April 8, 2014

New On Show-Me Sunshine: School District Collective Bargaining Agreements

In 2007, the Missouri Supreme Court overruled 60 years of case law and determined that teachers have the right to organize and collectively bargain. At the Show-Me Institute, we wanted to determine how many districts have entered into collective bargaining agreements (CBA), so we requested CBAs from every public school district in Missouri with more than 1,000 students. Approximately one-fifth of the districts we contacted have a formal CBA. In the interest of transparency, we have posted those agreements online here.

April 7, 2014

Kansas City Streetcar Robs Poor to Pay … Rich?

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

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

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

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

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

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

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

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

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

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

Terminals For T-Shirts

Over the weekend, the Kansas City Star quoted me in an article regarding concessions at Kansas City International Airport (KCI). The article reported:

Even if Kansas City builds a new terminal and begins to perform as well as peer airports in raising retail revenues, conservative policy analyst Joseph Miller calculated the airport should only expect another $1 million or $1.5 million per year in extra funds.

Hardly much to offset the cost of building a new facility, he said.

“Remember that debt service for a $1.2 billion new terminal is likely to be close to $70 million a year,” said Miller of the Show-Me Institute, a free-market think tank based in St. Louis. “In terms of making a new airport affordable, retail sales are not a well-thought-out argument.”

It seems that the Kansas City Aviation Department and other supporters of the proposed $1.2 billion new terminal plan for Kansas City International Airport are still arguing that increased retail sales at the airport is a valid reason for opting for a new terminal. In reality, the amount of revenue that retail would bring to the airport is minimal and dwarfed by the cost of the new terminal plan.

First, let’s be clear about what retail we are discussing. Concessions at airports are usually defined as either food service or retail (e.g., Kansas City trinkets, Dan Brown’s latest mass-produced masterpiece, luggage for people who by definition already have luggage). The Star states that retailers at KCI drew $29 million in revenue last year, but only if we include food service. In fact, retail and duty-free shops usually generate less than $7 million a year in total revenue.

But KCI does not get to keep all the revenue from those shops, only a cut. From retail, KCI only received approximately $900,000 in 2013. Combine retail with food sales, and revenue to KCI from all concessions climbs to just less than $3 million per year. When we remember that KCI’s total operating revenue is $104 million in 2013, we see just how miniscule the retail source of revenue is.


If we assume that with a new terminal KCI will perform as well in sales/pass as other airports with new terminals, at best, KCI will increase retail sales by $1.5 million and food sales by $2.5 million. Certainly they must have a better argument to build a $1.2 billion terminal.

April 4, 2014

Show-Me Institute Research Discussed On Ruckus

On Thurs., April 3, the Show-Me Institute’s research about the Kansas City streetcar and the proposed $1.2 billion new terminal plan for Kansas City International Airport (MCI) was featured prominently on the program Ruckus. That program aired on public television station KCPT-TV in Kansas City. Show-Me Institute Board Chairman Crosby Kemper III argued that both the new airport terminal plan and the streetcar are wasteful projects, the result of Kansas City becoming a “fact-free city.”

On the video below, discussion of the future of MCI starts at 1:15 and goes to 7:00. The streetcar discussion, directly addressing our writings about the streetcar expansion’s cost-effectiveness and ridership estimates, starts at 12:24 and goes to 18:40.

The Myth Of The ‘No Tax Increase’ Bond Issue

“There’s no such thing as a free lunch,” is a common phrase in economics. It is a phrase that people must remember when considering “no tax increase” bond issues.

Bonds are one of the most common ways for school districts to fund construction of new buildings. They are essentially a loan and are a form of debt. To pay for this debt, school districts levy property taxes. Sometimes districts must levy new taxes to finance a bond and other times they are able to refinance an existing bond and hold the tax levy at the same rate. The latter often are labeled as “no tax increase” bond issues; but make no mistake, there is no such thing as “no tax increase” bond issue.

As I explain in this edition of “Show-Me Now,” a “no tax increase” bond issue is a lot like a home equity loan. Your mortgage company can refinance your loan to give you access to cash right now. Often, they are able to do this while holding your payment the same, but extending the length of your repayment. So instead of your payments ending in 10 years, they may be extended to 30 years. Whether you refinance or not, your monthly payment remains the same.

