passing.

Last week, the Columbia City Council attempted to assuage fears of eminent domain. An advisory board:

recommended an ordinance that would safeguard against the use of eminent domain as part of the program by preventing the EEZ-related blight designation from being used to meet blight requirements for other laws.

Unfortunately, the recommendation does not provide full protection for Columbia residents. Other definitions of blight are exactly the same as the one the board used to blight half the city. What is to stop the city from blighting areas using statutes that expressly permit eminent domain?

The real problem Columbia residents face is the unconstrained use of blight. As long as the definitions of blight remain so broad, any property can be blighted and seized (except farmland). No residential or commercial property is safe. The definition of blight must be reformed.

A government project that will not make money and its presumed customers do not want to subsidize? Over to you, City Council.

Council members late Thursday unanimously approved three measures that establish a streetcar zone for two blocks on either side of Main Street {…}. The measures … also remove a requirement that private development within the zone provide off-street parking, a move aimed at encouraging use of the streetcar and other public transit.

The rezoning is considered a necessary step as the city races to meet a March 19 deadline to apply for as much as $25 million in federal grants to help pay for the estimated $100 million project.

In short, the city’s rushing the project through to get federal dollars, with the balance of the bill coming from new taxes. It is worth noting that the residents in the trolley district who would be voting on the proposed property and sales tax increases for the project will not necessarily be the ones paying the tax, because the business owners do not necessarily live where their businesses are located. That has some entrepreneurs pretty irked. Says one property owner, “My biggest concern is taxation without representation.”

“The people who vote on it live in the apartments and lofts,” Nicholson said. “The people who pay don’t have a say. I’ve always been a supporter of streetcars, but it’s a community asset, and having business owners pay for it is problematic.”

In any case, when the people who presumably stand to benefit from the trolley do not want to pay for it, should anybody be paying for it? And if the tax is implemented as planned, how will local businesses respond? It seems the city is out of sync with even its own projects and objectives; after all, why would the city plan to build a new hotel downtown — and then turn around and raise downtown hotel taxes to the second-highest in the country to fund the trolley? Wouldn’t these initiatives be working against each other, and even if they did not, isn’t one bad idea enough for the city to take on at one time?

The trolley did not make sense in September, and it still does not make sense.

Read David’s testimony that was presented to the Saint Louis County TIF Commission.

The two-and-a-half-year process of applying (to both state and federal agencies) was arduous and intensely bureaucratic . . . But in February of this year [2005], Norwood Hills was finally notified that it did indeed qualify to be included on the registry. And with the honor came a huge financial benefit: specifically, the ability to earn tax credits for 45 cents of every dollar spent on the renovation project.

How did the club get 45 cents on the dollar? The state HPTC offers 25 cents on the dollar for qualifying renovation expenses, but the federal version of the HPTC offers an additional 20 cents on the dollar for those expenses. At the Show-Me Institute, we talk a lot about state incentives because we are, after all, a state-focused think tank. However, taxpayers should understand that there oftentimes is more than just state money involved in renovation and building projects like this — so much government money, in fact, that nearly half of the cost of a multi-million dollar renovation to a private golf club could be underwritten with tax credits. Have taxpayers gotten their money’s worth? I report, you decide.

One other noteworthy tidbit from the article is that the original idea of making Norwood Hills a Historic Place came from a real estate developer — who apparently did not think Norwood Hills was that historic of a place (emphasis mine):

Another huge boost to the renovation project came after a Norwood Hills member who is a real estate developer suggested that the club, which hosted the 1948 PGA and has a long and rich connection with St. Louis-area social history, look into the possibility of applying for placement on the National Registry of Historic Places. Successfully securing that status, the developer member advised, would then qualify Norwood Hills, which operates as a for-profit corporation, for renovation tax credits.

“[The member] felt we could qualify not so much because of the club’s history or architecture, but because of the distinction of our members in the St. Louis community through the years,” Wright says.

If Norwood Hills as a place was not itself historic, what exactly was the Historic Preservation Tax Credit preserving? “History” is no doubt in the eyes of the beholder, but for taxpayers on the outside looking in at Norwood Hills, what they gained in this process is of considerable interest, sweat or no sweat.

Both the Saint Charles and Saint Louis County Executives have been leading the fight against TIF, to their great credit. They are dead right that TIF is nothing more than cities pursuing their interests at the expense of everything else, all while leading to the economically harmful scenario of developers chasing subsides.

Mayor Conrad Bowers of Bridgeton is totally wrong with this quote in defense of TIF:

“Cities have a legitimate right to do what they think is in the best interest of their community and it certainly was in our best interest to keep Walmart in the city of Bridgeton . . .”

What he is so wrong about is that by using TIF, the city is also making tax decisions that impact every other tax district in the area: school, fire, community college, zoo-museum, county, library, and more. If they were acting only with city money, that would be one thing. They are not. They are acting with everyone’s money, and in a manner that will increase Bridgeton’s sales tax collections while hurting the property tax base of all the other districts.

There is no more important policy change in Missouri than removing the ability of cities to override a county TIF commission’s rejection of a TIF proposal. For more on the Show-Me Institute’s work on TIF and the closely-related sales tax pool, check out these links.

However, if Missouri would eliminate the income tax and instead tax services such as massages, shoe repair, beauty salons, and tuxedo rentals (all of which are exempt from the state sales tax), we can shift the tax burden to those who CHOOSE to use such services and away from people’s paychecks.

While pondering my income tax burden, I started to wonder just how many services are exempt from the state sales tax.

According to the latest data from the Tax Administration, out of 168 services surveyed, Missouri slapped taxes on only 26! Now, being in favor of low taxes myself, on the surface, that does not necessarily seem to be a bad thing. However, considering that all workers in the state are forced to pay income taxes, wouldn’t it be better to eliminate the exemptions for services that a select group of people use? Then the extra revenue generated could be used to lower the personal income tax. Sure, one would have to pay more for a massage, BUT he/she would have more income to pay for it. The tax burden then would shift to only people who use such services.

Would such a broad-based sales tax harm Missouri? Studies show that taxes on consumption have a less negative impact on GDP growth per capita than taxes on personal income, and personal income tax cuts for lower earners would be most effective for economic recovery.

Tennessee has not been harmed because of its reliance on a broad-based sales tax. Tennessee has no personal income tax and taxes 67 services (at a higher rate, too: 7 percent vs. 4.225 percent in Missouri) and yet it has surpassed Missouri in economic and population growth. This tax structure might not be the only reason for Tennessee’s success, but I think it is fair to say that Tennessee’s economic growth has not been hindered due to a heavy reliance on a broad-based sales tax. Considering that Missouri ranks 49th out of 50 states for job creation, broadening the sales tax base and lowering the personal income tax rates (even if it means more costly massages) does not seem like a bad idea.

However, if the state is going to spend more on higher education, then it is going to have to take it from taxpayers. Taking is the opposite of giving. The state is not learning anything from charitable donors if it uses tax revenue, its primary source of funding, to increase spending on higher education. Spending other people’s money is not charity.

Let’s give credit where it is due; the editorial nicely honors those who have donated money toward the cause of helping others. For instance, it praises the generosity of folks like the late Lorene Thompson Brooks, who donated $4 million toward the “need-based scholarship program Corps of Opportunity and two athletic scholarships.” And it (rightfully) lauds the donors who gave $14.4 million in donations towards a university’s capital campaign – $4.4 million more than the hoped-for $10 million. I cannot help but wonder if these individuals would have been able to be so charitable if the state had taken more of their money.

The argument that the state should mimic the example of private donors, taken to its logical conclusion, undermines real charity. When the state spends more, taxpayers have less money to donate.

Let’s hope the state remains an environment of less taking and more giving.

The Commission voted 7-4 against using tax incentives to finance the development, but despite the commission’s opposition, we may very well see a Walmart Superstore in Ellisville. That is because, in this case, the Commission’s recommendation has little practical effect. The Ellisville City Council still has final say and the negative recommendation’s only effect is to require a supermajority vote of the City Council (five of seven members), whereas a positive recommendation would have required just a simple majority (four of seven).

The Ellisville situation exemplifies just how broken the TIF system is in Saint Louis County. Despite overwhelming opposition from the County (all seven negative votes came from County representatives), Ellisville could still easily get its TIF. This approval process favors point-of-sale cities and plays down the importance of the County TIF Commission’s decision.

The Missouri Legislature needs to revisit the TIF approval process in Saint Louis County. In order for a TIF to pass, the local city government and the county commission should each have to approve the project, independent of one another. Independent approval requirements would encourage collaboration between cities and the county, in contrast to the current adversarial process that threatens the sales tax pool and encourages point-of-sale cities to abuse eminent domain.

Charles Pavlack, the Commission chairman and a former Ellisville City Council member, told the St. Louis Post Dispatch: “For us to say we’ll take the moral high ground and make a brave stand to turn down TIF, when others have used the same method to take our business, doesn’t make sense.” But this should not be about Ellisville versus Saint Louis County. After all, there is overwhelming evidence that an Ellisville TIF is bad for everyone, including Ellisville. According to the East-West Gateway Council of Governments, TIF creates one retail job for every $370,000 in taxpayer subsidies. As David Stokes testified last night: “That is not a road to growth — it is a road to poverty.”

Does it strike anyone as worrisome that in economic times such as these, public officials are scrambling to work out a way to funnel public money into a sports stadium housing a team that a billionaire owns and is in the process of trying to acquire another sports team? When the Dallas Cowboys built their $1.15 billion stadium, the Jones family (the owner of the Cowboys) contributed $261 million to building the stadium. In fact, less than 30 percent of the new stadium was financed with public money. The CVC’s first proposal did not indicate how the non-Rams portion (close to $60 million) of the plan would be financed, but it seems that the CVC will turn to the state of Missouri, Saint Louis County, and Saint Louis City, who put forth the original financing for the Dome’s construction. The Rams rejected this proposal. It seems disquieting to think about how much the Rams will ask from the public for the upgrades they want.

What justification do the state, Saint Louis County, and Saint Louis City have for spending public money to help a private sports franchise, beyond civic pride? I previously cited a study that the St. Louis Federal Reserve conducted showing that in most cases, building or refurbishing a sports stadium has NO impact on that city’s real per-capita personal income growth and in the case of Saint Louis, the impact was a NEGATIVE one.  Here is the exact quote:

Moreover, Baade found that of the 30 metro areas where the stadium or arena was built or refurbished in the previous 10 years, only three areas showed a significant relationship between the presence of a stadium and real per-capita personal income growth. And in all three cases — St. Louis, San Francisco/Oakland and Washington, D.C. — the relationship was negative.

Given this finding, it is hard to find a compelling reason as to why the state, Saint Louis County, and/or Saint Louis City should provide ANY public funding to the Edward Jones Dome and so far, it seems that public officials have yet to provide one.

Adams said:

It takes 100 days to remove a teacher after you give a teacher a plan. In every other city or county in the state of Missouri, it takes 30 days. So if there’s a bad teacher in the classroom, I have to work with that teacher for 100 days with a detailed plan, called a PIP, a professional improvement plan, to remove that teacher . . . I’m not talking about the hearing process, I’m just talking about getting them out of the classroom. No other place has that in the state of Missouri but Saint Louis.

You might find Adam’s statement difficult to believe. But he is correct. According to state law, if a teacher is doing a poor job, that teacher cannot be dismissed quickly. Instead, in Saint Louis City, the teacher needs to be notified in writing at least one semester before the superintendent can even present the charges against the teacher.

Actually, after looking over the statute, I think that Adams is being kind. One school semester is 87 days (half of the 174 required school days), and the law requires a 30-day notice before any hearing can occur. Once you start counting weekends, holidays, and everything else, it looks like it takes a lot more than just 100 days to remove a bad teacher from the classroom.

The city school district is struggling to boost student academic performance. It is one of the small number of unaccredited school districts in the state. And, it is common knowledge that teachers can have a large positive (or negative) impact on their students’ education. That is exactly why laws that severely limit districts’ ability to remove bad teachers hurt students.

Just think: Thanks to state law, an ineffective teacher could continue teaching students for more than 100 days. That teacher might have a little more job security, but those students will continue to receive a mediocre education. It is time to focus on helping students, instead of teacher job security.

