Toellner Tells it

KC's eTax passes by large margin, but what are (or should be) next steps?

Yesterday, Kansas City voters voted to keep its earnings tax. Keeping the tax earned a whopping 78% of the nearly 74,000 votes cast (in what was a surprisingly high voter turnout given the one-issue on the ballot and potential voter fatigue after having 3 elections in the past 2 months).

The issue is slated to appear on the ballot again in 2016.

It seems that the consensus among folks at city hall is a sense of relief that it passed. Admittedly, it seems as if there couldn't have been a worse time for the city to lose the revenu from the eTax without any programs in place to replace that revenue -- and with budgets having already been slashed by $200 million a year because of the down economy.

But what's next for city leaders?

It seems that most in political circles seem to think the status quo on the tax is A-OK. Others have gone so far as to want to petition Jefferson City to remove the requirements of Prop A so we no longer have to vote to keep the eTax.

Sadly, there seems to be no real conversation of analyzing the eTax to see if it is really a good idea for Kansas City.  Voters overwhelmingly voted in favor of the eTax because it was the only option on the table to drive necessary revenue. Being the only option on the table is different from being the BEST option. And city hall has a responsibility in the next 5 years to create the best option.

And I think most, if they're honest with themselves, will realize the eTax is not it.

Over the past 4 decades, Kansas City has lost nearly 10% of its population -- dropping from 507,087 population in 1970 to 459,787 in 2010.  This population loss is actually much worse than this in the urban core, as their losses have been somewhat offset by population gains North of the River.

Meanwhile, Kansas City has also lagged behind other areas of the metro when it comes to job growth. Over the past 15 years, the metropolitan area has grown total jobs by about 7% (compared to around 15% for the US average).  However, almost all of the job growth has been on the Kansas side of the state line -- with the Kansas counties growing by about 17%, while the Jackson County part of KCMO lost 15% of its jobs (KCMO as a whole grew by about 4.2% -- again due to gains North of the river).

Proponents of the eTax have (rightfully) pointed to other factors like crime, poor schools, and more aggressive tax incentives from the state of Kansas as the reasons for the declines in population and jobs. As with most things, there are a variety of factors at play here. 

However, it should also be nearly impossible to ignore that most other cities that have city income taxes are also struggling.  The list of cities with an earnings tax is a virtual who's who of struggling cities: Birmingham, AL; Wilmington, DE; Louisville, KY; Baltimore, MD; Detroit, MI; Cleveland, OH; Cincinnati, OH; Pittsburgh, PA;  Toledo, OH; St. Louis, MO. 

The few cities that do have an earnings tax that seem to be doing well have other factors at play -- certainly New York City is a far different situation than Kansas City, Portland has a regional earnings tax, so it remains on a level playing-field among its regional counterparts, and Washington DC gets the benefit of not having a state income tax that surrounding areas have to pay.

In fact, over the past decade, of the 6 cities that have suffered the largest population declines across the country, 5 of them (Detroit, Cleveland, Cincinnati, Pittsburgh aand Toledo) all have an earnings tax.  Only New Orleans -- whose losses are tied to Hurricane Katrina - does not. Sure, there are other factors you can point to, but the reality is, that all of these cities have struggled to replace their large industries with smaller start-up companies.

While most reports show that large corportations seldom use the earnings tax as a deciding factor in where to relocate, it is a much larger factor among smaller companies -- the type that don't get large tax breaks, or are impacting only a few employees. These are the small companies that get often unnoticed, but are the ones that often grow to become the next large companies in a city.  And KC is losing out on most of them.

According to a recent report by the Show Me Institute, they are estimating that the city's earnings tax in KC led to the city population between 1990 and 2000 to grow by 1.5 percentage points less and for employment to grow by 2.3 percentage points less due to the earnings tax (with efforts made to control for other factors).  While we can discuss whether we trust the Show Me Institute, or their methods of figuring this, I don't think those swings over a 10 year period would surprise anyone.  And in a 10 year snap shot, they seem fairly inconsequential -- but if you multiply the numbers by 4 (to include the number of decades we've had the eTax), you start seeing a pretty large shift in business from one city, to others.

These are the type of conversations the city should be having over the next 5 years -- to come up with a better solution to the eTax. Instead, I get the sense that the city will just assume everything is just great, that no changes are needed or wanted, and continue on with the status quo....which is Kansas City continuing to lose jobs and population across the state line.

A couple of months ago, the KC Downtowners Blog had a nice analogy:

"With its complete dependence on the earnings tax, City Hall is like a heroin addict. Its short-term desire for the next fix overwhelms any thoughts of long-term health. Meanwhile, the drug is slowly poisoning the body."

Woody Cozad, who has been a very vocal critic of the eTax, made similar statements in last night's concession speech of sorts:

Tonight, a small minority of Kansas Citians choose to continue with an earnings tax that is driving small businesses out and pushing homeowners away. For the first time in 40 years Kansas Citians had a discussion about whether or not the earnings tax makes sense. Thousands of Kansas Citians have decided it does not.

“No one disputes that our city would be more attractive to small businesses without an earnings tax and no one wants to cut police or firefighters. The dispute is about whether or not we can find a better way to fund our city. 125 of the largest cities have done it and Kansas City should too.

“Now that the campaign is over, our leaders have an opportunity to take an honest look at the problem without the hyperbole. The time has come for those paying in to get the same level of services that are being spent out, on both sides of the river. Tonight we extend an olive branch to our leaders. Commit to finding a better way forward and we will work with you. However if they choose to continue this regressive tax then this is not the end of this campaign; it’s just the intermission.”