Bonds work in much the same way and school districts can “refinance” to extend the term of the bond. They market this to the public as a “no tax increase” bond issue and claim that your payment will not go down or up whether the issue passes or not. Your tax payment will not change, but you will be paying for a longer period of time.

There is no getting around it, paying the same rate for a longer period of time is a tax increase. Therefore, it is more appropriate to call these a “no tax levy increase” bond issue.

Airport Advisory Group Not Really Interested In Input

A previous post detailed the Kansas City Airport Terminal Advisory Group’s effort to avoid open records laws in their meetings with Kansas City public officials. This post deals with the group’s unwillingness to even hear from those skeptical of a new terminal. On Jan. 30, I wrote the following email to Airport Terminal Advisory Group leaders Bob Berkebile and David Fowler:

I was able to attend the Advisory Group presentation before the Hispanic Chamber of Commerce last week, and the slideshow contained four statements that are either incorrect of very misleading. These include (1) the ‘firewall’ between airport funds and the city, (2) whether city funds can be used by an airport, (3) that all city bonds require a public vote and (4) that no airport has ever defaulted and that the city is not a guarantor.

The Show-Me Institute has conducted a great deal of independent research into the Aviation Department’s claims and the wisdom of large airport projects in general. We would welcome the opportunity to present our findings to the Advisory Group, so that they need not lean so heavily on presentations from the department whose claims they are investigating.

That same day, Fowler forwarded the message to a city staffer with this addition:

Can you have your folks at the city look into these matters, please ?

I am sure this group is looking for exceptions to the general rule and will try to discredit what we have heard in testimony from the Aviation Department and the City finance group.

These are certainly policies and broad statements about the legal ramifications of the airport revenue bonds. Whether there are exceptions, loopholes, etc may be called into question.

Maybe have [the City Attorney] look into potential exceptions, etc.

A few days later, on Feb. 2, Fowler forwarded my note to one of the consultants at Frasca and Associates, who is working with the advisory group, with this addition:

Please see the email we received from a special interest group contesting certain facts we have heard from either the Aviation Department and/or representatives of Kansas City.

Which one of these points would you be credentialed to respond to or could research without much additional time (so we don’t blow our Frasca budget) and which ones would you suggest are more legal issues best handled by independent attorneys ? In other words, are some of these questions Kansas City airport-specific, Missouri law-specific or are they all generic facts around most public airports ?

I would like to discuss this during our planned call on Feb. 4, but wanted to give you advance notice that we need answers on these asap either from you or someone else who is independent. We may be able to get our FAA representative to clarify as well and we intend to pose to him too.

Two weeks after that, on Feb. 17, Fowler sent this note to the same city staffer to whom he initially forwarded my email:

Can you please confirm back to me that someone from the City has followed up with Patrick Tuohey on his email below so he feels like we are paying attention to his messages.  I don’t want him ever saying he reached out to us and nobody ever responded.

Let me say loudly that we reached out to them and nobody ever responded. On March 24, I again sent to advisory group leaders Berkebile and Fowler the following note:

On January 30, I sent the note below indicating that the Show-Me Institute has compiled a good deal of independent research on the proposed new terminal. This research includes matters that ATAG has never covered, including financing and the impact of debt servicing.

My note received no response. Therefore, I am asking that the original January 30 email be considered testimony and be distributed to all members of the Advisory Group and included in whatever testimony is made public.

As of this writing, we have heard nothing. They received our note but apparently were more interested in circling the wagons — and seemingly protecting the Aviation Department from being contradicted — than actually collecting information on the new terminal proposal. Perhaps as a result of failing to accept pertinent testimony, Kansas City Mayor Sly James stated falsely in his State of the City address that funds raised at the airport must remain at the airport.

We cannot know what other groups have asked to present information to the Advisory Group and been rebuffed or ignored. We do know that some groups, such as airport concession operators, have not been heard from and we know that the consultants downplayed important testimony from Southwest Airlines. Observers of the advisory group have complained that it gives the appearance of being one-sided and uninterested in legitimate public dialogue. These internal communications only confirm those fears.

