By Jack Naudi
Show-Me Institute

JEFFERSON CITY — With tax credits of all sorts under a microscope in Jefferson City, supporters of historic preservation tax credits are starting to get nervous. They fear that a wholesale gutting of the credits could end up killing what they say is a proven redevelopment program.

Typical of the reaction was a recent editorial in the St. Louis Post-Dispatch, which opined:

“Residential projects have drawn homeowners into the city, including downtown, by the thousands, adding to the tax rolls and strengthening the fabric of neighborhoods. Commercial projects — office buildings, restaurants, hotels, entertainment districts — have become vibrant hubs and tourist destinations.”

But critics question the effectiveness of the tax credits. And some state lawmakers say they want to end tax credits as entitlements for developers. Historic preservation tax credits are awarded based on formulas. Project success generally isn’t considered.

A quick review of how historic preservation tax credits work is in order. In general, there are two types of historic tax credits available in Missouri: federal and state credits. The Missouri Department of Natural Resources doles out the federal credits. Developers or building owners can receive credits equal to 20 percent of the rehabilitation cost for an income-producing property in a local, state, or federal historic district.

Of more concern to Missouri lawmakers are state tax credits issued by the Department of Economic Development. The DED provides tax credits equal to 25 percent of rehabilitation costs, and homeowners are eligible to receive credits. Last year, the DED awarded $170 million in historic preservation tax credits, nearly a third of all tax credits given by the state.

Some state senators, led by Brad Lager (R-Savannah), want to restrict the annual historic preservation tax allotment to $50 million. In addition, they want to make the tax credits a part of the appropriations process.

That has stirred historic preservationists who point to studies showing that tax credits yield impressive economic returns. Missouri historic tax credit proponents often cite a study that was conducted by Rutgers University researchers for the state and the Missouri Downtown Association. Released in December 2001, it concluded that the $346 million in both state and federal historic tax credits issued up to that point added nearly 14,000 jobs, produced $459 million in income, and boosted tax revenues by $144 million.

However, a good chunk of the benefits, according to the study, flowed out of the state. More than 40 percent of the jobs were generated outside of Missouri. Only $70 million of tax revenues stayed in Missouri. The rest went to the federal government and to border states. And $249 million of the $459 million of income, or 54 percent, stayed in Missouri.

More recently, Washington, D.C.-based economist and historic preservation proponent Donovan Rypkema has estimated that during the last decade, state historic tax credits led to more than $2 billion in rehabilitation of old buildings, brought Missourians $1.3 billion in additional income, and helped create 40,000 jobs.

But critics of tax credits, such as University of Missouri–Columbia economics professor Joseph Haslag, zero in on the total money returned to the state. He figures that the state receives just 3 to 4 cents for every dollar of goods and services produced in Missouri. So, for every dollar of a tax credit, the state would have to produce $25 to $22 of final goods and services for the state to get its money back.

“I think the only justification for historic preservation tax credits is the existence of an externality — we like to look at old, well-maintained buildings,” said Haslag, who is also executive vice president of the Show-Me Institute. “There is no economic development justification for the preservation tax credit.”

Even the Rutgers study suggests that state government receives less than 10 cents back in taxes on every tax credit dollar invested. More recently, the Department of Economic Development reported that the return to the state amounted to 23 cents on every dollar in tax credits. Although higher, this is still much less than the dollar-plus figures that some have claimed.

That figure has been disputed by historic preservationists who say it doesn’t include indirect costs, including the multiplier effects. And Saint Louis city officials say it has contributed to $1.8 billion in investments in portions of the city that were dying.

“This isn’t off-the-wall stuff,” said Jerry Schlicter, a Saint Louis lawyer and one of the pioneers of Missouri’s historic preservation efforts. Historic tax credits create interesting places where people want to live, and businesses want to relocate and stay, he said.

“People in other cities, they talk often about how they’re dying to have such wonderful historic architecture,” Schlicter said. “I stand with what has proven to work over a decade in providing tens of thousands of jobs.”