Herein lies the problem: students want to transfer, and have the right to transfer; but accredited schools cannot accommodate all of them. The “Passport Scholarship Program,” which Missouri Rep. Scott Dieckhaus (R-109) and Missouri Sen. Jane Cunningham (R-7) introduced in their respective houses, addresses at least part of this conflict. The program promotes school choice in the purest form, and could ease the burden that Turner created for suburban schools in the Saint Louis and Kansas City areas.

Under the Scholarship Program, private Missouri taxpayers would receive a tax credit for donating money to any “educational assistance organization,” which must be private, non-profit, charitable organizations. The educational assistance organizations would administer the donations, and distribute money to eligible students in the form of tuition scholarships. Any student residing in an unaccredited district could then apply for a scholarship to attend any qualifying private school in Missouri.

The Passport Scholarship Program has great potential for success in Missouri because it is a market-orientated solution that limits state involvement. Individual taxpayers personally decide whether to donate,  and the educational assistance organizations administer the funds privately. The government has only a minor oversight role in the process. And students could apply the funds to any private school, religious or not, because the Blaine amendment does not affect private scholarships. Any student receiving a scholarship could actually go to the school of his or her choice. So if our goal is school choice — and it should be — the Passport Scholarship Program is a step in the right direction for students stuck in failing schools.

Due to faulty electrical outlets in the home’s bathrooms, Laura said that they are forced to dry their hair in the kitchen, and with the extra money needed to pay for college, they will be forced to continue this practice. Laura also said that the family may have to forego putting new tires on their son’s car. It is not difficult to imagine the unnecessary worry this young man’s parents will feel when their son drives to and from Columbia on old and worn out tires, especially if it is raining or snowing.

While the University of Missouri raises tuition on families such as the one described above due to state cuts in higher education funding, historic tax credit authorizations in Missouri are on an upswing. In fact, the $91 million in Historic Preservation tax credits authorized in the first six months of fiscal year 2012 have almost surpassed state estimates for Historic Preservation authorizations for the entire year.

The question should be asked whether handing out tax credits of questionable value (like the $1 million tax credit issued to Norwood Hills Country Club)  is worth more to the citizens of the state than preventing a tuition increase that will affect families across the state.

Considering that the state of Missouri faces a large budget shortfall, it would behoove the state to make sure that, at the very least, tax credits go to worthwhile projects. A possible avenue for oversight of the tax credit system would be to subject tax credits to the appropriations process. Missouri Sen. Jason Crowell (R-Dist. 27) has submitted a bill (SB 436) that does just that, and there are items in the bill that deserve commendation. Subjecting tax credits to appropriations would enable the state to keep closer tabs on these programs and help ensure that questionable issuances are examined. Considering the price that all Missourians pay for these tax credits, is subjecting tax credits to some sort of appropriations process too much to ask?

City leaders are touting the transfer of these vacant properties as a “gift.”  The Kansas City Star’s headline today reads: “Bank of America gift of vacant houses will aid KC’s urban core.”

But this gift comes with many risks. Kansas City will have to pay to maintain the properties until they are sold. Presumably, Bank of America was paying property taxes on the properties that it owned — taxes that will not be paid if the city takes ownership. The transfer could be a gift, but if Kansas City fails to sell the properties quickly, that gift will soon turn into a liability.

Though I may disagree with their proposed solution, city leaders and area legislators have openly stated that it is difficult to sell vacant property in the city. It is a real possibility that some of the so-called donations will remain vacant, and in city ownership for a very long period of time. That is the risk of owning vacant property, regardless of whether you are a city, or a private investor: There is the chance that no one else will want to buy your property.

For the sake of Kansas City residents and taxpayers, I hope the city finds private buyers who can put the property to productive use as quickly as possible. But I think, given the foreclosure crisis and associated risks, a better headline would have been: “Kansas City’s acceptance of low value properties will aid Bank of America’s bottom line.”

The brainchild of British transplant Stan Brock, RAM started as a relief service abroad. But for many years it also has turned its services inward to help America’s neediest, providing medical care to those who otherwise would not have received it. Brock told 60 Minutes in a 2008 report (featured above) that his organization “operate[s] entirely on the generosity of the American people.” Like so many families, stretching those sometimes “little checks” is how RAM makes ends meet. In addition, thousands of highly-trained and medically-licensed volunteers have traveled the country assisting Brock’s work for decades by providing their professional services free of charge.

Yet a recurring stumbling block as RAM visits states is artificial barriers to entry – that is, state laws that prevent out-of-state volunteers from easily donating their medical expertise because of burdensome, and sometimes expensive, licensing requirements. During a phone call last week, Mr. Brock told me that RAM wanted to do more in Missouri, but onerous state requirements — such as requiring licensed in-state medical personnel to participate in a clinic before RAM could provide its services — had stifled his organization on several occasions. Most recently, he said, Missouri regulations prevented RAM from providing free eyeglasses to the southwest corner of the state.

But Missouri could make it easier for groups like RAM to help the state’s neediest if officials relax licensing rules and explicitly allow medical professionals licensed in other states to provide their services for these charitable endeavors. Tennessee has led the way on this policy front.

In 1995, Tennessee enacted the “Volunteer Health Care Services Act,” a reform of its medical licensing law which allowed relief organizations like RAM to bring out-of-state medical professionals to help Tennessee’s poor without putting professionals licensed in their home states through an arduous and unnecessary process of re-licensing. If a doctor is licensed to practice in her home state, RAM can bring that doctor to provide her services free of charge to Tennessee’s medically-underserved. It is, in short, a clear and unambiguous law that ensures the state’s neediest are served ably and safely.

The good news? The reform movement appears to be spreading, with a handful of states following Tennessee’s lead in whole or in part. Oklahoma has reformed its laws to accommodate organizations like RAM, and more recently, Connecticut and Illinois passed legislation that allows organizations like RAM greater access to its neediest citizens. Arizona currently is taking up a reform of its own laws.

Tennessee’s law is a model for the country – and a model that Missouri, one of Tennessee’s neighbors, would do well to emulate. Allowing organizations like RAM to freely enter Missouri would go a long way towards improving care to Missouri’s underserved. When burdensome licensing laws and medical regulation interfere with the delivery of skilled, safe, and desperately needed services to America’s poor, the system is in need of reform. For Missouri, relaxing licensing laws for charitable groups like RAM would be a step in the right direction.

Norwood Overview from Norwood Hills CC on Vimeo.

Norwood Hills Country Club first opened in 1922. A successful private club in north Saint Louis, it hosted the PGA Championship in 1948. In 2005, the club sought and received designation as an historic landmark in the federal government’s National Register of Historic Places. As a designated historic landmark, it was eligible for Historic Preservation tax credits from Missouri, and the state issued credits to Norwood the next year, in 2006.

Whether credits for a country club are an appropriate use of taxpayer money is a question worth considering. The Missouri Department of Economic Development administers the Historic Preservation tax credit program, so tax credits in that program are imbued with a presumption that a fundamental objective of the credit is economic growth. Indeed, entire studies have been devoted to trying to measure the HPTC’s impact in terms of jobs and growth. But does granting historic preservation credits to a private country club that markets a $1,000 entry-level membership package really promote economic growth? Is that what Missourians thought they were paying for by offering these credits?

The HPTC is often defended as a way of correcting market failures and increasing positive externalities — that is, giving an intangible boost to the standard of living of those who can see and enjoy the property. Is it likely that there was a market failure at Norwood Hills that the state had to step in and correct? And is it reasonable to believe that Missourians will really be able to enjoy the externalities promoted as a result of sending their tax dollars to a private club?

To be clear, determining whether a building is “historic” is oftentimes in the eye of the beholder. But taxpayers have ample reason to question whether the state should be granting tax credits to country clubs, not only on grounds of whether an economic development objective is really being advanced, but also whether society is really getting a “positive externality” when it subsidizes an operational private club and golf course. And certainly, sometimes buildings are properly considered “historic” by virtue of their age alone, but if the “age” of a building is enough to get an HPTC, what should be the cut-off year? 1800? 1900? 1950? 1980? The later that date gets, the more important it is that the reverse of the question is asked: how many buildings would not be considered historic under the tax credit system?

Moreover, the proximity in time between historic designation and tax credit issuance is troubling. Did Missouri issue a tax credit to preserve an historic landmark, or was an historic landmark created to access Missouri tax credits?

Lastly and more generally, what has the state foregone – what “unseen” projects and tax cuts have gone by the wayside – because the state has been putting money into projects like Norwood Hills?

The Facebook page for Save The Historic Pevely Complex references numerous prior plans to rehab the complex using historic tax credits (emphasis mine):

The Pevely Dairy complex is on the National Register of Historic Places. Under our city’s preservation ordinance, such buildings should not be demolished if they are structurally stable and have rehabilitation potential. The Pevely buildings are both, as evidenced by the numerous plans to rehab them using historic tax credits prior to SLU’s purchasing the site in August 2011.

A search of the Missouri Accountability Portal and the Show-Me Living tax credit tool, however, indicates that no development tax credits have been issued to SLU for this project. Imagine that. A new development project in Saint Louis apparently not in need of state tax credits!

As discussed in my previous post on this topic, the goals of social progress and economic growth direct our attention to the future. While a healthy respect for the past is not a bad thing, given the current state of the city’s economy, a new ambulatory care center is more important than a brick smokestack and a declining building. The sentimental value of the Pevely site and its smokestack, while endearing, pales in comparison to the value of a modern medical facility to the Saint Louis community.

So let’s continue to train our sights on the future, and leave the image of the Pevely site to scrapbook photo montages and warm reminisces.

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

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

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

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

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

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

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

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

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

The reason, Mayer said, is many in the Senate will demand comprehensive tax credit reform — an idea that died twice last year over difference between Republican leaders — before signing off on the fund, known as the Missouri Science and Innovation Reinvestment Act (MOSIRA).

“I don’t think the Senate can pass MOSIRA without comprehensive reforms to our state tax credits,” Mayer said. “That was true during the special session and that’s true now.”

The Senate passed the MOSIRA bill with a contingency clause that said it couldn’t go into effect unless a separate tax credit bill also won approval. Even though the House didn’t approve of the contingency clause it passed the bill anyway in the hope that it would hold up in court.

In a ruling Tuesday morning, Cole County Circuit Judge Dan Green concluded that the contingency clause was unconstitutional, and because he believes it was vital for the legislation to pass and “may well have been a last-ditch attempt to garner enough votes,” the entire fund is unconstitutional.

The “separate tax credit bill” referenced here originally included the Aerotropolis credits, but when the Missouri Senate largely removed those credits from the bill, the Missouri House declined to pass the tax credit bill in any form. That decision, it appears, has sealed MOSIRA’s fate, at least for now; everyone expects that the case will be appealed to the Missouri Supreme Court, and there always is the possibility that Judge Green’s decision could be overruled. That said, it is very good to see legislators recognizing the gravity of the tax credit problem. Legislators should not be resurrecting the same sorts of failed tax credit ideas and tax incentive policies over and over again: abetting a tax incentive system that, particularly since the late 1970s, has grown fatter and fatter as the decades have passed.

Try something new: reduce taxes for everyone. Missouri can be more competitive, and it can start by eschewing opportunities to constantly pick and choose who benefits from the state’s largesse.

Some (but by no means all — Historic Preservation and Low-Income Housing are capped, but not eliminated) of the various tax credits that will be repealed include the rolling stock tax credit, the charcoal producers tax credit, and my favorite (not really), the wine and grape production tax credit. The money saved if the state abolished these tax credits would go toward offsetting revenue lost if the corporate income tax is reduced. In fact, the fiscal note for this bill states that there will probably be little to no net impact on general and total state revenue. However, I would caution that estimating the fiscal impact when it comes to tax credits is difficult, because it is difficult to determine when or if tax credits will be redeemed.

I have made the case before about why corporate income taxes should be cut (or eliminated), but I want to summarize the benefits of a lower corporate income tax. Lower corporate income taxes are fair because they apply to all corporations and not favored industries. Lower corporate income taxes also allow a company to reinvest more of its money into the company, and they can make a company more competitive compared to companies in other states, without having to resort to corporate handouts like tax credits. Combined with the elimination of some tax credits, which have a record of not being successful in generating economic development, SB 472 has potential to do some good for a state that ranks 49th in job creation.