April 3, 2014

Metro Plans Unfair Fares?

In the past week, Saint Louis’ transit agency Metro has held meetings to discuss a proposed fare increase on Metrobus and Metrolink tickets. Some at those meetings cried foul, arguing that the increases are too much to bear. But not only are Metro fares heavily subsidized, the way Metro operates means that either fares or local taxes must increase to cover ever-rising costs, as the testimony I submitted to Metro details.

Metro has proposed increasing fares on selected ticket options by approximately 10 percent, with the purpose of raising an extra $2.2 million in revenue. Metro’s strategy is to regularly increase fares by small amounts, rather than imposing infrequent large increases. But even this smaller increase has its opponents. As reported in the St. Louis Post-Dispatch, many have spoken out against raising fares. One attendee at a Tuesday hearing stated, “I agree with a partial raise, but not such a big jump on everything.”

The fact is that fares cover an extremely small percentage of Metro’s costs. In the last 20 years, total Metro fares ($746 million) have accounted for only 14 percent of the total costs of building and operating transit in the Saint Louis area ($5.5 billion). Even if one treats the generous grants of the federal government as manna from heaven, local taxpayers pay far more to fund Metro than fares contribute. For example, in 2012, fares ($49 million) made up only 22 percent of local operating funds ($217 million). The other 78 percent principally comes from taxpayers in the Saint Louis region, only 4 percent of whom use the system to get to work. While it is true more use transit occasionally, most residents of Saint Louis City and County rarely use Metro, if ever. With the federal government and local taxpayers paying so much of Metro’s costs, it is hard to argue that Metro users are being charged too much for their tickets.

To make matters worse, the percentage of operating costs that fares cover has been on a steady downward trajectory over the last two decades. In 1991, fares ($23 million) covered about 28 percent of local operating costs ($83 million) while today they only cover 22 percent. Increasing ticket revenue is not keeping up with the rising costs of operating, much less improving, the Metro transit system, as the chart below demonstrates.


We have written before about how Metro spends an inordinate amount of funds supplying near empty buses to far-flung areas of Saint Louis County. We also have written about the high cost of building and expanding the Metrolink. However, Metro officials feel they have a mandate to improve and expand those services, waste notwithstanding, which means ever-increasing capital and operating costs. Given those constraints, if Metro does not regularly increase fares, a higher and higher share of operating that improved system will fall on those who do not use it.

Inexcusably, Medicaid Expansion Proposal Omits More Than $1 Billion In New State Costs

The leading “Medicaid Transformation” proposal in the Missouri House purports to deliver a Medicaid expansion that effectively makes the state money. Suffice to say, that’s a highly questionable claim, and I don’t even have to cut apart any of the bill’s dubious calculations to reach a very different conclusion. Why? The issue is startlingly simple: The bill’s proponents simply did not account for more than half of the new costs of the Medicaid expansion.

Let me explain how that happened. There are two populations that we discuss regarding Obamacare’s Medicaid expansion. The more obvious of the two is the population that would become “newly eligible” under the law — those who, by virtue of the law’s passage, would now qualify for Medicaid coverage up to 133 percent of the federal poverty level. The Kaiser Family Foundation (KFF) estimated that had Missouri expanded its broken Medicaid program after the law passed, the newly eligible population would have cost the state more than a billion dollars from 2013 to 2022. The House expansion bill’s hypothetical budget only really integrates that group into its calculation starting in 2015.

It’s the second population, however, that is an even bigger budgetary concern, and it is substantively ignored in the expansion bill. That group is the “currently eligible” population: those who currently qualify for Medicaid but only become enrolled as part of the expansion’s enrollment push. The phenomenon is sometimes called the “woodwork effect,” as this population that has always been eligible emerges and begins leveraging the Medicaid entitlement for the first time. KFF estimated that over that same period, Missouri would pay $1.6 billion for those new enrollees. That’s more than a doubling of the expansion’s total costs. Without even addressing any of the other problems in the bill’s budgetary forecast, how would the state pay the currently eligible cost of the expansion? I haven’t heard an answer to that question for years now.