The final piece of the puzzle missing in the pro–tax credit economic analysis, say critics, is an economic term called “opportunity cost.” Simply stated, it suggests that the $346 million used to finance tax credits would have yielded even larger economic gains if spent in more efficient ways.

Haslag, for example, favors giving the money back to taxpayers.

But Schlicter said low taxes alone don’t make an area more attractive. “If low taxes were the only factor, Mississippi would lead the nation in economic development. And it ain’t happening.”

Lager said he’s not debating the effectiveness of historic preservation tax credits. But he does want to place more controls onto how they’re granted.

“Today, that check and balance is not there,” Lager said. “We have a program with no cap, and it is an entitlement. I do not believe that it is a responsible government program. … The responsibility is ours to make sure the taxpayers’ money is spent in the best interest of taxpayers.”

But Schlichter said historic tax credits have built-in controls. The rehabilitation standards, for example, are comprehensive. And he argues that a cap does exist, because there is a finite number of properties eligible for historic tax credits.

“There have been multiple reports prepared by the state,” he said. “So the legislative oversight is there. Plus, the DED has oversight. And you’ve got to jump through a lot of hoops to qualify (for tax credits). So this this is not something that somebody hands you.”

Community-Wide Review Reveals Widespread Support for Merit Pay

By Janese Heavin
Show-Me Institute

SAINT LOUIS — The Ladue School District is in the process of implementing a revised pay system that will better reward educators who demonstrate outstanding teaching practices.

The district has offered merit pay for more than five decades. Several years ago, administrators began to rethink that system after the community rejected a district tax increase.

A community-wide review process determined that the model needed to be updated, but also revealed that taxpayers and teachers remain committed to paying educators based on performance, Associate Superintendent Marsha Chappelow said.

“The community is very supportive of an incentive pay system,” she said. “I think the merit system tries to recognize those individuals who do go beyond expectations for kids. I think that’s good for students, and it’s good for the school community.”

Under Ladue’s previous merit pay system, teachers were awarded points that would equate to a dollar amount based on how much money the district had to spend in a given budget year. During an average budget year, a point would be worth an extra $150 to $160. Teachers were given a flat pay raise, then an additional salary increase based on the points earned that year.

Teachers earned points by volunteering for extra duties and through evaluations by a team of fellow teachers and administrators. Every school building also has a teacher representative who responds to any grievance; however, Chappelow said, there haven’t been any complaints about the pay system for at least the five years she’s been with the district.

The new pay system — which is still being tweaked — will categorize teachers based on performance, with each category being assigned a multiplier. For instance, a “proficient” teacher would receive a certain increase in addition to a base pay raise, while an exemplary teacher would receive a higher percentage. The categories are based on evaluations, professional development, and use of best teaching practices in the classroom.

Teachers are only in a category for one year. “There are new teachers who are still learning,” Chappelow said. “Especially when you hire someone straight from a university, in the first three years, a lot of growth goes on. So if something doesn’t click the first year, you can work on it and receive training and support.”

Neither the former system nor the new system uses student test scores to determine a teacher’s performance.

If the number of applications is any indication, performance pay is popular with educators. Ladue sees nearly 3,000 applications for its 325 teaching spots every year, Chappelow said. “That’s a lot for a district with 3,700 students,” she said.

Ladue is the only school district in Missouri that uses a performance pay system, though it’s common in charter and private schools. State statute requires school districts to operate salary schedules, which increase teacher pay based on years of experience and education.

Ladue’s pay system has not been legally challenged, but Chappelow said that might be because the district also works closely with its teachers’ group. The Ladue Education Association comprises members from both the Missouri National Education Association and the Missouri State Teachers’ Association. The district began meet-and-confer negotiations with the association two years ago.

Although MNEA continues to oppose paying teachers for performance, MSTA Executive Director Kent King has expressed support for merit pay. In a 2007 column, King told members a performance pay system would treat teachers like professionals, not factory-line workers.