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

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

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

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

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

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

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

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

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

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

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

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

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

People in the Saint Louis area often talk about the problems associated with so many different governments and so many types. Those problems are real, but there are positive aspects of having a large number of small governments, too. One of the best aspects of having a high number of smaller governments (such as the 90 different municipalities in Saint Louis County) is the inability to enact comprehensive planning in the area. Government-directed urban planning is too often just an excuse for others to tell you how to live. We do not need growth boundaries in Saint Louis. We do not need higher density zoning (which should be allowed, of course, if that is what people want; it just should not be mandated by government). We do not need excessive impact fees for construction. We do not need — and more importantly, do not have — any number of other examples of land use rules governing our lives. What does that lack of mandated planning give us? More freedom and lower housing costs; two wonderful things.

Wendell Cox is uniquely qualified to comment on the affairs of Saint Louis. While his writings and lectures are international in scope, he resides in the Saint Louis area. The Show-Me Institute is excited to have him writing for us, and you can view his full policy study here. You can also enjoy a conversation between Wendell and Rick Edlund, Show-Me Institute’s director of communications, here.

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

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

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

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

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

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

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

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

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

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

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

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

There are some public services that should never be privatized, some that should always be privatized, and some that depend on certain factors. Parking enforcement is in the “always” category. Contracting out the enforcement of parking meters is something that the private sector can easily do, and should do. There is no reason parking enforcement jobs should be on the public dime, with the benefits, pensions, etc., that are included in government jobs. Mr. Williams deserves a great deal of credit for making this change and reducing the political imprint of his office to save taxpayer dollars. If Alderman Wessels was really so offended by the manner in which the privatization occurred, I think he should have contested the move long ago.

The Reason Foundation has done some excellent work on all types of parking privatization. To be clear, Mr. Williams has not gone nearly as far with this privatization effort as Chicago did – where the entire city street parking operations were contracted out. All Williams did was contract out the collection of money from meters – the city still controls the rates, meter placement, etc. I do not support privatization law enforcement functions, but meter enforcement is hardly that. I view meter collection as a support service to law enforcement, like the mechanics who work on the police cars or the clerks who manage the department documents. You do not need a police officer to do it, and you do not need a government employee to do it.

Now, if Mr. Wessels wants something to legitimately criticize Mr. Williams for, how about the dearth of readily available data on the city treasurer’s office? This post would have been a longer and more detailed defense of the city treasurer’s privatization effort if I had easy access to the budget data from the office. (This is a blog post, not a policy study, so I do not have the time to gather data which should be up on the city website.) The city’s budget division only has very cursory information available on the treasurer’s office and the parking meter fund. So, whomever among the five candidates for the office wins in April, I hope they improve the available information for the office.

Begin by thinking of a pension fund as a pool of investments (like stocks, bonds, etc.) that are purchased from money that employers contribute. These contributions and investments hopefully grow enough over time to cover the future retirement benefits of retired employees. But when employers fail to remit sufficient contributions, and when investments do not grow fast enough, the amounts of money available to pay retirement benefits fall short of the promised benefits. When this occurs, you have an unfunded liability. And because we are discussing public pension funds (where the government is the employer) future taxpayers are on the hook for the unfunded liability. And a looming fiscal crisis ensues.

We have reviewed the most recent comprehensive annual financial reports of five large statewide public pension funds in Missouri. The unfunded liabilities of each are listed below:

Missouri State Employees Retirement System (MOSERS): $2.4 billion

Missouri Local Government Employees Retirement System (MOLAGERS): $900 million

Public School Retirement System (PSRS): $5 billion

Public Education Employee Retirement System (PEERS): $500 million

County Employees Retirement Fund (CERF): $130 million

That is a total of just under $9 billion in unfunded liabilities that we owe to current and future public retirees! That is $1,500 per man, woman, and child in Missouri. And this includes only five public pensions (while these are among the largest public pensions in Missouri, there are approximately 130 public funds at the local and state level). This debt exceeds Missouri’s total general revenue collections for fiscal year 2011 ($7.1 billion, see the table on page 10 of the governor’s fiscal year 2013 executive budget). Taxpayer, beware. How many of the remaining 125 pensions operate in the red and how much do we really owe after they are accounted for?

Now, of course, if the economy and stock markets recover, the picture improves somewhat. But not by as much as you may suppose. Stay tuned for further discussions on that point.

“It was clear that not enough assurances could be provided to ensure the protection of the City’s residents or the City employees who were proposed to join American Water,” [Arnold Mayor Ron] Counts said in a news release on Friday afternoon.

Any city should consider the costs of a decision, and I am glad that Arnold took the time to analyze those costs before making a decision. However, I believe there are benefits which may outweigh the costs. Should the city ever again be presented with the opportunity to sell its sewers, I hope city officials will fully consider the advantages of privatization. Here are a few examples from an op-ed that I wrote on the topic, untimely published five days after the decision not to sell (untimely due to bad luck, not a lack of effort):

1. Arnold’s sewers are in dire straits. The city would face less of a financial difficulty if it relied on private capital to fund renovations and repairs.
2. Private ownership leads to more efficient uses of labor and capital. Privatization can produce savings relative to bureaucratic management.
3. The city of Arnold would obtain monetary benefits from the sale. When Florissant sold its water utility in 2002, it was able to establish a $10 million reserve fund. Arnold could use the revenue to establish its own reserve fund, pay down debt, or lower taxes.

For more Show-Me Institute commentary on privatization, click here.

The state legislature is currently considering legislation that would create a land bank in Kansas City with much the same power and authority as the Saint Louis land bank, the Land Reutilization Authority (LRA). Audrey’s policy study on the LRA, “Standstill: Is Saint Louis Hindering Development by Waiting for Large-Scale Miracles?” (published last April) provides important insight into the potential pitfalls of a land bank with expansive authority to acquire and hold property.

The lessons of the LRA are well worth considering for any proposed land bank. Lofty public policy dreams often run afoul of the law of unintended consequences, and the long history of the LRA may serve better as a cautionary tale than an achievement to be repeated.

Missouri Gov. Jay Nixon takes great pride in not raising taxes to close the state’s budget shortfalls. However, where is the big push for income tax reform in the governor’s agenda? In the Executive Budget for fiscal year 2013, Nixon does propose, among other things, $4 million to provide loans or other investment tools to help high-tech businesses create jobs through the Missouri Science and Innovation Reinvestment Act (MOSIRA) and $10 million for the State Small Business Credit Initiative to increase the amount of private capital made available to small businesses. Yet, there is no push to cut taxes across the board and these spending initiatives sound like the same tired and retread policies the state has taken when it comes to economic development (they also are not very successful; Missouri ranks 49th out of 50 states in job creation).

Kansas is looking to cut taxes, so is Oklahoma, while Tennessee has no personal income tax. These states are making the RIGHT moves to be more competitive and business-friendly. The governor should follow suit.

What should raise concerns, however, is whether state legislation that mandates optometrist eye exams for incoming kindergartners is right for Missouri. At least one state commission does not think so, which does not even begin to address the philosophical consistency question implicit in the move. The St. Louis Post-Dispatch reports (emphasis mine):

Calling the law ineffective and a financial burden on families, a state commission recommended that legislators drop the exam and instead beef up vision screenings by school nurses. The state’s eye physicians and surgeons embraced that approach.

Optometrists, however, are mounting a big push to get the Legislature to renew the exam requirement, which is slated to expire this June. The Missouri Optometric Association has hired 11 lobbyists. More important, they have a key ally: House Speaker Steve Tilley, an optometrist.

Tilley, R-Perryville, put the optometrists’ bill on a fast track — it is headed to the House floor after a packed committee hearing last week — while he bottled up the alternative, the school nurse bill, by not referring it to a committee.

Caught in the political crossfire are families who may have to shell out $100 for a child’s eye exam, because private medical insurance generally won’t cover it.

The chair of the Children’s Vision Commission, Oscar Cruz, is not impressed about the merits of the current law. “It’s a political process, unfortunately,” he said. And then there is the fiscal note.

The fiscal note on the optometrists’ bill suggests the state could use a $99,000 appropriation earmarked for blindness screening and treatment to pay for exams for about 6,637 uninsured kindergartners and first-graders in districts without kindergarten.

But that would average out to only $15 an exam. Mickey Wilson, director of the Legislature’s Oversight Division, said the analysis assumes that some optometrists would do the tests for free, or at a reduced cost.

That sounds like an awfully big assumption, and it does not even answer concerns for insured children whose plans would not cover the exams, the cost of which would fall to Missouri’s parents. The commission notes that outfitting school nurses to perform eye care screenings makes more sense.

Cruz said screenings by school nurses catch about 95 to 97 percent of eye problems that can damage vision on a long-term basis. Forcing 65,000 kindergartners a year to get comprehensive eye exams, he said, is “an incredible waste of resources.”

Only two other states — Kentucky and Illinois — have similar eye exam mandates. Is imposing an onerous mandate on Missouri families really the right course, especially as the legislature (very publicly) fights the onerous Obamacare mandate? The inconsistency should cause some pause.

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

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

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

Consider the following:

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

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

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

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

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

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

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

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

Franklin County has and continues to violate the state’s Constitution by allocating hundreds of thousands of taxpayer dollars annually to fund counseling and antibullying programs in area private schools.

That’s according to Tony Rothert, legal director for the American Civil Liberties Union of Eastern Missouri.

The Blaine Amendment of the Missouri Constitution prohibits the use of public funds to support or sustain any school controlled by any religious creed, church, or sectarian denomination. The Missouri Supreme Court previously struck down statutes requiring that bus services and textbooks be provided to private school students. 

Annie Schulte, executive director of the Franklin County Children and Families Community Resource Board (FCCRB), raised a number of arguments detailing why the program does not violate the Missouri Constitution; unfortunately, none of them are very persuasive. The use of public funds to support a sectarian school is unconstitutional, whether the funds are paid directly to the school or indirectly support the school. The Franklin County program is also not analogous to Title I. Title I grants bypass the state and local agencies and go directly to independent contractors. Because no state or local agency ever controls the funds, they are not “public funds.” The FCCRB, on the other hand, is a local agency and does control the funds. 

The fact that the Franklin County program seemingly is unconstitutional is an illustration of how the Blaine Amendment currently stands as an obstacle to the freedom of school choice for students in failing districts, such as Saint Louis and Kansas City. As University of Missouri-Columbia Professor Michael Podgursky argued, the rigidity of the Blaine Amendment is keeping students stuck in unaccredited schools following the Missouri Supreme Court’s Turner decision. While the Supreme Court of the United States held that a voucher program for students to attend a private sectarian school does not violate the federal constitution, it is clear that a similar program would be struck down in Missouri. If the state cannot provide private school students with books, buses, and (probably) counseling services, a voucher program stands no chance of passing constitutional muster.

It is unfortunate that students at private sectarian schools likely cannot receive counseling services from the Franklin County program, but students who are stuck in unaccredited, failing schools is a much bigger issue. Given accredited public schools’ unwillingness to accept students from failing districts, these students may remain stuck until the Blaine Amendment is repealed.

For those who may be wondering what exactly “first-tier” means, the Edward Jones Dome must be in the top 25 percent of all NFL facilities regarding some established criteria, such as: Fan amenities (box suites, club seats, lounges, etc.), technical areas (scoreboards, lighting, sound, etc.), and revenue-generating facilities (shops and concession stands). Considering that stadiums qualifying as top-tier include the newly-built Cowboys Stadium (price tag: $1.2 billion, with the Dallas Cowboys football team paying $875 million) and MetLife Stadium (price tag: $1.6 billion), the Edward Jones Dome has a long way to go to qualify. In fact, according to Patrick Rishe of Webster University, the cost of upgrading the Dome to “first-tier” status would be, at a minimum, $200 million-300 million (the cost of construction for the Edward Jones Dome was $280,000,000 in 1992 dollars). That is significantly more than the estimated $124 million in the CVC’s proposal.

Thus, officials for Saint Louis City, Saint Louis County, and Missouri have a decision on whether to pay up or face the prospect of the Rams leaving Saint Louis. I would urge the city, county, and state to forgo the use of any public money for upgrades to the Dome for several reasons. The first reason is on principle; the Rams are privately-owned and yet want public money for one of their facilities. If the Rams want a first-tier stadium, they should make a first-tier investment (and put a first-rate team on the field).

