Final Phase of Grant’s Trail Comes Into Focus

Kirkwood is set to apply for a Surface Transportation Program (STP) grant funding for the final phase of Grant’s Trail extension to Downtown Kirkwood. The application will first go before City Council at tomorrow’s meeting (Jan 18) and then will be submitted to East-West Gateway (EWG) for consideration. EWG is expected to announce the applications that have been selected for funding at the end of March.

To re-cap how we got to this final stage, Kirkwood first applied to EWG for STP funding for the two-phase project in the Spring of 2022, but neither Phase 1 nor 2 scored high enough to be chosen. Then, in the Fall of 2022, Kirkwood submitted a TAP (Transportation Alternatives Program) application for a smaller portion of the first phase of the project, Phase 1a, running from the Farmer’s Market to the intersection of Monroe and Fillmore. This approach brought success as Kirkwood won the grant and then promptly submitted a new STP application for Phase 1b, running from the Kirkwood Fillmore to Leffingwell just one month later, which was also selected as a winner. These two grants have since been combined to cover the entire first phase of the project so as to expedite construction. In December of 2023, City Council approved the commencement of work on this first phase with final completion expected in the Fall of 2027.

Because STP grants are more generous than the TAP grants, Kirkwood chose to sit out the 2023 TAP application cycle, instead focusing its efforts on getting the entirety of Phase 2 funded in the one fell STP swoop now before the council. That swoop will seek to bridge the gap between the existing trailhead and Phase 1. It is expected that Phase 2 will utilize an abandoned rail spur from Leffingwell to Elliot before turning South on Holmes for the final 500 feet. Phase 1 (orange) and the proposed Phase 2 (blue) are depicted on the map below:

Municipal Finance 101

STP grants cover up to 80% of a project’s total cost, which, for Phase 2, the city has budgeted at $5 million. That means Kirkwood’s share would stand at $1 million after the federal government’s $4 million contribution. All told, the city of Kirkwood will have spent approximately $1.78 million on the two-phased project once complete. That’s a bargain for the expected return it will bring to the city in long-term tax revenue, but not an entirely trivial sum for the city to cover in the short term, especially if the city would like to continue to pursue similar projects in the interim (which I absolutely think they should, see my proposal for a “Frisco Trail” linking Downtown Kirkwood with Downtown Webster here).

So how do we pay for good projects like the Grant’s Trail extension in the short-term while we wait for the long-term returns to start flowing into the city’s coffers? Let’s take a look at the four primary revenue-generating tools municipalities have at their disposal (and break some more news while we’re at it):

1. Municipal Bonds

First, municipal bond issuances in the state of Missouri must be approved by a 4/7ths majority of voters, meaning that there’s a fairly high bar to getting them approved. Even if they are approved, . On top of that, because interest rates are high right now, the revenue capacity of municipal bonds is further constrained as cities are forced to pay high rates to service any debt that they take on through bond issuances. Take on too much debt, and the city could dig itself into a financial hole that would significantly harm its credit rating, thus constraining its ability to borrow in the future.

Now, there are some bond-adjacent variations on this that can get you around some of these limitations —Kirkwood City Council, for example, is set to approve the issuance of a securitized version of muni bonds called Certificates of Participation (COPs), which don’t require voter approval, to fund a new ladder truck for the fire department, improvements to the rec center, and the much-discussed new public works property— but I’ll spare you all the gory details of these alternatives for now (no promises I’ll show the same constraint in this week’s newsletter). Suffice it to say that bonds give cities money in the short term but also create debt obligations, and those obligations eventually have to paid off from our revenue (i.e. taxes). So bonds still leave the problem: where do we come up with those additional taxes?

2. New Sales Taxes

One option is by getting voters to approve the levying of additional sales taxes. And, it turns out that on the same City Council agenda that lists the Phase 2 extension, there’s another item that pertains to whether the city should place just such a sales tax increase on this April’s ballot. The proposal calls for the declaration of a city-wide Transportation Development District (TDD) which would impose a half-cent sales tax increase to fund transportation improvements. That mostly means repaving roads and improving sidewalks, but it also could potentially be used to fund other transportation projects like the Grant’s Trail extension.

The problem with the sales tax is that it tends to be regressive, meaning it captures a higher percentage of poor people’s income than rich people’s. Poor people have to spend a higher percentage of their income on basic necessities (rich or poor, everyone has to eat, buy toilet paper, etc) than the rich, who can afford to save more of their income (thus avoiding sales taxes). So in terms of making Kirkwood a more equitable place, sales taxes, at least in the abstract, aren’t an ideal way to raise revenue.