“The real world recognizes specialized areas in every profession and pays accordingly,” King said. “A neurosurgeon doesn’t make the same as a family practice physician nor does a corporate lawyer earn the same as a public defender. We need to recognize differences and allow for them in our profession.”

By Audrey Spalding
Show-Me Institute

JEFFERSON CITY — This may be the year for increased government transparency.

At the federal level, President Barack Obama has directed government officials to presume that information is available to citizens when they request it. The Missouri House of Representatives is currently considering legislation that would require governmental bodies to do the following:

• keep more detailed minutes of public meetings (under the current version of Missouri’s records law, minutes of open and closed meetings must include only “date, time, place, members present and members absent, and votes attributed to each member”);
• increase the maximum fine an official must pay for knowingly withholding public information, from $5,000 to $8,000;
• decrease the maximum fine for an official who unknowingly violates the Sunshine Law, from $500 to $100;
• make the government strictly liable for all of a plaintiff’s legal fees, if that plaintiff wins a lawsuit for withheld public information (currently, the loser in a public information suit pays the legal fees of both parties);
• make all records and meetings of the House Ethics Commission open to the public, except for records of investigative proceedings and meetings concerning pending complaints.

This legislation, House Bill 316, is a proposed amendment to Missouri’s open records law, commonly known as the Sunshine Law.
Missouri media law attorney Jean Maneke said the general public has seemed especially supportive of the proposed changes in recent months.

“At a hearing of H.B. 316, we had witnesses coming out of the woodwork,” she said. “It was an incredible experience to see all these people standing up to support this bill who we had not scripted, we had not planted.”

In addition to working with the bill’s sponsor, Rep. Tim Jones (R-Eureka), Maneke also has helped write amendments to the Sunshine Law since the 1990s, some of which are currently in place.

Interestingly, a government official, Brentwood Alderman Thomas Kramer, is responsible for many of the proposed law’s provisions, including strict liability and the requirement that minutes must reflect an accurate account of discussion during an open meeting, or as close as practical.

Kramer’s experience as an alderman is what drove him to contact the attorney general’s office, and then Rep. Jones, with his suggested changes.

“Over five years now I have come to the firm belief that there is not enough incentive for public bodies in general to be mindful of the greater public good which the Missouri Sunshine Law seeks to protect,” Kramer said. He is currently involved in a civil suit in Saint Louis County regarding what he alleges was an “egregious violation of the Sunshine Law.”

While Kramer and Maneke stressed the need for changes in order to encourage government officials to comply with information requests, the Missouri Municipal League has come out strongly against H.B. 316.

“Open meeting laws cover tens of thousands of public volunteers,” said MML Executive Director Gary Markenson. “A new city clerk could violate this law 20 times before she knows there is such a law.”

At the heart of Markenson’s opposition to H.B. 316 is the issue of whether government officials, especially those in smaller communities, understand the Sunshine Law.

“We need far more training,” Markenson said. Though the attorney general’s office holds training sessions, and the MML trains about a thousand city officials each year, Markenson said that’s not enough.

The bill’s proponents, Maneke, Kramer, and Rep. Jones, said not knowing the law isn’t an excuse.

“I think if someone is going to take the step to voluntarily run for political office, on any level, for work in the realm of public service, it’s everyone’s responsibility in that field to educate themselves of what the law requires,” Jones said. He said there are plenty of opportunities for government officials to educate themselves about the Sunshine Law, and that as an attorney he had received continuing legal education notices at least daily.

Kramer also disagreed with Markenson’s point. “For anyone to suggest that a smaller community or public body would lack the intelligence to grasp the understanding of the law would be remarkable,” he said.

At the March meeting of the Missouri Sunshine Coalition, a group that advocates unfettered access to public information, Attorney General Chris Koster announced that he “intends to increase Sunshine Law presentations across the state,” from about 20 presentations per year to 150. “I think the vast majority of violations occur out of ignorance, not malcontent,” he said.