Second, even if city, county, and state officials wanted to pay for the upgrades, where are they going to get the money? The state is not exactly awash in cash, and the situation in the county is not much better. Both Missouri Gov. Jay Nixon and the state legislature have ruled out tax increases to help close the budget gap and I highly doubt they will go back on that in order to keep the Rams in Saint Louis. The city, county, and state could issue bonds (the state, at least, has a great credit rating), but they are still paying off ($12 million for the state and $6 million each for the city and county every year until 2021) the bonds issued to build the Edward Jones Dome. Does it make sense for the city, county, and/or state to go further into debt to keep the Rams in Saint Louis for another 10 years? Besides, when Kansas City and Jackson County helped fund renovations to Arrowhead Stadium, Jackson County struggled to keep up with the debt payments. Why put Saint Louis City and/or Saint Louis County in that kind of risky position?

Finally, even if the city, state, and/or county had the money, the use of public funds for sports stadiums does not generate much economic activity. According to a St. Louis Federal Reserve publication, the weight of economic evidence shows that the taxpayers do not get much of a return on their investment. In fact, the Federal Reserve study referred to another study:

Baade found that of the 30 metro areas where the stadium or arena was built or refurbished in the previous 10 years, only three areas showed a significant relationship between the presence of a stadium and real per-capita personal income growth. And in all three cases—St. Louis, San Francisco/Oakland and Washington, D.C.—the relationship was negative.

Considering these reasons, what justification can officials for the city, county, and/or state give for further expenditures on behalf of the Edward Jones Dome?

But now former Missouri Supreme Court Justice Mike Wolff is lending some credence to the idea, writing in the Post-Dispatch that not only would the move be legal, it would be preferable to cutting other state programs:

If the governor or the Legislature declared a holiday on accepting tax-credit coupons in payment of taxes, the state would not be reneging on its promise to accept tax credit coupons to pay taxes. The state simply would be saying, “wait until next year.”

Should the state pay interest on tax credits that are on holiday for a year (or more, perhaps)? For example, when a taxpayer eventually is allowed to use its $10 million in tax-credit coupons, which the taxpayer bought for the discounted amount of about $9 million, perhaps the state should pay interest because the tax-credit owner has had to wait. Because these tax credit certificates are bought and sold through banks, perhaps the passbook savings account rate should apply. At the current generous rates, that might cost the state 1 percent or less per year.

But what if the taxpayer does not want to spend cash to pay its taxes because it needs the $10 million to rebuild its jet plane’s engines or to refurbish the yacht? Not a big problem, actually, because remember, the tax credits can be sold. But can these $10 million in tax credits be sold for the taxpayer’s original price of $9 million? Well, probably not, there could be a further discount; markets work, even markets for tax credits.

If Justice Wolff’s idea was implemented, it might help Missouri’s budget problem for a year, but it would not solve the underlying problem: tax credit issuances run amok. In fact, declining to redeem tax credits could actually compound budget problems in future years if other reforms are not implemented to reduce the state’s forthcoming and outstanding tax credit liabilities; tax credits that have been authorized or issued but not yet redeemed constitute a multi-billion dollar (that’s “billion” with a “b”) liability that the state will have to pay in coming years. Preventing budget cuts to favored programs — for Justice Wolff, education — does not seem to be a compelling reason to embark solely on his plan. It is almost like trying to get a hamburger today for $1 tomorrow . . . at some point, you have to pay for the hamburger. Tax credits are a recurring problem, the reduction of which could cure other recurring parts of the budget (for example, reducing taxes on all corporations with the savings, rather than picking and choosing winners and losers.)

Keeping all of that in mind, if done in concert with a moratorium on tax credit issuances (ideally including caps, sunsets, and other permanent changes), Justice Wolff’s idea might be workable as part of a larger reform program; over the long haul, such a multi-pronged approach may actually make a real dent in the state’s looming tax credit liabilities, and ultimately save the state money.

Missouri officials cannot just treat the symptoms of the state’s tax credit excesses and defer cuts for later; it must also treat the underlying disease. Trimming tax credits and reducing taxes is a better, forward-thinking solution, and would provide the foundation for a healthier economy and a more stable budget.

1. Teachers could be fired for doing a bad job.

Most of us live in a world where doing consistently bad work means you lose your job.

Not so for teachers.

Under the current laws, a tenured teacher can be fired only for egregious conduct, such as willful or persistent violations of the school laws, excessive or unreasonable absences, and felony convictions. Even then, a severely truant teacher would get generous procedural protections from termination: a majority of the school board must vote to fire the teacher, and the teacher can appeal the board’s decision through an administrative hearing.

If this bill passes, boards could not only fire convicted felons, but they could also dismiss teachers for unsatisfactory performance.

2. No more indefinite contracts for teachers.

Most of us also have to live with the reality of at-will employment.

Again, not so for teachers.

Under the current laws, a teacher who survives a five-year probationary period becomes “permanent personnel” with an indefinite contract to teach.

The proposed bill, on the other hand, gives school administrators more discretion to retain teachers they actually want teaching in their schools. Schools could contract directly with teachers for up to four years; and what’s more, the board would retain the power to terminate a multi-year contract if the teacher scored poorly on evaluations.

3. Teachers will get paid for what they do, not how long they have done it.

That is right, teachers do not live with the reality of performance-based pay either.

Under the current laws, school districts are prohibited from basing salaries on performance-related criteria. Instead, districts pay their teachers based on length of service and level of education. The proposed bill removes this prohibition and requires school boards to consider teacher evaluations when making decisions related to pay, retention, promotion, and dismissal.

Not surprisingly, the unions started speaking out against HB 1526 before it was even proposed. Missouri National Education Association President Chris Guinther told the St. Louis Post-Dispatch last week: “we’ve got to be given the protection that we need to give those kids the quality education that they need.” Wouldn’t our kids be getting a better education if school boards could dismiss failing teachers more easily, like this bill would allow? The problem with the union perspective is that it focuses on teachers, not on kids. Tenure is not about having due process, as Susan McClintic, president of the Columbia Missouri National Education Association, told the Columbia Missourian last week. On the contrary. Teachers do not have  a right to their jobs; it is the students who have a right to a public education, and they should have good teachers to boot.

We have the same objections as we had last year. If shipping cargo out of Lambert makes economic sense, why do taxpayers need to subsidize it? Why not just lower taxes for all businesses? As the Aerotropolis proposal has shed more of its baggage en route to this latest forwarder credit, it is fascinating that the argument for the project has turned from “we need all of it!” to “just a little will do.” We may have simply just reached the “bargaining stage,” or alternatively are seeing the last-ditch attempts of Aerotropolis supporters to get something, anything out of this mess.

If the freight forwarder credit resurrection affirms anything, it is that tax credits need reform. Indeed, there is ample room to clip the tax credit waste and cut taxes, and we have talked about this issue again and again. It makes no sense to be adding programs to a tax credit system that is already bursting at the seams and rife with tax credits of dubious value. Tax credit redemptions are expected to reach nearly $700 million in 2013 — ranking right up there with this year’s gargantuan budget deficit. And yet, state officials continue trying to pick winners and losers.

Missourians can judge for themselves whether Missouri’s economic development status quo has served them well. It seems the legislature is more than happy to serve up more of the same.

I mention our neighbor’s misfortune because it serves as an example of different approaches to handling financial difficulties. Last year, Illinois raised taxes on personal income and the corporate income. Yet, despite these increases, its financial situation continues to deteriorate. In Missouri, the tax rates have remained the same. Missouri Gov. Jay Nixon brags about not raising taxes and personally cutting $1.6 billion in government spending. While both states have a budget shortfall to close, which budget situation would you prefer?

Illinois officials’ reaction to the state’s financial difficulties also presents an opportunity. As I mentioned before, Illinois responded to its dire fiscal situation by raising its corporate income tax. This has already put pressure on the state’s own businesses, and other states (Wisconsin and Indiana) are trying to entice those businesses to relocate into their states. Missouri has had its own methods of trying to encourage companies to relocate to the state, but they tend to be costly. When the Missouri Department of Economic Development (DED) used tax credits to get Applebee’s to relocate to Missouri, the cost was about $35,000 per job.

Instead of handing out millions of dollars in economic development tax credits, why doesn’t Missouri eliminate the corporate income tax? Considering that Illinois just raised its corporate income tax, wouldn’t a corporate income tax cut (if not outright elimination of the tax) serve as a powerful incentive for Illinois companies to move to Missouri?

Missouri officials estimate receiving $352 million in corporate income tax revenue for fiscal year 2013. Missouri officials also estimate that the state will issue more than $450 million ($463,409,492, to be exact) in economic development tax credits for the upcoming fiscal year. A reduction in tax credits would enable the state to make up for any revenue shortfall it would encounter via the forgone corporate tax revenue and provide a more permanent, and more fair, incentive for businesses to relocate here.

Illinois is in an unenviable situation. Illinois officials’ handling of that situation serves as a reminder that tax increases are not a cure-all for a state’s budget woes. Missouri officials have an opportunity to head in the opposite direction from its neighbor; however, will Missouri legislators embrace a new direction (tax rate cuts), or continue with the status quo?

The people who have researched the idea said it wouldn’t bring in a ton of money, but many districts are in a position where every little bit helps.

Parents and school officials in the Lee’s Summit School District met and discussed the idea Thursday evening.

Parent Keith Asel said it could make about $500,000 for Lee’s Summit schools.

“With all the budget cuts we’ve had, if we can just incrementally move the needle through things like school bus advertising, we can get to a number that really makes a difference,” he said. “We’ve got to think outside the box. The traditional means, I mean, we’ve already put such a burden on taxpayers.”

As it turns out, 17 states already allow districts to implement such an advertising program. Parents at the meeting reportedly did not have a problem with the idea, either, so long as the advertisements are age-appropriate. Supporters said ads for “alcohol, tobacco and even sugary foods” would be “restricted,” which I assume means effectively or explicitly “banned.”

My take? It is a great idea. Until I saw this story I had not realized that such a bill was floating around the Capitol, but apparently the bill has support from both sides of the aisle. Like the parent in the report says, we have to “think outside the box” if we want to improve education and reduce tax burdens. This, to me, is a great proposal that seems like it would promote both objectives.

LoMonte writes:

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

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

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

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

The following cases that LoMonte recounts are deplorable:

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

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

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

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

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

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

Since January 2009, accidents increased at 11 of 17 monitored intersections, and fatal crashes increased at 13 of those locations. Kansas City is not the first to see this happen with its red light camera program. The Star interviewed University of Illinois at Chicago Assistant Professor Rajiv Shah, who studied a red light camera program in Chicago:

“I’d say [Kansas City’s results are] very consistent with what cities across America have found . . . There’s really not a hard connection between reducing accidents and red-light cameras.”

The results of this study should have red light camera proponents reevaluating their positions. As we have pointed out before, red light cameras have many problems: they invade privacy and create a constitutionally suspect presumption of guilt. They are also prone to mistake. Brenda Talent, executive director of the Show-Me Institute, was fined for a violation she did not commit in Kansas City last year, and 1,000 lucky drivers were falsely accused of running red lights in Arnold, Mo., just two weeks ago.

Not surprisingly, American Traffic Solutions, the company that runs the program, publicly criticized the police department’s findings. ATS identified weather patterns, impaired drivers, and cell phone usage as the cause for increased wrecks. In other words, ATS identified anything but the red light cameras, which the company receives $1.6 million a year to operate, as the culprit for the increased crashes.

Despite the police study, it is likely that camera proponents will not rest. The Star editorial focused on a study by city engineers that found a decrease in total violations at monitored intersections. The Star praised the decrease in violations and declared that “red light cameras are working in Kansas City.” Fewer people running red lights, maybe; but if more accidents are occurring at monitored intersections, it is a stretch to conclude that red light cameras improve safety just because total violations have dropped.

Much to the dismay of proponents like the Star, the police study just confirmed what we already knew. Red light cameras are not about public safety, they are about generating revenue through traffic enforcement. The program has been very lucrative in Kansas City. The police study reports that officers have written nearly 200,000 tickets at $100 per ticket — adding $20 million to the city coffers.

Lobbyist detente on tax credits is not a sustainable status quo, and continuing to carry old tax credits forward while instituting new ones is a failure of leadership. That state officials would try to re-brand a failed system and grow the development tax credit leviathan beyond its current confines is hugely disappointing. It is just more of the same, and Missourians deserve better than that.

My post last week discussed a lawsuit between the Kansas City Public Schools and five suburban school districts regarding the implementation of the Turner decision. In a nutshell, Turner requires surrounding districts to enroll students who live in unaccredited (failing) school districts (i.e., the Saint Louis and Kansas City public schools and the Riverview Gardens School District). In effect, this is a limited school choice option under Missouri law.

