Taxpayers should never be on the hook just because a major airline doesn’t make a monthly profit for a new route to their city. That’s why the Goldwater Institute sent a demand letter this week to city leaders in Columbia, Mo., challenging a deal they made with American Airlines that does exactly that.
Columbia is violating the Missouri Constitution’s Gift Clause by putting up taxpayer money to guarantee that the American Airlines route between Columbia and Charlotte, N.C., will meet its revenue goals every month. Goldwater is working on behalf of regular taxpayers to ensure their money isn’t used to shoulder the risk for a multi-billion-dollar company.
Instead of American bearing the standard business risk of establishing a new route, Columbia created a safety net that includes $750,000 in public money from the Transportation Sales Tax fund. But Missouri’s Gift Clause bans cities and other state subdivisions from lending their credit or granting public money “to or in aid of any corporation.” Even before Columbia pays any money to American, the city’s promise to pay still constitutes a violation because the airline can use that government backing as credit to obtain other financing for its project.
Importantly, the Goldwater Institute’s demand distinguishes between private businesses who might choose to assume the risk of ensuring American’s route remains profitable and Columbia’s choice to put public credit and taxpayer money at stake. Indeed, it appears that private businesses and other organizations have contributed an additional $750,000 to guarantee American’s revenue goals. Goldwater does not object to that arrangement so long as public money is not at stake.
Private entities that believe they will benefit from the Columbia-Charlotte route are free to assume some of the risk, negotiate a share of the reward, or stay away. In contrast, the Missouri Constitution makes clear that it is improper for a public entity to use tax dollars citizens are forced to pay and funnel them to ensure the revenue of a private corporation.
Giving away tax dollars—or even promising to do so—to subsidize a private corporation’s bottom line is an abuse of power. This type of government overreach distorts the free market and forces taxpayers to become involuntary backers of American’s expansion strategy without the opportunity to benefit from the airline’s upside. The Goldwater Institute is reminding Columbia’s leaders that the public purse is not a private piggy bank.
Unfortunately, this theme of public subsidization has been repeated across the country. From challenging a $125 million Hollywood handout in Arizona to challenging the expenditure of public money in Texas used to fund private labor union activities, the Goldwater Institute has a strong track record of fighting to give teeth to gift clauses in state constitutions across the country. The lesson is clear: when governments are forced to follow their state constitution and stop playing favorites with tax dollars, the public wins. Accountability ensures that tax money is spent on essential public services, not on corporate welfare.
The clock is ticking in Missouri. By June, American Airlines’ taxpayer-subsidized flights will be off the ground in Columbia. The Goldwater Institute will continue demanding transparency and making sure Columbia officials follow the Missouri Constitution. Taxpayers shouldn’t be forced to pick up the tab for a private airline’s potential lackluster ticket sales. The public’s money belongs to the public, not to a private corporation’s bottom line.
Read the Goldwater Institute’s letter to Columbia, Mo., here.
Tony Napolitano is a Senior Attorney at the Goldwater Institute.
