Missouri State Auditor Nicole Galloway on Wednesday pushed for reform of community improvement district laws and practices, which she called “vague,” “lax” and “lacking accountability.”
Currently, there are more than 400 CIDs throughout Missouri, including 11 in Independence, four in Blue Springs and one in Grain Valley. Their purpose is to fund capital improvements, develop land and attract – as well as retain – businesses through special taxation, particularly sales taxes.
However, in releasing a 38-page report, Galloway says she’s noticed a pattern: a lack of taxpayer consent and awareness of CID projects.
In fact, she argued that it remains unclear whether or not many districts benefit taxpayers or their communities, rather than simply serving developers.
“Developers can essentially stack the deck and create an inherent conflict of interest,” Galloway said. “I am calling for an overhaul of the laws that allow, and even encourage, this type of behavior.”
Galloway referred to a lack of board requirements. In more than 80 percent of cases, Galloway’s report found, project developers controlled CID boards themselves.
In addition, the report spotlighted that the current law does not require municipal evaluation, an estimate of economic impact, public notification or a clear CID lifespan. Galloway added that some CIDs continue taking taxpayer money even after projects have been completed.
“Taxpayers don’t know for how long or why their dollars are being collected,” Galloway said. “There are 75 districts with no end life span, which is unending taxation for Missourians.”
Another key finding of the report is that the law does not require open bidding.
In the case of Independence Events Center CID, which collects the most sales tax of any CID in the state, this has led to $110,000 in annual administrative expenditures since 2013 under a contract with the city – a service the CID did not competitively procure. The report says other districts pay less than $15,000 for similar services. The report also points out that the city has a controlling interest in that board.
This same district also did not submit an annual budget by the mandated timeline, something the CID board said it would correct.
That district was set up in 2007 to pay for the land and the construction of the Independence Events Center, now called Silverstein Eye Centers Arena. The added sales tax of three-fourths of a cent in that area brings in about $6 million a year to pay of bonds for that work.
When Galloway released her audit of the Events Center CID in November 2017, City Manager Zach Walker said in a prepared response the city would take the administrative fee findings “under advisement” and would review the agreement to determine if the costs are still appropriate.
After the arena was completed, he said, protocols were put in place to ensure capital improvements would be approved beforehand by the board.
Though Galloway acknowledged that “there are good CID projects out there,” she maintained a clear stance.
“The law needs to be changed,” she emphasized.
Galloway recommends municipal monitoring of CIDs, a requirement of public vote and notification, more timely reporting and overall greater transparency.