Three Alternatives To New Transportation Tax

Last Friday, I wrote a piece explaining Prop T and why I don’t think it’s the right solution for improving Kirkwood’s roads. In the week since, I’ve got a lot of responses folks stating that, while they agree that a Transportation Development District might not be the ideal solution, they weren’t sure what the alternatives were. Today, I want to answer that question.

Property Taxes Ain’t It

First though, a quick note on why I think the most commonly listed of the alternatives —raising property taxes instead of sales taxes— doesn’t really work. There are a few reasons, but the most important is a provision of state constitution passed in 1980 called “the Hancock Amendment.” The amendment has a lot of different components to it, but the most important part for Kirkwood are the limits it imposes on how much property tax revenue a municipality can bring in. Here’s an explanation from Missouri Independent:

The Hancock Amendment directs districts imposing property taxes to calculate how much total assessed value has increased and how much money would be raised by the tax rate used the previous year.

The expected revenue is compared to the money realized the previous year, adjusted for inflation and subtracting taxes from new construction. If the adjusted revenue exceeds the calculated limit, rates must be reduced.

That means that Kirkwood is not allowed to bring in any more property tax revenue (after adjusting for inflation) than it already does. Even if voters approved a property tax hike, the city would just be forced to refund them. The one exception to that hard cap is for new construction projects, which don’t count towards the cap and actually raise the overall ceiling for what the city is allowed to bring in (more on that in a second).

Three Alternatives

So if I don’t like the idea of funding our streets by raising sales taxes and I don’t like the idea of funding our streets by raising property taxes, how the hell are we going to fund them? Well, here are a few options:

1. Implement Fuel Tax

First up, Kirkwood could implement a fuel tax (essentially a sales tax on gas). A fuel tax has several advantages over a general sales tax. First, it would mean that the people who actually use and degrade the streets (drivers), would pay for the streets. That’s a much fairer tax regime. Poor people own fewer cars and drive less than richer folks, so in addition to being fairer, it’s also more progressive than a general sales tax. It also encourages positive changes in behavior. When gasoline becomes more expensive, people are incentivized to either switch to an electric vehicle (meaning less local air pollution) or walk, bike, and take the bus instead (less air pollution and less traffic and less wear and tear on city streets).

The conservative think tank The Show Me Institute published a whole write-up arguing that Kirkwood should consider such an alternative back in 2021, the last time the city tried (and failed) to get voters to approve a Transportation Development District to fund city streets. That piece estimated that a 2-cent-per-gallon gas tax could raise $266k for the city annually. That’s nowhere near enough to replace the entire $2.8m Prop T is expected to bring in, but it 1) would chip away at the problem and 2) yield the other positive benefits for the city that I mentioned above.

2. Paid Parking

I’ve written about paid parking several times this year so this will be review for some of you, but I think it makes for an excellent alternative funding source for several reasons:

• Like the fuel tax, instituting paid parking means you’re raising revenue for road improvements from the people actually using the roads: drivers
• Charging for parking hopefully encourages some people who might otherwise drive to walk or bike instead. That means fewer cars on city streets, which means less wear and tear on streets, which means improved longevity and lower future maintenance costs
• Paid parking also means you’re raising the revenue you need while actually improving quality of life in the city since, if done right, it would ensure there are always one or two spots available on every single block in the city
• And because there are one or two spots available on every block, there is less need to circle around Downtown in your car looking for parking, which in turn means less traffic, and, again, less wear and tear on city streets

That’s all old news. The thing I haven’t written about before though, is how the relatively modest annual paid parking revenues could be leveraged to generate the more significant capital amounts needed to fund our streets.

Because paid parking would generate a new stable revenue source for the city, that revenue could be used to securitize bonds. Essentially, the city could sell bonds to generate the short term financing needed to improve the streets and pledge the parking revenue that they expect to be generated in future years as collateral. If we expect paid parking to bring in $750k a year (which I think reasonable), we could promise the next 15 years of paid parking revenue for ~$9 million today, sort of like how your house backs the mortgage you used to buy it. That would mean that we could get the first three years’ worth of TDD funding in year 1, drastically improving the speed with which we could solve the problem. Unlike TDD, that funding would also be permanent, meaning we could begin to think about how to get ahead of the eight-ball rather

3. Embrace Development

To end back where we started, I think the clearest path out of our self-imposed financial hole is to simply take the handcuffs off ourselves and allow people who would like to invest in our community to be able to do so.

If you remember the explanation of the Hancock Amendment I gave at the top, municipalities are allowed to increase their overall property tax revenue, so long as that additional property tax revenue comes from new construction or significant improvements made to buildings. If you are in the same house you’ve always been in, the city can’t soak you, but it can raise additional developments from big projects like The James or a new addition on your home, or the construction of an ADU.

If Kirkwood got out of its own way and allowed private investment on city-owned lots, or permitted ADU’s by-right, or put city-owned parking lots up for development, allowed our Urban Villages like Woodbine to actually be vibrant places, or let people use the valuable land next to Grant’s Trail for anything else besides t-shirt printing, ice carving, and coffee bean roasting, we’d simply have a lot more money to invest in our community.

The dollars we’re missing out on here are very real. In passing on the Jefferson RFP responses, I estimated that the city lost out on ~$275,000 a year on tax revenue that could have gone to city streets (check my work!) And that’s the impact of allowing development on just two lots in a city with thousands. Looking for places where the community might actually be supportive or (or at least indifferent to) new development is not rocket science; it’s common sense.

Instead, the only plan city leaders ever offer is to raise taxes on things like groceries and clothes and school supplies. All I’m asking is that you make them try a little harder.