Missouri State Auditor Nicole Galloway says economic development tools known as transportation development districts lack oversight, accountability and transparency, at the expense of taxpayers.
“The citizens are getting totally taken advantage of here,” Galloway said Tuesday.
Transportation development districts, or TDDs, use an added sales tax in a specific area to pay for transportation projects related to economic development. The state has more than 200 TDDs, and more than 20 of those are in Jackson County.
Galloway said state legislators have written the TDD law to favor developers and allow conflicts of interest.
“They’re supposed to be for the public good, not for the benefit of private developers,” she said.
Galloway is urging legislators to reform the law but conceded that it’s late in the 2017 session and that action this year is unlikely.
Under a new state law, the auditor’s office now has the power to audit TDDs. To begin her review, Galloway asked each TDD in the state to submit basic records, and she said only 60 percent did. Those districts alone account for $941 million in public debt, she found.
For this report, she keyed in on 12 TDDs that she said are representative of those around the state. Several weren’t following all of the rules. One of those is the Coronado Drive TDD in Blue Springs, and the violation there was that not all stores in the district prominently displayed the sales tax rate in that district.
Her audit says the problem is systemic.
“The current TDD laws allows for the formation of a TDD and approval of the related sales tax without voter approval or adequate public scrutiny,” the report says. “The TDD law does not include adequate safeguards to protect the public when the TDD law is used as an economic development tool, particularly when funding is used for private assets.”
And she was direct in her comments Tuesday.
“This is rigged against the citizens,” she said.
She said a 1997 change in Missouri law is particularly harmful, allowing the creation of TDDs that cover as little as one piece of property. In setting such policies, she said Tuesday, the General Assembly “has legalized self-dealing and conflict of interest.”
She used an example from St. Louis in which a parking lot was designated a TDD, so the owner was collecting parking fees, and the sales on those fees flowed back to the owner as well.
“They’re basically double-dipping on the same property,” she said.
Also in St. Louis, she said, one TDD simply extended a 13-year sales tax to 40 years without public comment or approval.
“In fact,” she said, “the law allows districts to form with no end date in sight.”
In some TDDs in Missouri, she noted the total sales tax rate exceeds 12 percent.
Record keeping is such, Galloway said, that it’s possible that sales taxes from TDDs are being used to pay off tax-increment financing districts, another popular economic development tool using tax money.
Asked if the new law allowing TDD audits has sent a message that officials need to make sure they are abiding by the law, Galloway said, “I sure hope so.”
Galloway also has been taking a look at community improvement districts, though she pointed out that those are structured and governed differently than TDDs. The 39th Street CID in Independence is one of the largest in the state, and a new one is set for improvements on Noland Road.
Her suggestions for such a new body? “First of all,” she said, “they need to operate transparently.” She also suggested putting citizens, and not just developers and business owners, on the CID board.