Of course, H.B. 316 hasn’t made it to Missouri’s House of Representatives floor for a vote; that didn’t happen last year, either, and the bill has since been reworked. As Jones put it, “This bill has a long way to go before it’s going to become law.” But the general issue deserves attention: Is the Sunshine Law adequate as is, and will this legislation make it easier for citizens to obtain public information?

“There are times I think our law is relatively clear,” Maneke said, “but Missouri continues to get a bad grade when groups grade every state’s performance on the Sunshine Law.”

A 2007 study by the Better Government Association awarded Missouri an “F” for government officials’ responsiveness to information requests (although, to be fair, 37 other states earned “F” ratings as well).

Even if H.B. 316 passes, it may not address the easiest way for government officials to ignore a request. Officials who want to be unresponsive without violating the letter of the law can simply charge a large fee for processing an information request.

“Agencies use the threat of charging processing fees in order to make people go away,” said Tom Blanton, the director of the National Security Archives, an organization that is dedicated to publishing historically important federal documents. “I’ve seen outlandish fees.”

Currently, the Sunshine Law allows a governmental body to “charge up to 10 cents per page for standard copies,” and a “reasonable fee for the time necessary to search for and copy public records.”

The governmental body decides what constitutes a reasonable fee, although the law does allow fees to be waived for requests that serve the public interest. According to Missouri state statute, requests serve the public interest when the information requested is “likely to contribute significantly to public understanding of the operations or activities of the public governmental body and is not primarily in the commercial interest of the requester.”

Sunshine Week, a national series of events led by the American Society of Newspaper Editors, occurred during the week of March 15–21. It was created to encourage discussion about the benefits of open government and freedom of information.

By Jack Naudi
Show-Me Institute

JEFFERSON CITY — In his Jan. 27 state of the state address, Gov. Jay Nixon made invigorating the state’s economy a central theme. A key component of his plan called for expanding the state’s most prominent tax credit program, Missouri Quality Jobs. He asked the legislature to pass a bill by the March break to remove the $60 million cap on the program.

The effort got off to a fast start, with House Bill 191 passing Feb. 5. But that bill, and a duplicate Senate version, Senate Bill 45, still sit in the Senate, with the governor’s requested March 12 deadline having come and gone. In the meantime, questions about the effectiveness of Quality Jobs, and concerns about the state’s 60-plus tax credit programs in general, have gained traction.

Under the Missouri Quality Jobs Initiative, businesses receive tax credits for creating jobs. But in a recent story, the St. Louis Post-Dispatch reported that many of the proposed jobs never materialize. The state claims that Missouri Quality Jobs had added 22,000 jobs since 2005. The actual number, however, was 2,373.

The state’s total, which is tallied by the Missouri Department of Economic Development, includes both proposed and actual jobs created. Linda Martinez, who heads the department under the Nixon administration, defended the higher proposed jobs number to the Post-Dispatch, saying that businesses had two to three years to add the jobs. Martinez did not return a Show-Me Institute call for comment.

Others are less sure about the impact of tax credits in general.

“I believe that the private sector creates jobs, not the government,” said state Sen. Brad Lager, R-Maryville. “For people to believe that we can throw money around, and that’s job creation, I fundamentally disagree with that.”

Joseph Haslag, executive vice president of the Show-Me Institute, wrote several commentaries in 2008 that generally were critical of tax credits. Haslag explained it this way in one commentary: The state generally receives 3 to 4 cents for every dollar of goods and services produced in Missouri. That means for every dollar of tax credit, companies would have to produce $25 to $33 of final goods and services just for the state to get its money back. That kind of return is unlikely.

Haslag also said that the state must pick winners when deciding who should get tax credits. However, he pointed out, government officials have no special skills or abilities to help them determine which firms will bring the most growth, and picking even the second-best proposal could have devastating economic effects.

Nonetheless, lawmakers, economic developers, and business interests continue to push hard for greater use of tax credits, especially for Quality Jobs.

Tracy King, director of taxation and fiscal affairs for the Missouri Chamber of Commerce and Industry, noted that Quality Jobs tax credits aren’t offered until a job is created. In addition, credits are offered only for jobs that exceed the average wage of the county in which the jobs are located.

