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Federal & Missouri Fuel Taxes Should Be Raised Now, Indexed To Inflation

December 15, 2014 Economy, Featured, Missouri 5 Comments
The crumbling Kingshighway viaduct will finally get replaced in 2015
The crumbling Kingshighway viaduct will finally get replaced in 2015

In the last twenty years many things have increased in cost, including steel, concrete, asphalt, labor and other expenses of transportation infrastructure. Still, the main funding mechanism (fuel taxes) haven’t increased since 1993 (federal) and 1996 (Missouri). It’s no wonder our infrastructure is falling apart. Plus, we have more infrastructure than we did 20 years ago — more to maintain.

On the federal fuel tax:

It was last raised, in the year 1993, to 18.4 cents per gallon. That’s over 20 years ago, and gas prices at the time were close to the now unimaginable $1.00 per gallon mark. Yet the amount of the gas tax was fixed and not tied to inflation — so it has not changed since. (U.S. states also charge gasoline taxes; the national average is about 23.5 cents.) (Washington Post)

Fuel taxes have never been tied to inflation, but they need to be!  Politicians don’t like raising taxes, voters seldom approve increases. Yet we want nice roads and bridges that don’t collapse. Guess what folks, that requires money! Waiting a couple of decades between increases make raising the rate much more painful and shocking, we’re better off increasing incrementally every year or two.

Why now? Gas prices at the pump are at a 4-year low right now, but it’s likely temporary.

By holding production steady amidst very low global oil prices, Saudi Arabia and its OPEC allies have indicated that they will not take the U.S. assault on their market share lying down. Despite all the advantages of advanced U.S. hydraulic fracturing technology, Middle Eastern oil still has a definitive advantage: production cost. While OPEC countries could tolerate oil prices as low as $60 per barrel, analysts predict the U.S. will see a decline in new drilling if the price falls below $70 per barrel.

In the wake of OPEC’s announcement, the U.S. West Texas Intermediate crude oil benchmark price fell below $66 per barrel—right into the sweet spot between $60 and $70 per barrel that OPEC hopes will curb U.S. oil production. (Scientific American)

U.S. production, through “fracking”, has been impressive. Still, we’re a net importer of oil. Fracking is an expensive way to extract oil from the earth, if prices are too low it doesn’t pay to continue. Something will change that causes the supply to be reduced, causing gas prices to go back up. We need to get fuel taxes increased and set to go up automatically with inflation so we can maintain our existing infrastructure.

— Steve Patterson


We Shouldn’t Finance A New Stadium To Keep The Rams In St. Louis

Edward Jones Dome as seen from The Laurel Apartments
Edward Jones Dome as seen from The Laurel Apartments

Last week Gov Nixon took steps to try to keep the Rams NFL franchise in the St. Louis region:

Two civic leaders who played major roles in bringing the Rams to St. Louis have been tapped to play  similar roles in trying to keep them here.

Missouri Gov. Jay Nixon discussed the future of the football team  during a teleconference this morning.

Nixon is giving attorney Bob Blitz and former Anheuser-Busch executive Dave Peacock 60 days to develop options to be presented to the Rams before Jan. 28, when the team is scheduled to announce if they’ll convert their Edward Jones Dome lease to year-to-year. (KMOX)

I have no doubt the Rams will go year to year, recently readers agreed (see Readers: St. Louis Rams Will Opt Out Of Dome Lease). They’re going to want a new stadium somewhere, no incentive to lock into an old facility for another decade.

It appears many think it is important to keep an NFL team here — at taxpayer expense.  I’m all for investing in the region, but only those investments with a high rate of return. For example, historic rehab tax credits.

From 1997:

Sports facilities attract neither tourists nor new industry. Probably the most successful export facility is Oriole Park, where about a third of the crowd at every game comes from outside the Baltimore area. (Baltimore’s baseball exports are enhanced because it is 40 miles from the nation’s capital, which has no major league baseball team.) Even so, the net gain to Baltimore’s economy in terms of new jobs and incremental tax revenues is only about $3 million a year—not much of a return on a $200 million investment. (Brookings Institute — Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?)

From 2012:

This is an altogether too common problem in professional sports. Across the country, franchises are able to extract taxpayer funding to build and maintain private facilities, promising huge returns for the public in the form of economic development. 

