April 15, 2014

Hazelwood Tax Increases And Places To Cut Spending

City officials in Hazelwood, a suburb of Saint Louis, are considering a proposal to implement a 6 percent utility tax in order to raise revenue to offset decreasing funds coming from sales taxes. The proposal is expected to raise $1.3 million in revenue. Now, I’m not opposed to raising revenue in all cases. However, I only favor revenue increases when it is absolutely necessary. If there are places in the budget to cut, do that first, before asking taxpayers for more money.

Case in point. In the course of my research regarding public pensions, I found that the city of Hazelwood maintains a pension for just its mayor and city council. It isn’t a very large pension. As of 2012, it had $96,000 in assets. But I question why such a pension exists in the first place. Is it really necessary for the council of a small municipality that meets only once or twice a month on average to have its own pension? No other municipality has a separate pension plan for its city council. Despite its size, the city still spends money on the plan. For fiscal year 2014, the city plans to spend $17,000 on the city council pension plan. That is $17,000 too much.

I’ll be the first to say that there is a large difference between $17,000 and $1.3 million. However, before asking for more taxpayer money, I would look at ways to trim the fat. As much as the law allows, I would phase out Hazelwood’s pension for the city council and save the city some money. It is not nearly enough to offset this proposed tax increase, but every little bit helps.

April 14, 2014

Proactive Is The New Reactive

There is a lot of talk these days in Jefferson City about being proactive in public schools. Currently, when a school drops below a set performance mark, the district becomes unaccredited. Students are then able to transfer out of the district to a nearby accredited one. Many view this as a reactive, nuclear option. What we need, they say, is early intervention. We need to be proactive when a school starts to struggle. I hate to get tied up in semantics, but by definition, targeting schools that are struggling is reactive, not proactive. It is a reaction to their declining performance.

Lawmakers have their hearts in the right place, but they place too much confidence in their ability to dictate solutions from Jefferson City. After I testified before the Missouri House Elementary and Secondary Education Committee about the student transfer issue, one representative asked me what lawmakers should do to help those struggling school districts.

“What advice would you give us?” she asked.

“I would tell you that you cannot mandate excellence and you cannot dictate innovation,” I said.

“You would have us do nothing?” she asked.

“No, I would have you get out of the way,” I said. “Remove unnecessary restrictions and burdensome regulations. Free the local schools to innovate.”

Missouri could:

Reform teacher tenure policies; remove Last In, First Out provisions; and reform teacher pensions so schools have more flexibility in staffing decisions.

Change seat time and class restrictions that inhibit some blended learning and online learning models.

Try something like Kentucky’s “Districts of Innovation,” where school districts can become “exempt from certain administrative regulations and statutory provisions.”

Responding to government failure with more government action is not being proactive. Policies like the ones cited above are proactive. They put the power into the hands of the school leaders on the ground. A proactive system is one that gives school leaders the freedom to be innovative and gives parents the ability to choose.

Streetcars (Still) Do Not Reduce Miles Driven In Cars

NextRailKC.com is the website promoting the streetcar/lightrail extension in Kansas City. The site is supposed to present information, but more often than not, it offers data so cherry-picked that it can only be considered intentionally misleading. This is a shame, because people are eager to understand the very complicated issues at hand.

Here we will address the site’s claim regarding Vehicle Miles Traveled (VMT). Previously, we have explained that rail transit does not remove cars from the road. But NextRailKC persists in making claims that, well, confuse people who honestly seek information.

The almost indecipherable graphic, which was produced for the Charlotte Area Transit System (CATS) and reposted on the NextRailKC site, seems to suggest that rail transit results in fewer vehicle miles traveled per person. But this is wrong on several points.

First, just as with economic development claims, there is absolutely no peer-reviewed data to support the claim that rail reduces VMT. None. As written in Reason Magazine, “VMT is influenced by a host of factors. Density is the most important but land-use, development patterns and politics also matter. The prevalence of transit is maybe the 25th most important factor.”

Second, the cities they chose skew the results to the point that they are meaningless.

New York has lower VMT because it is extremely congested, located on water and built before World War II when cars were less prevalent on a pre-planned street grid. Even without its fantastic transit network it would still have a much lower VMT.