“It creates high-paying jobs,” she said. “And they have to pay for health insurance. I think that’s an important note to talk about.”

King said the chamber is studying the recent proposed changes to S.B. 45, which includes reinstating the cap on Quality Jobs credits, and raising it to $120 million from the current $60 million. Those, and a number of other changes, came at the urging of senators, including Lager, who say some tax credit programs must be reined in.

Lager pointed out, for example, that there are no limits on historic tax credits, which he calls “entitlements.”

“If you do items A, B, and C you’re guaranteed money from the government. That’s not oversight. That’s not accountability,” he said.

The lack of accountability and the absence of caps, Lager said, make the programs ripe for abuse.
The latest version of S.B. 45 calls for caps on virtually every tax credit program. It also includes a sunset provision, so that all of the tax credit programs expire on particular dates. That should allow time for each program to be evaluated, Lager said.

“We, as appropriators, need to have a better idea of what tax credits are going out every year,” he said. “Can we be more efficient and smarter? Can we narrow (the number of tax credit programs) down to 10 or 15 that work really, really well?”

The chamber, King said, is sensitive to calls for reforming tax credits.

“We haven’t taken a position, but we’re open to discussing it,” she said.

Whatever the Senate does, it needs to happen quickly, given the state’s rising unemployment rate. “Quality Jobs is important, especially now.”

Jack Naudi is a researcher and writer for the Show-Me Institute.

By Jack Naudi
Show-Me Institute

JEFFERSON CITY — Rep. Ed Emery (R-Lamar) is hopeful that the third time is the charm in his ongoing effort to revamp Missouri’s tax system. He has introduced for the third consecutive year a proposal to get rid of the state’s individual income tax, corporate income tax, and estate tax, and replace them with a broad-based retail and service tax at 5.11 percent.

The initiative, House Bill 814, would require voter approval for a constitutional change.

The bill is one of two in the House Tax Reform Committee that are part of the “Fair Tax” movement. (Indeed, H.B. 814 is called the “Fair Tax Act of 2009”). For several years, federal lawmakers have introduced legislation that would repeal — or partially repeal — the income tax and replace it with a sales or value-added tax.

Emery’s bill, along with a similar one introduced by Rep. Chris Kelly (D-Columbia), follows the federal model.
The fair tax bills have attracted skeptics and critics, and so far Emery has been ready for all of them.

For example, in a recent hearing held by the House Special Committee on Tax Reform on the Fair Tax bills, Rep. Jeannette Oxford (D-St. Louis) complained about exempting businesses from the income tax. A Springfield News-Leader article quoted her saying that business taxes are “patriotic dues.”

But, in an interview with the Show-Me Institute, Emery challenged that assumption.

“The fundamental economics of that question is: Who pays the taxes?” Emery said. “Corporations only have the money that they take from their customers. So they’re not really a taxpayer, they’re a tax collector.”

While H.B. 814 does away with corporate income taxes, it also does away with state tax credits. Such credits are typically given to companies that want to relocate or expand in Missouri. The trouble is, they don’t work. A recent story by the St. Louis Post-Dispatch noted that the state’s Quality Jobs tax credit program generated just 2,273 new jobs since 2005, while the state economic development officials claimed that the program had created 22,000 new jobs.

Eliminating the income tax, Emery figures, will be a more powerful incentive.

“Once you remove the (income) tax, I can imagine a Missouri delegation walking into a room where we’re bidding against other states for a major renovation of a plant,” Emery said. “We walk in with one page that says, ‘no income tax.’”

Studies released by the Show-Me Institute have concluded that replacing the income tax with a broad-based retail and service tax would have a number of desired effects. For starters, the income tax acts as a drag on growth because it provides a disincentive for workers to put in extra hours. On the flip side, the income tax poses a dilemma for employers who are forced to raise the pay of workers to compensate for lower net pay, which is reduced by income tax withholding.