Instead of acknowledging that Cozad may have a point, the Kansas City Star's Campaign manager columnist Yael Abouhalkah called Cozad "graceless" and "insulting" and the campaign to end the eTax as "snake oil" and the olive branch comment "laughable".

Hopefully the folks at city hall will engage in a real debate at city hall about the merits of the eTax vs potentially better forms of revenue generation.  My fear is that with the margin of vote, it will be easier for them to just dismiss KC's problems with growing new business and continue on with the status quo. And that would be a shame.

 

Door-to-door dog licensing? Wasting resources, wasting time, & KCMO continues to make contentious relations with citizens

Last week, KCMO Animal Control made the startling announcement that on each Wednesday from now until September, Animal Control will be choosing neighborhoods in "targeted areas" and going door-to-door checking on whether people have their pets licensed.

In KCMO, all dogs, cats, and ferrets must be licensed. For each pet that is not licensed, the owner will receive a $75 fine - -so fines could total as much as $300 for someone with four pets in their home (all pets over the maximum of four allowed by the city will be taken from the owner).

KCMO is barely able to provide basic resources for their residents. The schools are suffering. Crime is still high. Our roads don't get plowed when it snows. Public transportation continues to get cut. But somehow we have the the funds to send Animal Control door-to-door to check to see if they're licensed? 

The head of animal control, Patrick Egberuare, says the move isn't about generating revenue (which is laughable) but is "pretty much about public safety."

"Pretty much?"

And "public safety"? I don't want to speak for everyone here, but I can only guess that when 40% of the people in the city said they don't feel safe in their own neighborhoods (and 88% in city parks at night and 72% in downtown KCMO) that most of them didn't answer it that way because they felt threatened by their dog not being licensed. Just a guess on my part.

No, if the city were all that concerned about public safety, there are dozens of other things that would take precedence over dog licensing checks. So why are we wasting money on this?  And why is it that when the city faced a major budget deficit this year, that Animal Control was one budget that remained intact. It appears to me that they must have a lot of excess resources that could have been cut.

Nope, it seems obvious that this is a revenue grab by the city -- and one that could prove to be really costly.

The Constitutionality of doing door-to-door checks to look for people breaking laws is definitely in question. The 4th Amendment protects us (supposedly) from being searched without reasonable cause that we have done something wrong.  We would all instantly see the 4th Amendment being violated if authorities came door-to-door looking for illegal weapons, or to check someone's legal citizenship. And while dog licensing seems innocent enough, it is still a violation of the same Constitutional Law.

The city of Louisville currently has two legal cases (one state, one federal) they are working against for similar activity there. And Two years ago, when a Lucas County, OH (Toledo) dog warden attempted the same type of license checks, and was quickly shut down by the county government because they said it was a waste of time and likely a violation of the 4th Amendment (that particular dog warden resigned under public pressure last fall).  All it's going to take is one ACO crossing the wrong person who knows a lawyer and the city will have yet another lawsuit on their hands -- especially when many of the "targeted areas"happen to be in our lower-income areas (Eastwood Hills, Blue Hills, Ivanhoe Northend, etc). Meanwhile, many of our upscale neighborhoods (Waldo, Brookside, Ward Parkway, Armour Hills, etc) have been miraculously left off the targeted list (even though if you visit these areas on a weekend it seems that everyone there owns a dog).

Not only are these searches an unnecessary money-grab from the city, but they continue to put the city in a contentious relationship with its citizens by needlessly harassing people who are not causing any problems and in many cases, heaping substantial fines on them. At a time when KCMO should be doing whatever it can to try to attract people to want to live here, they continue to make policy decisions that make the citizen's relationship with the city tenuous at best. This is one reason many people I know haven't licensed their dogs already is because they feared by doing so they would become the targets of animal control. Seems like their fears are pretty warranted.

If the city council and the mayor have any sense at all about them they will pressure the Animal Control department to quit wasting our tax dollars on these silly searches. It's a waste of time and money -- and is leaving the city open to another potential lawsuit. There are hundreds of other things we could spend money on besides this.

For those of you who's neighborhood is going to be targeted, here's some good information from Kansas City Dog Advocates on your rights as a citizen when Animal Control comes knocking.

I'm not an economist, however....

I'm not an economist...but I found this diddy pretty interesting this morning.

Kansas City, MO is facing a severe budget crisis -- and is looking at a budget deficit of around $90 million. Because of the economic crisis, Kansas City is projecting a major shortfall in their projected revenue for next year.  Because of this shortfall, the city is looking for ways to increase revenue (city government translation = increase taxes).

So....let's look at how this problem happened.

Over the past 5 years or so, in an effort to put more people in homes, the government encouraged financial institutions to give out more loans to people to buy homes.

The huge increase in the number of people buying homes inflated the value of homes. Meanwhile, many of these loans ended up being adjustable rate loans.  As the rates on these loans adjusted, people were no longer able to pay their mortgages, which caused them to have to leave their homes.

Because more people were no leaving their homes instead of buying them, the value of homes dropped dramatically.  Because the value of the homes has dropped -- according to this article an estimated 10-12% lower in Jackson County, the city is going to see their income from property taxes drop 10-12% next year. 

So the city's possible solution to the problem?  Raise property taxes. Making it even more costly to stay in a home in a depressed housing economy, which will most likely escalate the problem on the people who are scraping to get by in home ownership as well.  Which very well will cause more people to lose their homes, further depressing the housing economy, and making the situation worse, not better.

Seems like there has to be a better way.