You can read more about the issue here. So far without expansion, Medicaid enrollment in Missouri has actually declined; under the circumstances, it is reasonable to suggest that implementation of the expansion itself would initiate the uptick in woodwork costs that KFF forecasted. It is inexcusable that these costs have not been accounted for in the House proposal, but rest assured, this isn’t the first Medicaid expansion proposal I’ve read that failed to integrate these expenses.

Spending is no substitute for reform of a thoroughly broken Medicaid program, especially when the forecasted costs are so woefully understated. If it wasn’t clear before, it should be now: reform is where the legislature should focus its attention, particularly this late in the session.

Airport Advisory Group Seeks To Avoid Public Scrutiny

Avoiding public scrutiny is no way to conduct the people’s business.

We have been critical of the Kansas City mayor’s airport terminal advisory group, including when leadership met with the Kansas City Aviation Department’s PR firm. We also have been critical of its conflicted make-up and its treatment of opponents. Prior to that, we were critical of the Aviation Department and of the Kansas City City Council for refusing to answer questions. We’re not alone; some have called for the airport director to go.

But this is something new. In a recent email sent from the advisory group’s leader, Bob Berkebile, including to several city employees, he seeks to circumvent Missouri’s open meetings law (emphasis added):

On another note we have offered to meet with members of the city council who may want to offer input or to hear from us about how we are doing with our deliberations.  Cindy Circo has extended an invitation to members of the council to meet with us between 9:30 and 11 either this Thursday or on April 3rd.  Our assumption is that these will be informal and that only a few will schedule interviews (to date John Sharp is the only one to request time).  We have also assumed that they will be small (one to one sessions or two of us and two of them in a session).  Cindy and Travis will help us manage the times and any potential conflicts with committee structures to avoid creating a public meeting. Please let us know if you are interested in representing us with your council representative or any of them, and if you are interested please identify what dates/times you are available.

In other words, city council members want to offer input, but they don’t want to do so publicly. This is not new or unique to Kansas City government — all levels of government seek to work around the open record or sunshine or freedom of information laws that apply to them. However, it is disheartening to learn that the group supposedly appointed to bring the public into the discussion about a $1.2 billion new terminal is complicit in keeping things from them.

At every ‘town hall’-style meeting the advisory group hosted that I attended, people said they were frustrated with the process and that they felt locked out of meaningful discussion. Unfortunately, the advisory group’s actions seem to confirm the worst of these fears.

April 2, 2014

New Documentary Highlights Criticism Of Common Core

On Monday, the Home School Legal Defense Association released a documentary about the Common Core State Standards, “Building the Machine.” There is an obvious bias against the standards in the film, which means Common Core proponents undoubtedly will pan it as propaganda. Nevertheless, the documentary does present some pretty compelling criticisms of the Common Core development process and the standards themselves.

It also does something that Common Core proponents haven’t done very well; it treats individuals with opposing ideas with some respect, ominous music notwithstanding. For example, Michael Farris, founder of Home School Legal Defense Association, stated:

David Coleman [lead writer of Common Core] is a nice man…I don’t agree with his approach at all. I don’t agree with his philosophy. I think that on balance his proposals are not for the good of the public schools. They certainly aren’t good for homeschoolers or private schools. You know, I have some criticism there. But the man’s motives, I don’t think we should be attacking people for their motives. Because, he wants to try to improve the public school system. He genuinely believes that systemization and centralization and data collection are good things for kids.

His point was the underlying current of the film – people have deeply held convictions on issues of education and those convictions often vary.

The film ends with this message:

Decades of research show that the single most important element in a child’s education is parental involvement. So, regardless of which side you support in the reformation of America’s schools…Be involved.

That is good advice. In fact, it is the same advice Emily Watson shared on the Show-Me Daily blog about a month ago.

April 1, 2014

KC Streetcar TDD Will Not Raise Enough Money for Expansion

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

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

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

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

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

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

Don’t Forget About Homeschoolers!

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

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

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

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

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