Sales and service taxes can be controlled by individuals, who may alter their consumption habits, while income taxes cannot be avoided. Those who wanted to reduce their overall tax bills would be able to do so by putting off purchases or buying less expensive items and services.

“The most fair (part of the Fair Tax) is it taxes consumption, rather than income,” Emery said. “As a result, it doesn’t punish disproportionately people who are successful and make higher incomes. But just by the nature of people’s (spending) practices, it is a progressive tax. The wealthy tend to spend more than those who are less wealthy just by the purchases of the goods and services that they buy.”

Emery’s bill also calls for rebates to be given for each family, with lower-income families and larger families given larger rebates. This qualification answers critics who fear that imposing a broader-based sales tax would be regressive — meaning that poorer people would pay a disproportionate share. Instead, impoverished families would likely pay no taxes.

Jack Naudi is a researcher and writer for the Show-Me Institute.

SAINT LOUIS — The Show-Me Institute, in conjunction with the Missouri Broadcasters Association and the Missouri Broadcast Educators Association, is launching a contest encouraging students to participate in Missouri’s political process by investigating policy areas of their choice and creating original stories. The purpose of this competition is to develop a more informed citizenry, while helping students learn how to research and communicate stories about today’s most interesting Missouri policy issues.

Between today and May 20, high school and college students throughout Missouri may submit original stories covering a Missouri policy issue of their choosing. Acceptable forms of media include audio or video clips lasting no more than five minutes, or written articles of up to 1,000 words. Cash prizes in the amount of $500 each will be awarded each month to one high school student and one college student. At the end of May, an additional $750 grand prize will be awarded to the best overall submission from the three previous months, for each of the two school categories, along with a $500 prize awarded to the teacher, professor, or instructor designated by these grand prize winners. Awards will be presented at the Missouri Broadcasters Association award ceremony on June 6. Any submission that is of exceptional quality will also be posted on the Show-Me Institute’s comprehensive policy tracking site, Policy Pulse.

Please help by informing students of this unique opportunity. Contest rules are available online for your convenience. For more information, or to submit an entry, please contact:

Show-Me Institute
Attn: Jason Hannasch, Vice President
7777 Bonhomme Avenue, Suite 2150
Saint Louis, MO 63105
(314) 726-5655
info@showmeinstitute.org

Missouri’s only free-market think tank, the Show-Me Institute is a publicly supported 501(c)(3) charitable organization, and a research and educational institute that is dedicated to improving the quality of life for all citizens of Missouri by promoting sensible solutions to state and local policy issues.

Contacts:

Show-Me Institute

• Jason Hannasch — (314) 726-5655 — jason.hannasch@showmeinstitute.org
• Breck Frerking — (573) 449-8298 — breck.frerking@showmeinstitute.org

Missouri Broadcasters Association

• Don Hicks — (573) 636-6692 — dhicks@mbaweb.org

Missouri Broadcast Educators Association

• Leslie A. Cross — (573) 681-5295 — crossl@lincolnu.edu

By Andrew Guevara
Show-Me Institute

COLUMBIA — Two recent pieces of legislation, Senate Bill 228 and House Bill 554, have brought Missouri’s electric base rates to public attention. People are clamoring for cheaper and cleaner sources of energy at a time when the state’s energy demands are expected to grow by 30 percent during the next two decades, so future base rate levels will likely remain uncertain until alternative sources of energy can help meet the constantly growing demand for electricity.

Renewable sources of energy like wind and solar power may provide a solution, but the dependability of these resources is not assured. The Nuclear Energy Institute (NEI) reports for 2007 that the average capacity factors — the percentage of output that an energy source produces on average — for wind and solar energies were only 30.4 and 19.8 percent, respectively.

On the other hand, one of the most reliable sources of power in the United States is nuclear, which has a 91.8 capacity factor and supplies energy continuously without creating carbon discharge as a byproduct. Additionally, the NEI reported that during 2006, nuclear plants prevented the release of carbon dioxide almost equivalent to all automobiles in the United States in a single year. Other nations have had a successful track record with nuclear energy. France, for example, supplies close to 80 percent of its energy needs through 59 nuclear reactors, and has one of the lowest overall energy bills in Europe.