Dallas has a lower VMT because congestion is much more severe. Worsening congestion to lessen VMT is a perverse policy goal. Further, Dallas is the poster child for how not to build rail. Despite populations increases and the addition of a light-rail network, fewer people take transit in Dallas in 2013 then before the light-rail network was built. When a region spends billions to build transit and the total number of people commuting by transit declines, you have made some major mistakes.

Kansas City’s population and density are not like the population and density in New York or Dallas. Additionally, Kansas City’s needs are different. We cannot look to New York or Dallas for any meaningful prediction of the impact of rail in Kansas City. The comparisons are absolutely meaningless, to the point of being misleading.

Perhaps most indicative of the city’s lack of desire to engage seriously with taxpayers is that officials NextRailKC can’t even be bothered to develop their own misleading infographics — instead, they chose to borrow Charlotte’s.

April 11, 2014

Tell Taxpayers Where Their Money Is Going

On Thursday, the mayor of Kansas City, Mo., disclosed that the city is ponying up another $65,000 to woo the 2016 Republican convention. Jackson Co., Mo., Wyandotte Co./Kansas City, Kan., and Johnson Co., Kan., also are chipping in an additional $65,000 each. This $260,000 total is in addition to the $100,000 that Kansas City, Mo., already spent. We participated in a KSHB TV story about the spending and asserted that taxpayers ought to be told what is being promised in their name.

Kansas City Mayor Sly James argued that hosting the convention is a once-in-a-lifetime opportunity, and he may be correct. Certainly, we all are proud of Kansas City and eager to show off on the 40th anniversary of the last time we hosted. Those are arguments for spending the money — they are not arguments for not telling taxpayers how the money is being spent. If the mayor is so confident about his choices, there is no reason to hide who is getting the money and for what. Furthermore, taxpayers ought to know what additional commitments the city is making to the convention committee. Remember, the $165,000 spent so far is just for the bid to host. Hosting itself will cost millions.

The city claims that the convention will have a large economic impact. We previously have written that those estimates are largely useless as they assume that without the convention there would be no economic activity — which is just silly. The city’s “fact sheet” suggests the economic impact to Kansas City would be similar to Tampa’s in 2012: $214 million. The city likely is getting that from a Tampa Tribune story in which they cited a University of Tampa analysis:

The total impact takes in $214 million in direct spending by the groups that put on the convention, including the Tampa Bay Host Committee, the City of Tampa, the convention’s Committee on Arrangements and corporate sponsors.

Note that in addition to ignoring any economic activity that would have happened without the convention, this impact includes spending from Tampa’s taxpayers.

Lastly, it was gratifying to read in their “fact sheet” that the city thinks we have sufficient hotel rooms and bus service to accommodate the convention, and that our airport has more than 50 direct flights. Let’s hope city officials remember this the next time they advocate committing public funds to convention hotels, streetcars, and new airport terminals.

Mark Your Calendars For Our April 25 Tax Credit Scholarship Event


When I speak about tax credit scholarships, I get a lot of questions: What is a tax credit scholarship? How would that work? What are the chances of that passing in Missouri?

If you want to find out the answer to these and other questions, join us on April 25 at Lindenwood University in St. Charles, Mo. We are partnering with the Hammond Institute for Free Enterprise at Lindenwood University to present a dynamite event, “Expanded Opportunities: A Discussion About Tax Credit Scholarships.”

Jason Bedrick, of the Cato Institute, and Jonathan Butcher, of the Goldwater Institute, will present information about how these programs are working in other states. You can download their recent case studies for the Show-Me Institute about the New Hampshire and Arizona programs directly from our website.

Attendees also will be able to take part in a panel discussion with Missouri Sen. John Lamping (R-Dist. 24), Sen. Maria Chappelle-Nadal (D-Dist. 14), Missouri Speaker of the House Tim Jones (R-Dist. 110), and Rep. Michael Butler (D-Dist. 79).

RSVP online, mark your calendars, tell your friends, and join us on April 25.