Practically speaking, one issue is, how can the suburban districts in Kansas City and Saint Louis handle the potential influx of urban students? A recent survey estimates that approximately 13,500 students may flee Saint Louis schools for Saint Louis County under the Turner law. That is close to one quarter of school-age children in Saint Louis city. Pressure to abandon the Saint Louis public schools is apparently growing.

While it is easy to get caught up in the apparent chaos, why don’t we disengage for a second and reflect on the deeper issues; specifically, the failure of urban education in the Saint Louis and Kansas City public schools. Perhaps the Turner decision is a blessing of sorts, compelling both the legislature and the courts to address head-on comprehensive school reform, not only for our urban districts, but for all districts in Missouri.

Teacher tenure reform, collective bargaining, charter school expansion, school closure, and expanded school choice are on the table. The legislative session is just beginning to heat up. Perhaps Turner was merely the first act in an unfolding multi-act drama. If so, the script should promote an increase in accountability for teachers and school districts, and an expansion of school choice, including choice of private and parochial schools for students in failing public schools.

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

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

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

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

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

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

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

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

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

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

Central Bank has agreed to make old-fashioned signature loans (that means no collateral from the borrower) of $300 to $2,500. That’s also what payday and installment lenders do. Except Fair Community Credit will lend money for slightly longer durations and at a double-digit interest rate, not a triple-digit one. That way borrowers will have a better shot at paying off their loans, rather than defaulting.

What makes that possible is Fair Community Credit’s promise to cover any loan losses from a $200,000-plus loan guarantee pool donated by foundations and individual donors.

The market is creating relatively cheap short-term credit alternatives to payday loan shops. It is incredible to watch society tackle perceived problems through voluntary interaction without the forceful hand of the state. It will be intriguing to see the results of this venture.

A hat tip to John Combest for the link.

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

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

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

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

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

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

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

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

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

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

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

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

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

Along with the Hancock Amendment, this amendment would restrict the power of the legislature. Therefore, the legislature should be commended for proposing this amendment. Constitutional amendments like this, along with a balanced budget requirement (which Missouri has), give legislators an easy way to say ”no” to special interests.

Now, this is not a full-throated endorsement of the proposed amendment. There are a couple of things that bother me. First, there was an amendment that passed setting the cap at fiscal year 2008, the so-called “high water mark” of state revenues. Considering that the general revenue is expected to increase 3.9 percent  from $7.3 billion this year and that net general revenue for fiscal year 2008 was slightly more than $8 billion ($8,004,309, to be exact), the cap probably will not matter for . . . a while. Second, the spending limits will expire in five years unless lawmakers extend the time limit. So even if the voters approve the amendment, there is a distinct possibility that the cap can expire before it ever has the chance to restrict spending. Finally, the cap only applies to general revenue, which is where lawmakers have the most leeway in regards to spending, but it is not hard to imagine lawmakers putting down in statute specific spending items they want preserved and directing specific monies to funding them.

Despite my issues with the proposed amendment, the legislature should be commended for trying to push spending restrictions. However, it is unfortunate that such restrictions would have to be so watered down before it can pass.

The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune. . . . Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

Although Cleveland was talking about federal aid during a drought, the lesson is applicable to our current situation: Charity should be preferred over taxes. After all, taxes do not lend themselves to a “kindly sentiment.” And is charity such a radical option? Don’t universities already receive such donations? It seems that if the state believes citizens want to support universities, the government should let the people voluntarily display their support.

But suppose charity falls short – what then? Tuition increases should be considered. After all, let’s not forget that students are the ones choosing to attend college. When the price of education goes up, there is nothing wrong with charging a higher fee. And for those who cannot afford the higher fee, there are alternatives: scholarships and student loans. If both those options do not work, there is the alternative of a less costly education at a community college. Finally, if all else fails, college can be deferred. I have known several individuals who have put off college in order to accumulate savings for it. All options should be exhausted before reaching into the public purse.

The good news? It seems the idea is picking up some steam with at least one Kansas City area legislator, who is considering a veritable tomahawk chop to some of the worst offending programs (via The Missouri Record):

[Sen. Will] Kraus’s bill would eliminate certain tax credits and apply the savings from the programs to lower the corporate income tax rate. Kraus said he hoped there would be enough additional revenue to get rid of the corporate income tax all together.

“This would make Missouri a much more business friendly place for businesses to come. It eliminates the picking of winners and losers by different tax credits,” Kraus said.

The measure would lower the low-income housing and historic preservation tax credits to 25 percent of their current value by 2016. The low-income housing credit costs the state $60 million a year, while the historic preservation costs $140 million.

The legislative session just began, so certainly a lot can change in the next few months that may temper my optimism. But in terms of policy, it is satisfying to see that the right, liberty, and free-market ideas are moving to the forefront of the state’s agenda. The state must realign its economic development program to reflect that in practically every circumstance, the best allocators of capital in the market are the participants in the market themselves.

As my colleague Michael Rathbone noted, there are only three states in the country that do not have a corporate income tax or a gross receipts tax, and none of them border Missouri. It would be a great way to get a leg up on our regional competition by telling businesses that Missouri is not only business-friendly, but that its tax laws are simple, predictable, and unencumbering. It also means that the unseen cost of the corporate income tax — higher consumer prices that compensate for the taxes that companies pay — would disappear, lowering costs of Missouri goods and making Missouri corporations more competitive.

It would be the right thing for Missouri, and I hope Missourians give the idea serious thought.

I look forward to seeing how this works out for the city and its residents. I am confident it is going to work out great. In our policy study on public-private partnerships for Missouri transportation, we discussed these options for transit at length (see Section VII, pages 32-36). There are many examples of successful transit privatization efforts in the United States, including Las Vegas and Denver. Here is a key finding from Wendell Cox, a local authority on transit and highways, as quoted in the policy study (note: competitive contracting is a common form of privatization):

Competitive contracting has produced positive results for transit agencies in the United States and abroad. The quality of competitively bid transit has been found to be equal to or better than that provided previously, and ridership has generally risen as cost savings allow for expanded service. According to Wendell Cox, direct savings from competitive contracting have ranged from 14 to 52 percent, with an average of 30 percent, over the former non-competitive service in cities that have competitively contracted out at least 10 percent of their service.

After this transit privatization works out to everyone’s benefit, I hope Independence can privatize a few more things. To their additional credit, at least the golf courses in the city are all privately operated.

So with this hope, skepticism. It remains to be seen whether the governor will risk much political capital for the agenda he has outlined, particularly if his ideas are greeted with opposition in the Missouri General Assembly. And the governor appeared to concede as much last night when he talked about tax credits.

While we’re talking about government efficiency, let me make a related point. For the past three years, I have called for comprehensive tax credit reform. Some of you in this room stood with me on this issue. Others did not.

The consequences of this inaction are clear. Over the past four years, more than $2 billion in state tax credits have been redeemed. Effective tax credits are used to create jobs and grow our economy. But tax credits that aren’t delivering for Missourians must be retooled and reformed. We all know that dollars spent on tax credits are dollars we cannot invest in other critical priorities.

Once again, I ask you to pass comprehensive tax credit reform to get this spending under control.

One hundred and twenty three — that is how many words of the governor’s 5,814-word speech were devoted to the state’s budgetary equivalent of a billion dollar bunker buster. It is good that the governor even talked about tax credits, but the subject constituted just 2 percent of a speech that often detailed how the state is tightening its belt. That such a tiny amount of time was spent on highlighting such a huge problem is baffling and disappointing. But more frustrating, the content of those 123 words revealed nothing new, nor did they suggest any greater commitment to “getting it done” when it comes to tax credit reform. Says the governor, just do it. Or, you know, not.

That is despite the fact that ideas are bursting out from across the ideological spectrum on how to combat the tax credit problem. But whether the idea is blocking tax credit issuances (that is, the distribution of tax credits) or even going as far as the desperate step of unilaterally blocking tax credit redemptions altogether — as the left-leaning St. Louis Post-Dispatch suggests — there is growing interest to get a tax credit system that has spun out of control back in line so that our constitutionally-mandated priorities remain in order.

It is concerning that in the same speech where the governor paid brief homage to tax credit reform, he simultaneously, and at length, talked about new industry-targeted incentives under his “Missouri Works” program. Unless an appetite for legitimate reform develops in Jefferson City, Missourians are looking at not only “same old, same old” in the Capitol, but much “more of the same,” as the tax credit fiefdoms that have developed in the last decade fight off legislative incursions and new duchies get created for the next “big idea(s),” Aerotropolis included. (Yes, legislators may try to resurrect it.)

If state officials cannot get serious about a budgetary problem measurable not only in millions, but in billions of dollars, I am not sure they can get serious about much of anything. Gov. Nixon struck the right optimistic tone, as is required of these events, but when it came to the substance, the speech last night was woefully lacking. The state of the state could be worse, but if the governor’s speech is any indicator, Missourians should not expect it to get much better anytime soon.

A couple recent videos:

• Are Missouri Public Schools Failing to Make the Grade? Saint Louis Public Schools Superintendent Kelvin Adams and University of Missouri Professor Michael Podgursky have the scoop.
• If You Play, You Pay I-70 in Missouri may be switching to a toll road, and Show-Me Institute Policy Analyst David Stokes thinks this sounds better than raising gas taxes for everyone.

Both videos are embedded below.

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

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

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

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

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

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

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

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

But let’s not get bogged down in the legal details here. Instead, notice how the law represents one giant step for students, yet one small step for Missouri school choice (my apologies to Neil Armstrong). Why is this so?

First, under the law, the unaccredited status of a school district triggers the right to school choice. While this is fine as far as it goes, what about students who suffer academically in failing schools in accredited districts? If the evil to be remedied is students victimized by failing schools, then the law should target all failing schools, not merely schools in unaccredited districts.

Second, the Missouri law limits transfers to other public schools in close proximity. Why not extend school choice to any public or private school in the state of Missouri? In this way, students will have greater choice, and increased opportunities, to reach their dreams and to receive a first-class education. Ask yourself: Why not?

State Sen. John Lamping, R-Ladue, has followed through with his plan to file a bill that eliminates state income taxes on the first $2,000 in individual income and replaces the money by hiking the state’s cigarette tax — now among the nation’s lowest.

Lamping says the bill is revenue neutral.

Under his proposal, SB 638, no Missourian would pay taxes on the first $2,000 of earned income. Now, state income tax is levied on all income, no matter how small. That cut would cost the state $128 million a year.

As David Stokes noted Thursday, non-smokers and infrequent smokers would be net beneficiaries if the legislation is implemented. The problem is, who would not be a net beneficiary? Smokers tend to be poorer than non-smokers, and any hike in the cigarette tax will tend to hit those living in poverty fairly hard. In 2009, the CDC found that “[t]he prevalence of current smoking was higher among adults living below the federal poverty level (31.1%) than among those at or above this level (19.4%).” Will there be a deterrent effect if there is a marginal increase of 26 cents in the cigarette tax? Possibly, but it also is fairly likely that what the poor gain from the income tax reduction could get eviscerated by the cigarette tax hike. If income taxes were exempted at a higher level, a “worse off” scenario for poor smokers would be less likely.

But there is an alternative to a straight cigarette tax hike if legislators really want to exempt income from the individual income tax. I wrote last week that major reductions to the corporate income tax could be made with the elimination of millions of dollars in failing tax credits. There also is ample room for a deeper cut to the individual income tax that would increase the likelihood that the poor would be net beneficiaries in a tax system rebalancing. Aside from the drastic hikes in the cigarette tax that have been proposed elsewhere, which would exacerbate the problem for the poor, a reduction in tax credits could account for much of the revenue required to make major cuts to the individual income tax.

Put more succinctly, to reduce income taxes, other taxes do not necessarily have to go up if state tax credits go down to a more manageable and appropriate level. Instead of picking winners and losers, let everyone benefit. It would make for a better Missouri and a better-balanced tax system.

Highlights of the Brownback Plan include:

• Lower the top individual income tax rate from 6.45 percent to 4.9 percent (Missouri’s is 6 percent).
• Double the standard deduction to $9,000 for head-of-household filers.
• Eliminate various tax breaks, including those for home mortgages and earned income.
• Eliminate individual income taxes on non-wage business income like limited liability companies.
• Preserve the 1-cent state sales tax.