Although nuclear energy has clear benefits, many — such as the Missouri Coalition for the Environment (MCE) and the Sierra Club — oppose its use as an energy source because of concerns about issues of waste disposal, radioactivity, and meltdown safety. The Nuclear Information and Resource Service reports that one nuclear reactor annually generates approximately 20–30 tons of high-level nuclear waste, which is stored within the same unit. Opponents worry about the safety of transportation and long-term disposal of this waste after it is removed from nuclear facilities. Furthermore, many have questioned the suitability of proposed nuclear dump sites, like Yucca Mountain in Nevada and Skull Valley in Utah, citing the possibility of leakage and permanent ecological damage. And, although safety mechanisms have seen immense improvements in subsequent years, concerns about the potential for a devastating nuclear meltdown — like the one at Chernobyl in 1986 — loom large in the public consciousness.

Callaway I, a 1,190-megawatt electric generating nuclear plant near Fulton, was completed back in 1984 and accounts for 19 percent of AmerenUE’s total energy output. AmerenUE has filed a construction and operating license application (COLA) with the Nuclear Regulatory Commission (NRC), hoping to gain approval by June 2011 to begin construction on Callaway II, a 1,600-megawatt nuclear facility. This is one of 25 COLA requests that the NRC has received from around the nation. If Callaway II were built, it could generate electricity for more than 1.2 million households in AmerenUE’s service area, in addition to the 780,000 that Callaway I currently serves.

The construction of Callaway II would carry a cost, however. During 1976, Missouri’s voters and legislature passed a law banning “construction work in progress,” (CWIP) which prohibits utility companies from recouping construction costs by adding them to customers’ rates before the plant actually begins producing. This would likely make it more difficult to secure financing.

In the case of Callaway II, AmerenUE would need to find backers who are willing to bear the risk of lending the forecasted $6.53 billion that it would take to complete such a large-scale project. Even if the plant were completed, however, the return on investment would not be guaranteed — unforeseeable actions by the Public Service Commission (PSC) could prevent full reimbursement to AmerenUE.

“The more risk you put on the project, the greater the risk premium,” Warren Wood, president of the Missouri Energy Development Association, commented. The more risk being carried by AmerenUE, the greater the likelihood that plant construction would halt. This is why a group of Missouri legislators is now backing efforts, through SB 228 and HB 554, to nullify the anti-CWIP provisions passed more than three decades ago.

Some, such as environmental groups like MCE, are protesting the legislation. According to a Feb. 6 “e-alert” released by MCE, “CWIP is patently unfair because it allows a monopoly utility like St. Louis-based AmerenUE to transfer risk from investors to consumers.” Furthermore, the group suggests, “We should instead be investing in real solutions. Renewables and energy efficiency are faster, cheaper, and cleaner options.”

Currently, however, the market cannot profitably support renewable sources of energy as viable, efficient options in meeting growing energy demand. In addition to the weak capacity factors currently associated with wind and solar energy, enormous facilities would be required in order to generate power equivalent to Callaway I, which itself occupies 1.4 square miles. To generate the same amount of power as Callaway I, 280 square miles of wind turbines or 78 square miles of photovoltaic solar cell panels would need to be constructed.

AmerenUE notes that it is working with alternative sources of energy and efficiency programs, but Mike Cleary, a public relations spokesperson for the utility, comments that these methods “won’t replace baseload generation in the foreseeable future.”

Missouri’s anti-CWIP resolution was passed at a time when anti-nuclear fervency was strong and popular fears equated nuclear energy with nuclear proliferation. Grassroots groups sided with consumer protection organizations in passing the bill, in order to prevent utilities like AmereUE from spending exorbitantly on construction costs without heeding consumer interests. Nearly three decades later, new legislation may bring Callaway II one step closer to completion. Time will tell how much public sentiment has changed since 1976.

Andrew Guevara is an intern with the Show-Me Institute and a student at the University of Missouri–Columbia.