April 10, 2014

Let’s Fix The Transfer Problem ‘One Piece At A Time’

One Piece at a Time” is one of my favorite Johnny Cash songs. In the song, a young man goes to “workin’ on a ‘sembly line” in a Detroit auto plant. He devises a plan to build a car by sneaking parts out one piece at a time. In the end, he has created a “’49, ’50, ’51, ’52, ’53, ’54, ’55, ’56, ’57, ’58, ’59 automobile.” I was reminded of this song as I drafted my testimony for Missouri Senate Committee Substitute for Senate Bills 493, 485, 495, 516, 534, 545, 595, 616, 624. It wasn’t just the name of the bill that reminded me of the song, but the way that so many different parts that seemingly do not go together were crammed into one bill.

Though the bill touches on many different topics, I tried to limit my testimony to the crux of the bill — the student transfer issue. As I said in my testimony:

Ever since the Missouri Supreme Court upheld a student’s right to transfer from an unaccredited school district to a nearby accredited one, Missouri school leaders have coordinated efforts to put an end to the transfer law. Some concerns regarding the transfer program hold merit. For instance, the current law has the potential to lead to the bankruptcy of unaccredited districts or to lead to overcrowding in accredited ones. Unfortunately, these problems have led many to ask, “How can we end student transfers?” rather than, “How can we make the transfer law work for students?”

Missouri Sen. David Pearce (R-Dist. 21) reiterated this point, stating that this bill is intended to reduce the number of students transferring.

Allowing students to choose their school is a good thing and we can make this program work for students if we institute four changes.

  1. Give accredited school districts the right to determine how many students they will accept.
  2. Fix the tuition calculation so that unaccredited districts will not be forced to pay rates that are higher than they spend themselves.
  3. Expand choice to private schools in the same or adjoining counties.
  4. Establish a fund to provide transportation for transfer students. Appropriations from general revenue and donations from the public could fund this.

You can read more details about my suggestions in my full testimony.

April 8, 2014

Gas Taxes vs. Transit Fares

In a post on NextSTL, the author points out that gas taxes in Missouri have not kept pace with inflation (the last time the tax went up was in 1996) while fares for transit have increased faster than inflation. The takeaway:

As you can see the value of the gas tax has been eroded by inflation while Metro fares have out-paced it. Of course this isn’t the whole picture. Property and local sales taxes and the Federal gas tax (hasn’t increased since 1993) and general revenues also fund streets, roads, and highways, and local sales taxes, Federal, and a minute amount of state money goes into Metro. But this puts into perspective just who is paying their “fare” share.

My position on the gas tax is pretty clear. I have written testimony arguing that Missouri should raise its gas tax, not general taxes, to pay for highways in Missouri. But the fact remains, indirect taxes on drivers mostly pay for roads while only a tiny sliver of the cost of transit in Saint Louis comes from fares.

First for the roads. In 2013, the Missouri Department of Transportation (MoDOT), which maintains federal and state highways in Missouri, took in $2.1 billion in revenue. Only 23 percent of that came from the state gas tax. But that’s not the end of the story. Forty-four percent of MoDOT funding came from the federal government, the vast majority of which the federal gas tax funds. MoDOT gets an additional 27 percent of funds from vehicle sales taxes and various forms of licensing fees. All told, approximately 80 percent of MoDOT’s revenue comes from taxes and fees on drivers. That’s too low, but adjusting the state and federal gas tax for inflation and controlling road spending would go a long way to making that number close to 100 percent. In addition, one should remember that the Missouri gas tax is split, with 4.5 cents of the 17.6 cents going to local governments, where it is a significant source for local road repairs.

The story is very different for transit. Taking the example of St. Louis Metro, from 1991 to 2012, fares covered only 14 percent of the costs of building and maintaining Metro. Just looking at 2012, fares covered only 16 percent of the system’s total costs. And while fare revenue has increased faster than inflation, the costs of operating Metro have increased even faster, as the chart below shows:


Essentially, fare revenue has covered less and less of Metro’s cost over time. The rest of the funding comes primarily from general local taxes and the federal government (much of which comes from the part of the federal gas tax that is designated to mass transit funding).

Has the government been irresponsible with the gas tax? Many would say yes. But that does not mean that people who use transit are paying more for transit than drivers pay for highways, because they are not.

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?

Taxes Icon

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.

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