Now, the plan is described as “close to revenue neutral” and the article quotes a legislator who states “the devil is in the details,” and I happen to agree. However, this proposal points Kansas in the right direction. Any attempt to lower tax rates and broaden the tax base (i.e., closing loopholes and ending tax breaks) should be commended. Is Missouri going to follow (Kansas is not alone in proposing tax reform; Nebraska also is looking at cutting taxes)? State officials in Jefferson City have the opportunity, with the new legislative session, to make some serious changes and set Missouri on the right path to compete economically.

At the Show-Me Institute, we have proposed various tweaks in the state’s tax code that could be beneficial and make the state more competitive. Is Missouri going to move down this road, or are state officials going to continue promoting economic development debacles like Mamtek (and other projects that should remain dead), which make for good photo-ops but have resulted in a failure to grow Missouri’s economy?

I think this is definitely an idea worth discussing. Everyone in the state would benefit from the tax cut (approximately $35 per worker, and part-time employees would benefit just as much as full-time – unless they are really part-time), and smokers would only pay more after they buy their 135th pack of smokes for the year. Basically, a pack-a-day smoker would pay an extra $60 per year in taxes under this plan, while more casual smokers would basically break even or come out ahead. (Is there anyone left alive who still smokes more than one pack a day? I mean, other than this kid, who doesn’t pay American tobacco taxes.)

The small size of the cigarette tax increase in this bill makes it immune from our criticisms that residents of other states would stop buying their cigarettes here, and thus cost Missouri that voluntary money. Of course, some marginal level of out-of-state purchases will be lost, but for the most part, Missouri’s tobacco tax would still be much lower than surrounding states. I think most of our commuters, visitors, etc., who enjoy a draw would still make a point to buy their smokes here.

I like the part of this proposal that all Missourians would benefit equally from the income tax cut. I like that casual smokers would roughly break even, and heavy smokers would only see a small tax increase. I like that out-of-state smokers would likely still continue to buy here when possible.

I do not necessarily like that a percent of the population (the smokers) are being targeted to fund a general benefit. However, we crossed that bridge a long time ago, and this proposal is far less drastic, and more equitable, than many similar proposals. I do not deny the political reality that tobacco taxes are going to be increased at some point. If that reality takes the form of a small cigarette tax hike that funds a tax cut for all Missouri workers (including the smokers), then Missouri could do a lot worse.

It is not just that the state could do worse, it is that we probably would do worse, such as some drastic cigarette tax hike that drives out-of-state buyers back home and uses the new tax money to fund a new tax credit only for films about ethanol-powered historic buildings near transit.

I think Sen. Lamping’s proposal has a lot of merit and deserves serious discussion.

The question arises about what to cut. However, what if appropriators flipped this picture upside-down? What if the legislators asked what should be funded first, instead of what should be cut?

It turns out that the authors of the Missouri Constitution gave this some thought.  The state Constitution provides a list of the order in which money is to be appropriated. It seems the authors of the state Constitution tried to tell us the state’s spending priorities. Those funding priorities are (in order):

1. For payment of sinking fund and interest on outstanding obligations of the state.
2. For the purpose of public education.
3. For the payment of the cost of assessing and collecting the revenue.
4. For the payment of the civil lists (in this case, state employees).
5. For the support of eleemosynary (charity) and other state institutions.
6. For public health and public welfare.
7. For all other state purposes.
8. For the expense of the general assembly.

Now, I am not saying cuts in say, education spending, are completely off limits. If there is waste, get rid of it, no matter where it is. However, the legislature should prioritize spending based on the guidelines of what is emphasized in the Constitution, and if spending cuts are needed, they should be in lower priority items. One example of something that might not qualify as “high priority” is the Missouri Wine and Grape Board. Another example is state ethanol subsidies. Between these programs and K-12 education, which is a higher priority to you?

Several members of the Dellwood Board of Aldermen have intentionally skipped board meetings over the last few months in order to deny a quorum. If the board had a quorum, it would almost certainly vote to disband the Dellwood Police Department and contract out police services to the St. Louis County Police Department. Smaller cities contracting with larger entities to perform certain services is one of the best examples I can give to improve efficiency while maintaining a large degree of municipal independence. I view it as a win-win situation for the people of Dellwood. Apparently, half of the board views it as a threat to speeding ticket revenues, so they are going to an extreme, undemocratic tactic to prevent a measure that will save money and improve public safety at the same time. The absent members of the Dellwood Board of Aldermen are harming their citizens, and behaving embarrassingly while they are at it.

Generally speaking, the county police provide better overall services than very small municipal departments. (But, yes, there are some dedicated, talented officers within small departments.) Just as important, it costs cities less to contract with the county than to operate their own department. If you want to read more about why contracts like this are a good idea, check out this op-ed I wrote when Jennings did it last year.

And why 2,500 feet? Who came up with that number? This article sites the possibility of crime and lower property values around clusters of these businesses, but half a mile seems a little excessive. I would hardly call it a cluster if the businesses located just one block from each other, but even one block is an arbitrary number.

As you may recall from the mantra “location, location, location,” the location of a business can drastically affect profitability. The proposed legislation may make it impossible for more than one loan shop to take advantage of a good location. Since when is that reasonable? Businesses locate in a particular area for a reason – and unfortunately for the affected businesses, the reason they locate to a particular area may be the county’s legislation dictating the available options.

Additionally, why is the government singling out pawnbrokers and short-term loan shops? What next? The proximity of ATMs? When will the regulations stop?

For more Show-Me Institute payday loan material, check out this and this, as well as this awesome video.

In its effort to change the business climate in Missouri, the Missouri Chamber of Commerce and Industry has identified three broad policy initiatives for the current legislative session. According to Chamber president Daniel Mehan:

“Among the list are issues left unresolved last legislative session that will be advocatied (sic) by Missouri’s top business associations and employers: workers’ compensation reform, employment law, and tort reform,” Mehan says.

Within the context of these broader policy initiatives, the following topics are among the most important issues the Chamber addressed. As briefly discussed below, each deserves careful consideration as a reform measure that can foster economic growth in Missouri.

1. Making Missouri employment discrimination law consistent with federal law. Businesses face confusing and parallel obligations under federal and state laws. Making Missouri law consistent with federal law reduces confusion and lowers compliance costs for businesses, which in turn lowers the cost of doing business in Missouri. Consumers and businesses then share the benefits of lower costs.
2. Capping damages in employment discrimination cases. Caps make future business costs more certain and predictable. Although the plaintiffs’ bar does not favor this idea, no one is closing the doors to the courthouse. Policymakers should carefully weigh the benefits and costs and make the decision that best advances business competitiveness and the administration of justice.
3. Exempting co-employees from liability for injuries sustained in workers’ compensation cases. Currently, employees injured by co-employees at work may sue the latter for damages outside the workers’ compensation system. This gives rise to costly disputes among employees, disruptions in the workplace, and an increase in employer costs (not always monetary). Also, multiple lawsuits for the same injury may occur as the injured employee sues both his employer in workers’ comp and his co-employee in circuit court. Time, money, and effort may be economized by requiring injured employees to maintain a single suit in a workers’ comp venue.

Again, these are but a sample of current issues impacting the business climate in Missouri. These issues are important in that each imposes additional costs on businesses in Missouri. As a result, consumers and households may suffer because they will face higher prices, fewer goods, and lower employment. Remember, we are all in this together, despite what some others may say or imply. Isn’t it possible that sometimes what is good for business is good for the people?

“The golf course fleet is better maintained than the sheriff’s department’s fleet,” Sheriff Richard Anderson said.

This brings to mind a very easy move for the county to make that will (1) bring new revenue into the county (the sale price); (2) reduce future expenditures; (3) expand the county property tax base (placing the property on the tax rolls); and (4) remove the county from doing things government is not intended to do. Privatize the golf course.

Golf courses make up one of the least important government programs. I say this as a golfer. I do not think governments should own golf courses, but at least some just own the land and contract out the operations of the course to private companies. Can someone say “comparative advantage”? But Platte County does not appear to even do that. The county appears to own and operate the entire course as a division of county government. (I base that on my reading of the 2011 budget, pages 221-224.) That is insane.

The Mackinac Center and the Reason Foundation both have conducted great work involving government golf courses.  This should be a fairly easy choice for Platte County. Shed the golf course to raise money to improve your sheriff’s fleet. Platte County should sell off its golf course to private operators, and if that is not possible (due to legal restrictions on selling parkland or some other such issue), contract out the management of it.  

And I now will resist the temptation to end this post with an overly cute golf reference, such as “Privatization would be a real Birdie for Platte County!”

Meet the new ideas, same as the old ideas.

The Minority Leader in the Missouri House of Representatives says rather than focus only on ideas that have already been vetted, the legislature needs to consider some fresh ideas.

Mike Talboy (D-Kansas City) points to the states neighboring Missouri, all of which he says have angel investment opportunities. Those could be tax credit programs or funds that are typically smaller than some of the economic development programs already in Missouri.

He says putting programs like that into effect can provide “good bang for your buck in the beginning. But then also as the budget years get better and as we have more revenue in the state and as we see the returns on those types of programs, then you can look at expanding them if you need to or be able to expand them into different parts of the state.” Talboy says there is nothing like what he is talking about currently offered by DED.

“Angel investments“ typically give the investor an ownership or convertible debt stake in a company, which oftentimes is a startup. They usually are differentiated from “venture capital investments” as investments measured in hundreds of thousands of dollars rather than millions of dollars. Angel investments — like so many investments — are inherently risky because success for a startup company is not certain, but such a high risk also has the potential for a high return. According to Jake Halliday, CEO of the Missouri Innovation Center, entrepreneurs oftentimes must give up “a 25 percent to 30 percent ownership stake in his or her startup for a $300,000 angel investment.” If the company grows, so does the angel investor’s money.

So if taxpayers underwrite these investments, will they also get a cut of the capital? I asked a similar question last year when it was revealed that half of the building Stifel Nicolaus was buying in Saint Louis — that is, the building it already occupied — was being subsidized with public monies. Taxpayers did not get to own half of the building it was paying for back then, and they almost certainly will not get a cut of the upside that could be realized from startups under an angel investor tax credit program. In short, we now are being told that Missourians should help defray the risk of high risk/high return investments that rational investors may not have undertaken. Sounds an awful lot like a bubble in the making.

If state officials really want to help businesses in Missouri, they need to stop treating the state’s economic development plan like they are throwing tax credit flapjacks against a wall to see what sticks, and instead cut taxes for everybody. Missouri’s tax credit problem has gotten so bad that Missouri officials could eliminate the corporate income tax entirely, and the state still would have millions of dollars in tax credits remaining. Even if elimination of the corporate income tax is not immediately feasible, officials easily could make deep cuts. They could eliminate millions of dollars of waste that regularly causes the state to lose all but a fraction of the money it expends in those tax credits.

Isn’t there a better way than the conventional wisdom in Jefferson City? Are more tax credits really the answer to our tax credit-fueled economic development problems?

This afternoon, I am pleased to appear on the Mark Reardon show on KMOX NewsRadio 1120 to discuss this issue. I will be on during the 3 p.m. time slot. Please listen in if you can.

I support turning I-70 into a toll road, for reasons discussed in the op-ed and in this blog post.

Like most people, NFL players have to pay taxes on their income. A team located where income tax rates are lower theoretically could offer contracts that are lower in nominal dollars but allow the players to receive higher take-home pay (for the purposes of this post, I am not taking into consideration deductions and tax loopholes, nor am I factoring in cost-of-living adjustments).  Which team’s players have the lowest income tax burden in the NFL? Well, there a couple of things to consider. First, what is the state and local income tax rate for where the players play their eight home games? Next, what is the state and local income tax rate for each of the team’s divisional foes (the players will travel for a road game against each of their divisional opponents)? The other games on a team’s schedule change from year to year, so the combined burden the players face will change somewhat from year to year.

So, for the 11 games (out of the 16 total) that a NFL team has on its schedule every year, is there a noticeable difference between the income tax burdens that the players on different teams face? From my calculations, there is (basic calculations —I only used the top marginal rate, so these numbers do not take into account the lower rates for the lower brackets and these numbers are slightly higher than they really would be). Take, for example, the Houston Texans. A team member who plays a game in Houston would pay no income taxes at either the state or local level. Therefore, for the eight games played in Houston, a Houston player will pay no income taxes. A Houston player will pay no income taxes for the road games in Jacksonville and Nashville, and $1,973.13 for the one game in Indianapolis. Therefore, the total income tax burden for a Houston Texans player making the median salary for these 11 games is $1,973.13. In contrast, a NFL player making the median salary would face a state and local income tax burden of close to $46,000 if he played for the Oakland Raiders (9.3 percent tax rate for eight games in Oakland and one game in San Diego plus the 4.63 percent and 7 percent rates for the games in Denver and Kansas City, respectively). Multiply that figure by 53 (the total number of players on the active roster) and the burden on a team’s players can increase substantially. If you used the mean salary ($1,900,000) instead of the median salary, the burden also increases.