For instance, just three of the NFL’s 31 stadiums were originally built without public funds. In two of those cases, public funding was later used to upgrade the stadium or surrounding facilities, even as all 32 of the NFL’s teams ranked among Forbes’ 50 most valuable sporting franchises in the world in 2012. (Only MetLife Stadium, shared by the New York Jets and New York Giants, received no public funding.) (The Atlantic — If You Build It, They Might Not Come: The Risky Economics of Sports Stadiums)

Study after study confirms that public financing of major sports facilities is bad economic policy. I get it, we have people here that like football. For this to make any sense we’d need a team to attract significant new money from outside the region more than a dozen times per year. If Kroenke wants to build a stadium somewhere in the region on his dime then great, otherwise thanks for the one Superbowl win in the last 20 years. Best of luck wherever you end up.

— Steve Patterson


Updating Parking Garage Lighting

Yesterday I posted about a parking garage attempting, poorly, to look like numerous buildings. In researching the garage I discovered in June Cheyenne WY approved spending a little more than $130,000 to upgrade the lighting from metal halide fixtures to LED.

Bob Bradshaw, the city’s special projects director, said the current metal halide bulbs are “burning out at a rate of a couple a day” and can cost up to $260 each to replace.

Not only are the LED bulbs more energy efficient, they last longer and require less maintenance, Bradshaw said. That means the city would save money on both energy bills and maintenance costs with the new lights. (source)

The new lighting is estimated to save $253,077 over the next decade, with the break even point “in just over four years.” While in Colorado & Wyoming electricians finished replacing the old halogen lights in our condo parking garage, located underneath both buildings.  The lights are on 24 hours a day, between electricity and replacements representing over 16% of our annual budget.

Our new lighting is brighter, with better color
Our new lighting is brighter, with better color
The fixtures look just like 4-tibe fluorescents, but these are LEDs.
The fixtures look just like 4-tube fluorescents, but these are LED tubes.

A rebate from Ameren reduced our upfront costs about 30%, but it was still a substantial investment. With a payoff of just 18 months the majority of us voted to proceed.

Once our inventory of compact fluorescents (CFL) has been depleted, we’ll begin using LED bulbs in our stairwells and hallways.

— Steve Patterson


Readers Use Plastic (Debit/Credit) For Most Purchases

September 24, 2014 Crime, Economy, Featured, Sunday Poll 3 Comments

You may have heard the phrase “Cash is King” before, but it doesn’t refer to paper or coin currency:

The belief that money (cash) is more valuable than any other form of investment tool. The “cash is king” phrase is typically used when prices in the securities market are high and investors decide to save their cash for when prices are cheaper. It can also refer to the balance sheet or cash flow of a business; a lot of cash on hand is normally a positive sign, while strong cash flow allows a company more flexibility in regards to business decisions and potential investments. (Investopedia)

Currency is being replaced with plastic and digital money, just in time too:

In 2013, the cost of making pennies and nickels exceeded their face value for the eighth year in a row. The cost of minting a penny stood at 1.8 cents, nearly twice its face value. Nickels cost twice as much as dimes – 9.4 cents vs. 4.6 cents – despite being worth only half as much. (The Washington Post)

How does this compare to paper currency?

Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury’s Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The new-currency budget for 2014 is $826.7 million, and reflects the following costs per denomination: 

  • $1 and $2 = 5.4 cents per note
  • $5 = 10.1 cents per note
  • $10 = 9.2 cents per note
  • $20 and $50 = 10.2 cents per note
  • $100 = 13.1 cents per note (source: Federal Reserve)

A nickel costs more to make than a dollar and ten dollar notes? Over $800 million per year to create the physical currency some use?

As of July 2013, currency in circulation—that is, U.S. coins and paper currency in the hands of the public—totaled about $1.2 trillion dollars. The amount of cash in circulation has risen rapidly in recent decades and much of the increase has been caused by demand from abroad. The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States. (Source: Federal Reserve)

Many still use cash, but the numbers are shrinking:

The national telephone survey of 983 adult U.S. credit card holders found that 1 in 3 usually uses a credit card or a debit card for in-person purchases of less than $5. The breakdown: 11 percent prefer credit cards, 22 percent debit cards, 65 percent cash.