3. New Property Taxes

The third option is to increase property taxes, but for Missouri municipalities, this isn’t really an option. That’s because property tax revenue is constrained by a provision of the Missouri Constitution known as the Hancock Amendment. The Hancock Amendment stipulates that city-wide property tax revenue can’t be more than the previous year’s property tax revenue plus inflation (as measured by the Consumer Price Index). That means that the amount of money the city brings in from property taxes is essentially locked in place: if property assessments go up, rates have to come down. Luckily, the amendment comes with one major exception…

4. New Development

The Hancock Amendment explicitly stipulates that new construction and improvements to properties (like additions) are excluded from the property tax revenue limitations . That means that if a city grows, it can continue to gain additional property tax revenue. Projects like The James, the Kirkwood Apartments, and The Aria, therefore, will yield significant increases to Kirkwood’s property tax base without increasing taxes on everyone else simply by putting the land they sit on to a higher, more productive use. The only limitation on this approach is essentially just how much new development we can get City Council to approve (and, secondarily, how much development we can get the voters, who choose those Council members, to support). In short, the city can basically improve its financial position by doing nothing more than allowing people to build.

Time to Capitalize on Our Investment

The Grant’s Trail extension offers us a massive opportunity to embrace this approach. I wrote about the idea at length here, but in summary, allowing the industrial land surrounding the trail to be developed into a higher use would 1) significantly increase the city’s property tax base (without increasing property tax rates for existing residents) 2) would likely increase sales tax revenue from any retail/restaurant components included in that development, and 3) would have the added benefit of increasing the supply of housing in Kirkwood, thus improving our overall affordability.

Obviously, the city knows that this is a winning approach for our municipal finances, which is why it’s the exact game plan they’re running in moving the public works facility so that the facility’s current site (directly adjacent to the Kirkwood Performing Arts Center and Phase 1 of the trail extension), can be developed into a higher productivity use (likely mixed-use multifamily housing).

Allowing owners of private property to do the same and put their trail-adjacent land to a higher use would yield similarly positive benefits. And with yet another item on Thursday’s Council agenda, we’re seeing that the city understands that the land in this area probably has higher uses than the light industry it’s currently zoned for: Bill No. 11020 would rewrite of the zoning code to allow professional and commercial services like gyms, hair and nail salons, and doctors’ offices on the light industrial land that flanks the trail. It makes no sense, though, why we should stop there instead of allowing restaurants and homes too.

Again, this is not to say that anyone would be forced to develop property that they own or that any existing businesses would be forced out, but instead that property owners would be granted to put the land they owned to a higher use if they wanted and the opportunity presented itself. A couple of months back, I talked to a person who had inherited a large piece of property in the trail-adjacent i-1 industrial district. The company that had been leasing the property was no longer interested in doing so, and she wanted to know what her options were, going so far as to suggest that a beer garden would be a cool concept for the trail-side lot. I had to tell her that, while I was in complete agreement and thought the idea was great, unfortunately the zoning code meant that her only real option was to find someone else who wanted to put the property to an industrial use.

That arbitrary limitation leaves money on the table for both the city and owners, and leaves everyone worse off than they otherwise would be, and I think it’s time we change it. Not on a case-by-case basis where property owners have to come hat-in-hand before the council to see if they’ll approve a zoning change with whatever additional limitations they stipulate, a process that costs all parties time and money and generates uncertainty that contributes even more dead-weight loss still, but by preemptively granting them flexibility through comprehensive edits to the zoning code.

No NIMBYs in Sight

I think Liz Gibbons is the favorite to win the Mayoral election in April, so a goal of mine is to try and anticipate her views on Kirkwood’s various land use policies and to begin to work within that framework. Gibbons is an incredibly skilled politician, and a part of that skill is undoubtedly listening to the loud complaints many of her constituents have had about the multifamily homes that have been approved over the past couple of years in Kirkwood and then representing the views of those constituents by opposing the projects they don’t like. That is, in some sense, her job, and I don’t fault her too much for it, even though I disagree.

The one project that broke this mold, was the 42-unit Aria, which Gibbons offered her enthusiastic support for. Why? Well, for one the project represented a long-hoped-for return on the substantial city-funded investment that is the Kirkwood Performing Arts Center, and second, the project wasn’t near many longtime homeowners, so I think she probably just didn’t hear from nearly as many people that were all that mad about it. My notes from the project’s public hearing indicate that only two people offered comments, and both were in support.

It’s my great hope then, that we —Jonathan Raiche, Liz Gibbons, the other Council Members, and Kirkwood at large— can look at the substantial city-funded investment that is the Grant’s Trail, can look at the underutilized industrial land that surrounds it with its relatively few nearby back yards (both real and metaphorical), can look at Kirkwood’s waning affordability, and can express a desire for us to be able to afford to do more great things, like this extension of Grant’s Trail, for our great city in the future, and decide that it makes too much sense not to go for it.