Would this tax burden make much of a difference? I cannot say definitively (I am not an economist), but if one team had to pay a couple of million dollars, which counts against the cap, to just the income taxes, while another team only paid $100,000 or $200,000, I can tell you which team I would rather own.

The St. Louis Post-Dispatch recently reported the St. Louis Preservation Board’s denial of a demolition permit to Saint Louis University (SLU) to raze the vacant Pevely Dairy headquarters building at the corner of Chouteau Ave. and South Grand Blvd. (you probably recall the Pevely smokestack). SLU officials intend to build a surgical center at the site, but now claim that the historic building may scuttle their plans if the building is not leveled and removed.

Before moving on to more pressing matters, perhaps a brief review of the tax implications is in order. Saint Louis public records indicate that the two parcels in question (1001 South Grand Blvd. and 3626 Chouteau Ave.) generate approximately $93,000 in annual property tax revenues for the city. See here and here. The future tax status of the properties, however, is uncertain (I called SLU’s controller, Gregory Haney, but he declined to express his opinion or share his knowledge on the subject). If the properties fall under SLU’s non-profit status, then SLU may be tax-exempt (similar to SLU’s 200 North Grand property). On the other hand, if property ownership vests in a for-profit entity, similar to Tenet Health System’s ownership of property underlying Saint Louis University Hospital, then taxes will likely be assessed and collected.

In either case, the city still stands to gain revenues if the surgical center is developed. This would arise from earnings taxes on new jobs created at the facility (although we have advocated for the elimination of the earnings tax and for alternative payments in lieu of taxes from tax-exempt non-profits, this blog post deals with the facts and law as they currently exist). For the sake of example, at 1 percent on taxable earnings, 124 jobs at $75,000 annual salary generates $93,000 in revenues, which compensates for the loss of property tax revenues under the tax-exempt scenario, but provides additional incremental revenues to the city under the alternative scenario. In either case, both the economy and the tax base are increased, which is a good thing.

While the tax implications are interesting, perhaps the more fundamental question is why are preservationists so insistent on saving the aging Pevely headquarters building? The history of progress is replete with tear-downs and rebuilds. Progress necessarily implies creative destruction, replacing old with new. Sometimes you have to let go of the past if you are to embrace the future. The past is but a distant memory. Happiness, prosperity, and success are forward-looking concepts that reside, if at all, in the future. Saint Louis, embrace the future, not the past. The Preservation Board should reconsider its decision.

However, the plan for obtaining a $107 million loan from state universities to help fund a department that gives a lot of money to . . . well, state universities, seems odd. If the state is facing a shortfall, it needs to make the tough decisions to balance the budget (i.e., cut spending and NOT raise taxes). What happens if the state faces a similar situation in fiscal year 2014? Will Nixon ask for ANOTHER loan?

There are other places in the budget that can be cut (granted, these cuts alone will not make up the amount of money needed, but they are a start) before even thinking about cutting money from the DHE, never mind resorting to this loan plan. However, that is not to say that cuts cannot be made in DHE. The DHE budget is not sacrosanct.

For example, in fiscal year 2012, the DHE gave more than $400 million ($366,765,401 from general revenue) to the University of Missouri system. If Gov. Nixon wants a $63 million loan from the University of Missouri-Columbia, why doesn’t he ask the legislature to cut $63 million from the University of Missouri system. Lawmakers can always appropriate more money in future fiscal years (not that they necessarily SHOULD). Why ask for a loan?
Prudence is a virtue for a reason. Before engaging in plans meant to avoid the task at hand, wouldn’t it be better if the state actually finds out what it is paying for and truly decide what it NEEDS to pay for, and what people can do without?

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

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

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

Well, here are two more.

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

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

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

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

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

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

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

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

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

The solution is not to ban cell phones.

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

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

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

Dick Fleming, the group’s longtime head, is stepping down from the organization he has helmed since 1994, and his replacement will come from a city just a short drive east on I-64: Louisville, Ky., also known as the “Gateway to the South.” Joe Reagan moves to Saint Louis from Louisville’s equivalent of the RCGA, the Greater Louisville Inc., or GLI. Marketed during Reagan’s tenure as “Possibility City,” Louisville will have to find a new chamber head for the first time since 2005. Louisville is already writing the postscript to Reagan’s legacy.

But the fact of the matter is that no man, or government, or organization, or even coalition of organizations, can plan an economy, or at least plan it well. That is an incredibly important point to highlight and probably the fairest thing that can be said as Reagan joins the Saint Louis community; it also is probably one of the most damaging points one can raise about how the RCGA and organizations like it behave.

Our local chamber loves to get the pat on the back for positive economic news and to pump “public-private partnerships,” oftentimes fueled with tax credits, that fail to substantively move the economic needle in the region’s favor. Meddling in the economy, local or national, destroys wealth more often than it creates it, leaving taxpayers with the promise of prosperity but little else. And it is no secret that Saint Louis city has languished for decades under one failed economic plan after another, compounded by the exodus of residents into nearby counties and driven by the continued intransigence of the city’s political class to step away from its cronyistic tendencies. In short, the economic development status quo is not a blueprint for a prosperous future for this region, and has not been for some time.

Which is why I hope that Reagan’s arrival in Saint Louis is not just more of the same. More precisely, I hope that Saint Louis — and Kansas City, and the state of Missouri — at least return to some sense of regional economic normalcy, if not runaway growth in the coming year. That is a Christmas wish of sorts, I suppose, but a wish that the RCGA, GLI, or any similar organization has limited or no power to bring to fruition.

Maybe a New Year’s resolution for the state and the city is in order instead: To simply let the market work. It does not matter if it is Saint Louis’ chamber hawking Aerotropolis, or Moberly’s chamber hawking Mamtek, or a political class increasingly disconnected from the electorate hawking Solyndra. There are no easy, centralized solutions to our economic woes. Acting like there is in Saint Louis only prolongs the municipal pain. Like all taxpayers, Saint Louisans cannot depend on a small group of decision-makers to make their lives better.

Free markets make genuine and sustainable economic growth possible, and if there is going to be a “Possibility City” in this region, let it be more than just another marketing slogan with another cartridge of development silver bullets as its driving force. Reduce taxes and regulation, get out of the way, and let the free market flourish. May RCGA’s new administration regain its faith in that formulation.

Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole — with their common aim of legal plunder — constitute socialism.

Provocative enough for your tastes? Do you vehemently disagree? Is Bastiat a kook? Come join us for spirited discussion and snacks this Wednesday; Bastiat is our topic.

The Show-Me Institute’s Book Club meets the second Wednesday of each month at our headquarters, located at 4512 West Pine Blvd. in the Central West End. Meetings begin at 7 p.m. and typically last until 8:30 or so. See link for more information. 

Please bring a friend. Hope to see you there.

The latest proposal is to transfer the bottle district TIF (tax increment financing) from the original developers to the control of Mr. McKee and his entities. To be clear, McKee and his groups were not involved in the original TIF proposal, so we cannot pin all of this on him. However, unlike tax credits, the TIF law was not drafted with the intention of TIF being transferable. I do not think it is right for one stalled TIF proposal to just be assigned to someone else – and I do not care who that someone else is. (Note: I am not saying transfering the TIF is illegal, just improper.) At least some people in city government seem to be aware of this issue:

[Saint Louis Development Corporation Executive Director Rodney] Crim wouldn’t specify what, exactly, the city objects to. But he suggested officials have concerns about using TIF for one project to help fund another.

“My focus is on what can and cannot be done with the Bottle District TIF,” he said. “We just have some more talking to do.”

I think it is especially wrong to continue to subsidize property that at this very moment is being made more valuable because of major public improvements. Here is one description of the property:

Located just north of the Edward Jones Dome (home of the Rams) along Interstate-70, the site is one of the most desirable development locations left available Downtown. Once the new Mississippi Bridge is complete,  its location next to the bridge will make the site even more visible and accessible than it already is.

Former longtime New York Sen. George Washington Plunkitt would have fully understood developers seeing their opportunities and taking them, but even he would never have asked for the new land to be subsidized on top of it. If this land at the base of a major new bridge has to be subsidized, I guess we are at the point where we just admit everything gets a tax subsidy, unless, of course, you are just a small entrepreneur without political connections.

Just how rich does this make Albert? Well, one local sportscaster estimated today that if Albert bats five times each game next year for the Angels, he will be raking in a cool $30,000 each time he steps into the batter’s box. Not bad, huh?

But if it makes you feel any better, it may not be all win-win for our legendary No. 5. Consider income taxes. Missouri’s top personal income tax rate is 6 percent, which kicks in at $9,000 (he would have also paid an additional 1 percent earnings tax [click on policy study and scroll down to page 46] in Saint Louis). In comparison, California’s top rate is 10.3 percent for incomes above $1 million (of course it might not STAY that way). I am not the only one to notice the possible influence that income tax rates could have had on Albert’s decision (this was regarding the offer from the Miami Marlins).

However, at the margins, how much of a difference would these tax rates have made on Albert’s decision? First, consider that Albert will only have to pay this 10.3 percent top rate for games played in California. He will play a good chunk of his games in states with NO personal income taxes (Washington and Texas). Now, I am not an economist and there are other factors involved here, but just doing some back-of-the-envelope calculations for the home games, I found that Albert would pay slightly more than $4.6 million more in taxes over the life of his contract in Anaheim than Saint Louis. Considering the supposed $30 million to $40 million difference in value of the contracts, would the tax factor make that much of a difference? It is certainly possible (even though Albert did decide to leave). If the Angels had offered him the same amount as the Cardinals, the tax difference would cost Albert approximately $3.7 million.

Who is to say if the difference would matter, especially for a single individual who has to weigh many factors in his decision to move. However, if you are a business, that tax difference could influence a decision between paying taxes or hiring a couple of new employees. Just some things to ponder while Albert packs his bags.

Ehlmann gave an excellent talk at the TIF hearing last month. Here is his stated opposition to the TIF:

However, he said a city tax-increment financing subsidy would be “bad public policy” because it would channel into the project some of the new property tax revenue generated that would otherwise go to the St. Charles School District and other governments.

“If the city can do a TIF to make others pay for what is their responsibility, when are we going to start using city money for schools?” Ehlmann said.

Ehlmann and his predecessor, Joe Ortwerth, have been leaders in calling out the fact that these TIFs do not do anything for our economy. They inefficiently redirect activity based on who is giving out the most tax dollars. Saint Charles County has put its money where its mouth is regarding TIF, and actively fought prior TIFs in court, although the rulings have always favored the cities. It is great to see Ehlmann is still fighting that fight against these abuses.

Charlie Dooley has also been leading the fight against these TIFs in Saint Louis County. He has not made a statement directly on the Shrewsbury TIF, so I do not know exactly how he feels about it. But based on his opposition to the last Walmart TIF in Bridgeton, and the comments of the county reps on the current TIF commission, I think he likely is opposed to this one as well. (Someone should feel free to correct me if I am wrong.) Dooley made public comments about the Bridgeton TIF between the TIF commission process and the city council decision. I think that is perfectly appropriate, and I hope he leads the opposition should the Shrewsbury City Council attempt to override the decision of the county TIF commission.

One of the most important legislative changes we need in Missouri is eliminating the ability of cities to override TIF commissions. Cities can approve a TIF even if the commission defeats it. That is an atrocious law that empowers small groups to abuse the tax system at the expense of many other people and entities (such as school districts). Both county executives – Ehlmann and Dooley – deserve great credit for thinking about their whole county (and region) first, and opposing these types of tax abuses.

The mission of MASBDA is to make “capital available to Missouri farmers, particularly independent producers; agribusiness; and small business at competitive interest rates on a scale to make a major impact.” This raises a red flag for me. An entity that makes capital available to businesses at a “competitive” interest rate sounds an awful lot like a bank to me. In fact, a couple of the programs that the MASBDA administers include: Missouri Agribusiness Revolving Loan Fund, Alternative Loan Program, and Animal Waste Treatment Loan Program. The total state funds loaned to the Animal Waste Treatment Loan Program alone is close to $500,000 ($485,333.56 for fiscal year 2011, specifically).