But the generational divide is striking. A slight majority (51 percent) of consumers 18-29 prefer plastic to cash, the only age group to do so. A preference for cash becomes stronger in each advancing age bracket, until at age 65-plus, 82 percent prefer cash. (CreditCards.com)

Here’s another look:

While credit and debit cards represent more than half of the purchases made for retail goods and services in the U.S., cash continues to dominate in small transactions. A recent consumer survey conducted by the Federal Reserve found that cash represented 66% of transactions under $10 and 58% of transactions under $25. When the transaction was more than $50, cash was used in less than 20% of the payments. (Wall Street Journal

It was the above statistics on cash use that prompted the poll last week, here are the results:

Q: What size purchase would you use cash versus plastic (debit/credit)?

  1. No amount, I use plastic for most purchases 49 [55.06%]
  2. Cash for $20 or less 13 [14.61%]
  3. Cash for $5 or less 11 [12.36%]
  4. Cash for $10 or less 9 [10.11%]
  5. Any amount, I use cash for most purchases 6 [6.74%]
  6. Unsure/No Answer 1 [1.12%]
  7. Cash for $15 or less 0 [0%]

The results make me wonder if location (urban vs suburban vs rural) has a role in cash vs plastic use? Income & education level? Include me among the 55% that use plastic for nearly every purchase, regardless of amount. I just know I rarely have more than $5 in cash on me, only for emergency stations or the occasional retailer that doesn’t take plastic for sales under some limit.

Despite the shift away from cash, using plastic is far from perfect. Last year many of us got new card numbers after the data breach at Schnucks grocery stores. Since then we’ve seen data breaches from nationwide retailers like Target, Neiman Marcus, and recently Home Depot.

That’s the risk of using debit & credit cards, right? For the moment:

Beginning later next year, you will stop swiping the credit card. Instead, you will insert your card into a slot, just like people do in much of the rest of the world, where the machine will read a microchip, not a magnetic stripe. You’ll still be signing for the time being, but the new system also enables the use of PIN numbers, if card issuers decide to add them to their cards.

The U.S. is the last major market to still use the old-fashioned swipe-and-sign system, and it’s a big reason why almost half the world’s credit card fraud happens in America, despite the country being home to about a quarter of all credit card transactions. (Wall Street Journal

Yes, we’re the last to use swipe-and-sign. I remember the 80s well when we used carbon slips to get impression of the face of cards, before the back magnetic strip was common.

By May 2014 the Target on Hampton had these new readers with a slot
By May 2014 the Target on Hampton had these new readers with a slot

But this type still isn’t the latest. Soon cards will have a chip imbedded allowing customers to just tap the card at retail stores with appropriate POS (Point of Sale) systems, my Ventra card for Chicago’s transit system has a chip and can be used as a prepaid debit card as well.

Alternatively your physical cards won’t be used, your phone will store the information and use NFC (Near Field Communication) to communicate with the store’s POS. Interesting times ahead.

— Steve Patterson




Training St. Louis Youth

September 8, 2014 Economy, Featured, STL Region 1 Comment

Getting a job isn’t easy, this is especially true for many from low income neighborhoods:

Millions of young adults in this country are facing social and economic injustice. Despite talent and motivation, they lack access to higher education and careers that provide them with a living wage. At the same time, our economy needs help. U.S. businesses are calling for more and better-trained talent to compete on the global stage, but there will not be enough skilled workers to meet that demand. (Year Up)

Year Up is an interesting program I learned about watching 60 Minutes, see Jobs Program Aids Fortune 500 and Underprivileged Youth. Year Up started in NYC, but now operates in 11 regions throughout the US, the closest is Chicago. Someone needs to bring this program to St. Louis.

The St, Louis Community College Center for Workforce Innovation (CWI) is  located in a former Circuit City near the Florissant Valley campus in Ferguson
The St. Louis Community College Center for Workforce Innovation (CWI) is located in a former Circuit City near the Florissant Valley campus in Ferguson

Closer to home:

Gov. Jay Nixon today applauded Centene Corporation’s plans to build a new claims processing center and create up to 200 jobs in Ferguson, Missouri. To facilitate the company’s expansion, Gov. Nixon’s administration is partnering with St. Louis Community College to provide targeted job training resources through the Missouri Works Training program. (Gov Nixon)

I too applaud Centene’s decision, but as a region we need to be proactive, not reactive. The Year Up program is one program that might make a huge difference in the St. Louis region. It wouldn’t be immediate, it would take a generation. Our people & our companies could do better.

— Steve Patterson