(The Center Square) – The same “Wayfair Tax” bill that made Missouri the nation’s last state to adjust statutes to collect online sales taxes also included tax-related provisions affecting community improvement districts (CID), redevelopment districts and tax-incremented financing (TIF) districts.
Senate Bill 153, which awaits Gov. Mike Parson’s signature, requires CIDs to include anticipated sources of funds and terms of such financing in their five-year plans and limits their duration to 27 years.
SB 152 mandates CIDs submit annual financial reports, comply with state standards for competitive bids for contracts, and requires at least one independent member on district boards.
CIDs are special districts that fund projects such as land acquisition, infrastructure improvements, business retention and capital improvements through a special sales tax, assessment, fee or property tax.
As of Dec. 31, 2017, according to an August 2018 Community Improvement Districts report by Missouri State Auditor Nicole Galloway, there were 428 CIDs in the state that spent more than $74.3 million in annual revenues.
Galloway found in her audit that lax CID oversight has allowed “spending decisions to be made by those that benefit the most,” noting taxpayers were on the hook to pay $2.2 billion in sales taxes for projects orchestrated by the 428 CIDs.
“State law allows a CID to be formed and taxes and assessments to be imposed without adequate public scrutiny or sufficient public protections,” Galloway wrote. “State law allows CIDs to overtax the public and remit the excess taxation to conflicted parties. Annual reports of statewide CID sales tax collections and distributions published by the Department of Revenue (DOR) do not include taxes distributed to all districts.”
Growth in the number of CIDs and Transportation Development Districts (TDDs) across the state since the 1990s has alarmed fiscal conservatives for a decade.
Economists, such as those with the Show Me Institute, cite inconsistent reporting, lax rules and the lack of a central database as easily manipulatable flaws that make the state’s 600-plus CIDs and TDDs “handy, legal tools for directing tax revenue toward private projects.”
SB 153 helps shed additional transparency on special district spending, but it does not go far enough, writes David Stokes, director of Municipal Policy for the Show Me Institute in a wrote in a blog post.
“We need far more voter involvement, stricter reporting requirements, tougher limits on which expenditures are allowed, and total tax caps, just to name a few potential improvements,” Stokes write. “The single most important thing we need is a requirement that a full city (or county, for unincorporated areas) vote to approve all new CIDs and TDDs. Absent greater reform, these special taxing districts will continue to just be the great Missouri tax-and-spend deception.”
The latest confirmation that CID and other special district spending needs more oversight comes from the city of Kansas City’s Auditor’s Office which released an April audit that said the city council has approved 77 CIDs since 2002 with 74 still imposing a sales tax on top of existing sales taxes with nearly 60% being “single beneficiary CIDs” and nearly half overlapping with one or more other economic development districts.
Auditors concluded Kansas City’s “review process does not critically evaluate public benefit, purpose and plan of the proposed district, sales tax burden impact, (whether it) overlaps with other economic incentives” and aligns with city goals.
The audit also found a third of Kansas City’s CIDs did not submit a proposed budget and more than 25% did not submit an annual report as required by state statutes. The city also did not monitor CID reporting status as required, according to the report.