Is anybody uncomfortable that a part of state government is acting like a bank? Why can’t the recipients of these loans get private financing? If they are great deals, why are private banks and/or financial institutions not jumping at the chance to invest in these projects? Farms already face lower property tax burdens compared to commercial businesses (farm property has an assessment ration of 12 percent compared to commercial at 32 percent and residential at 19 percent, and the soil quality grading system sets a very low appraised value already) so why do they need ADDITIONAL help with subsidized loans?

Also, how can a government and a private enterprise compete when it comes to financing? By issuing below market interest rates to different businesses, isn’t the state undercutting private financial institutions? Even if a state department/agency/program loses money, it can acquire new financing by compulsion with increased taxes. A private organization does not have that same power to tax (although with TDDs and CIDs, we are getting there). Thus, with the ability to achieve easier financing, what real incentive is there for the state to make wise spending decisions when it comes to these loans besides avoiding grief  from dedicated bloggers such as me? Isn’t it time for the state to get out of the business of lending with YOUR money and return to the basics? Just some food for thought.

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

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

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

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

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

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

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

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

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

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

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

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

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

Nixon said that he had offered assistance to [Saint Louis County Executive Charlie] Dooley. In particular, the governor mentioned Lone Elk Park, which is adjacent to Castlewood State Park. Nixon said such a state-county operation there would save money.

Lone Elk Park is adjacent to Castlewood State Park and a previous article states that the county was considering transferring Lone Elk Park to the Missouri Department of Conservation. The governor claims that a shared management operation would save money. I haven’t seen any data to support this claim, but IF it is true, then the idea can be viewed as having some merit.

However, it seems odd that in this article, the topic of privatization was barely mentioned, except in this brief statement:

[Saint Louis County Chief Operating Officer Garry] Earls initially said that some of the parks, including Lone Elk, could be sold. However, Dooley dismissed that possibility at a special budget meeting Tuesday night.

Prudence would suggest that the county not dismiss privatization (or ANY potential solution) out of hand. Shouldn’t the county consider privatization as a possible course of action before sharing park management with the state? If there ARE obstacles to privatization, what are they? The only obstacle I could find is in this piece of information from the Southeast Missourian:

Officials said deed restrictions and covenants would prohibit the sale of most of the parks to private individuals.

However, Lone Elk Park does NOT have a deed restriction on its sale so the above restriction would not be applicable. Are there any other reasons the county would not consider privatization of Lone Elk Park?

As David mentioned in his post, the Reason Foundation has done a good analysis of park privatization, and the conservancy model of non-profit, public-private partnerships operating a park has been tried successfully in Tower Grove Park. County officials have not given a reason why following the Tower Grove example would be a bad idea, and unless there is a deterioration of Tower Grove’s situation, shouldn’t Saint Louis County investigate privatization of Lone Elk Park if a private operator can be found to manage it?

Look, we all know that tax credits have a bad track record of success. Quality Jobs tax credits are especially infamous in Saint Louis, because of Liberty Mutual. The company sent pink slips to many of its employees, and told those employees that they could apply for lower-paying jobs.  Surprisingly, the Missouri Department of Economic Development said that Liberty Mutual remained eligible for the tax credits.

Of course, Quality Jobs tax credits are supposed to go toward creating high-paying jobs.

But today, I’d like to commend the creative designer who created the Business Journal graphic below. At first, it may seem like an ordinary cereal box. But, instead of the usual commercial claims, this cereal box proclaims that it is “Packed with $20 million in industrial revenue bonds,” and “INSIDE: $3.8 million in tax credits.”

I only wish that the designer had incorporated some fine print. Perhaps: “Job creation numbers have not been verified. Up to $20 million in bonds may be used for the project, which may not be good for the city of Saint Louis’ financial health.”

Graphic by the St. Louis Business Journal.

The city has issued an average of $35.4 million in permits per month since the tornado. Before the tornado, the city averaged just over $2.1 million a month in building permits.

Despite this evidence of a robust private market, the Missouri Housing Development Commission has:

. . . committed about $100 million in tax credits and loans over the coming decade to spark the construction of low-to-moderate income rental units and single-family, owner-occupied homes in the Joplin area.

[A] Sept. 30 revision of the federal wage rules significantly increased those amounts. For example, the federal prevailing wage for a carpenter in the Joplin area rose from $7.98 an hour to $21.47 an hour plus $12.65 in benefits. The federal prevailing wage for a roofer in the Joplin area rose from $7.25 an hour, which matches the general federal minimum wage, to $21.30 an hour plus $8.08 in benefits.

MoDOT officials state that in order to pay to rebuild I-70 using gas taxes (and I have nothing against gas taxes; I just prefer tolls where feasible), they would have to impose a 15-cent per gallon state gas tax hike. I am going to do a follow-up post next week on costs after I have time to work through the numbers, but for now, realize that everyone in Missouri would pay that same extra 15 cents, including people who rarely use highways, particularly I-70. People in Kennett would pay the same as people in Kingdom City. People who drive primarily on local roads (paid for with local property and sales taxes as well as gas taxes) would pay the same as people who drive predominantly on highways (which gas taxes pay for almost entirely).

The Show-Me Institute released a terrific study on private financing of highways back in November 2008. The study was done by “distinguished urban economist” (Freakonomics’ words, not mine) Kenneth Small. It may be my favorite paper that we have released, and it has something important to say about this exchange in the hearing with MoDOT yesterday:

Committee chair, Sen. Bill Stouffer, R-Napton, said he was concerned that motorists may try to avoid I-70 if it became a toll road, pushing traffic onto smaller roads, such as Highway 36 and Highway 50.

Keith said the concern was valid, but it would be up to the toll road operator to make sure tolls aren’t excessive.

The concern about traffic being pushed onto other roads because of high tolls is legitimate. Prof. Small states on page 23 of the study: 

The best results occur when the objective for awarding the franchise takes into account a combination of all three forms of payment by users and taxpayers: their own costs of congestion, toll payments, and the subsidy required. This is a highly stylized model not suited for designing a franchise for a specific road, but it does highlight the importance of considering not only toll payments and subsidies but also congestion costs incurred by users of both roads. 

I have one minor critisicm of the proposal. I do not think this should be required:

After the project is complete, the contractors would operate the toll plazas for a period of years until the contractor’s investment has been repaid.

I say just toll it now and forever. After the investment is repaid, there will still be maintenance costs. It may be reasonable to require that the toll be lowered at that point in time (when the debt is gone and MoDOT faces just upkeep), but doing away with toll at that point is not necessary, in my opinion. However, that point is minor, and I think MoDOT deserves great credit for this proposal.

In its opinion leading to the supreme court hearing, the intermediate court of appeals noted the following:

. . . no Missouri court has expressly interpreted Article I, section 29 [of the Missouri Constitution] to contain a duty of good faith . . .

If the Court, in a fit of judicial activism, writes a “duty to bargain in good faith” standard into the state constitution, school districts, once vested with substantial discretion from the legislature to manage their affairs, will suffer tremendously. For example, rejections of union proposals will now spawn threats of lawsuits. Districts will hire attorneys to assess the liability risks of decisions once left to the discretion of the districts’ officials. Good faith, in this context, is an invitation to litigate. And litigation diverts scarce resources and money from the districts’ core mission: to educate our children.

Interestingly, the Missouri Legislature has rejected five attempts to statutorily adopt a good faith standard (see footnote 4 in court’s decision). Haven’t the people spoken through their elected representatives? The Court should heed this message and reject a duty to bargain in good faith standard for Missouri’s public school districts.

But the core of it is getting major cities within two or three hours of each other. So, St. Louis to Chicago within three hours — with completely new infrastructure the entire way, it’s possible you get it down under two.

But you know what? The entire project currently underway in Illinois is based on implementing a 4-hour trip each way (at best). We are spending billions to knock a little more than an hour off of the current Amtrak route, and supporters of it are intentionally downplaying that.

Later in the interview, Harnish gives a great little aside downplaying safety of cars and claiming, by insinuation, that trains are safer.

. . . if you believe that our strength and unique identity is tied to the ability to risk your life everyday in a car . . .

OK, so we risk our lives everyday in a car. Would we not risk them in a train? Now, I am not saying passenger trains are unsafe — they are indeed safe. But if you compare them to cars, there are more fatalities on passenger rail than in motor vehicles per passenger mile. According to the latest data, passenger cars have 0.9 fatalities and 83 injuries per 100 million passenger miles. Passenger rail has 2.9 fatalities and 1,226 injuries per 100 million passenger miles. So they are both safe, but let’s not pretend passenger rail is safer.

High-speed rail is to transportation policy what ethanol is to agriculture policy. They are both high-cost jokes designed to please limited constituent groups (corn farmers, unions, Keynesian economists) which would not exist if markets made these choices instead of politicians. (High-speed rail on the eastern seaboard may pass the market test, and thanks to John Combest for the link.)

Tuesday’s vote is a wake-up call: reform TIF.

I want to make it clear that I do not want to outlaw wine in Missouri. However, it troubles me that taxpayer money is subsidizing the wine industry. Specifically, the Missouri Department of Agriculture spends $1,828,859 (click on HB 6-Agriculture and scroll down to page 133) on something called the Missouri Wine and Grape Board.

According to the Department of Agriculture’s 2012 Budget Request Form (click on HB-6-Agriculture and scroll down to page 134), “The Wine and Grape Board stimulates growth of the grape and wine industry for the economic and social benefit of the citizens of Missouri.” Aspects of the board’s functions include using funds to “develop programs for growing, selling, and marketing of grapes and grape products grown in Missouri.” Indeed, the Missouri Wine and Grape Board does have marketing products, including brochures, videos, and radio advertisements. The Wine and Grape Board also funds the University of Missouri Institute for Continental Climate Viticulture & Enology in order to fund grape research programs.

So, in essence, the board serves somewhat like a chamber of commerce for the Missouri wine and grape industry. However, unlike a chamber of commerce, participation in this program is mandatory, with a charge of a 12-cent excise tax on every gallon of wine sold in the state. Also, in all my searches through the state budget, I have yet to encounter an official appropriation for a private chamber of commerce.

I have to ask, why can’t Stone Hill or Hermannhof promote themselves with their own money? Why can’t there be a private chamber of commerce that promotes the wine industry, or all the wineries of the state? I have no problem with private groups promoting wineries, but do I think the state should be promoting them? No.

Also, there is no evidence that this expenditure actually DOES have a positive impact on the state’s wine industry. In my search, I haven’t seen anything to suggest that the Missouri Wine and Grape Board has a discernible impact on the Missouri wine industry. Even the economic development report on the Missouri Wine and Grape Board website doesn’t really show the spending cause and effect; it just shows that in recent years, Missouri wineries are doing well. However, it doesn’t link the activities of the board to the wine industry’s success.

The key issue here is funding priorities. Why is the state funding this board, at least at its current level, when there are other places in the budget that may require that money? If the choice for appropriators is between potentially laying off teachers, firing firemen, or withholding funds from vital social services, shouldn’t every area of the state budget come under review for potential savings? Just my 2 cents.

The city long survived on speeding ticket revenues. After a few scandals resulted in the disbanding of the St. George Police Department, the Saint Louis County Police Department took over. That was perfectly fine for the residents’ safety, but the County has no interest in writing speeding tickets solely for the purpose of city revenues. So the city lost its major source of revenue, the streets started to crumble, and there was no money for repairs. Thankfully, smart thinking prevailed and the city will no longer be with us once the votes are certified.

I am not a knee-jerk supporter of fewer municipalities in Saint Louis County. There are benefits (as well as costs) to having a number of small cities. The lack of centralized urban planning is the main benefit. However, in some instances, the tiny municipalities in the county border on the ludicrous, and St. George was Exhibit A.

I think some of the other 91 90 cities in the County should consider doing the same. Some should disincorporate, some should merge, and some others should follow Jennings’ lead and remain as they are while making key changes. I have no idea what would be the ”best” number of cities in the County. Nobody else does either. For the sake of this post, I would say that about 70 cities would allow for the benefits of many cities while getting rid of the most obvious cost inefficiencies and poor policies (like cities that have a primary funding source of speeding tickets).

Whatever the choice, it should be up to local citizens. I think the local citizens of the newly-unincorporated community formerly known as St. George made the right decision and have shown us the way.