“The law allows for sales taxes to be charged without a vote. The law allows for a lack of transparency and a lack of accountability,” Auditor Nicole Galloway said Wednesday during a news conference in Kansas City.
Galloway audited 15 Community Improvement Districts (CIDs), including four in the Kansas City-area: Independence Events Center CID, Ward Parkway Shopping Center CID, 12th & Wyandotte CID and Park Ridge CID in Lee’s Summit. Other districts include one in downtown St. Louis, the 76 Entertainment CID in Branson and one for the mall in Jefferson City.
CIDs are established to pay for things like business development or road improvements.
Galloway, who faces an election in November, has targeted CIDs in past audits. In December, Galloway said she uncovered “concerns about a conflict of interest with the companies” selected to work on improvements at Ward Parkway. And she had concerns in November about “excessive administrative fees” and “lack of board oversight” at the Independence Events Center.
Galloway’s new audit suggested these kinds of problems might exist with many of Missouri’s 428 CIDs, which brought in $74 million in 2017. The audit called on the state to make significant changes to how CIDs are formed and in reporting requirements to the state.
“What we’re saying is we understand local governments need tools in their toolkit to create economic development and improve their community,” Galloway said. “However, taxpayers need to be protected and the law needs to change to require taxpayers’ best interest be considered before they’re taxed.”
Eighty-seven percent of the money collected by CIDs comes from sales tax. Missouri voters generally get to approve sales taxes, but CIDs often have nobody living within their boundaries. That, the audit said, “allows the developer/property owner to essentially impose the tax.”
The audit also found some CIDs either collected sales tax from businesses outside district boundaries or, in the case of the Capital Mall CID, were not ensuring businesses were sending the taxes collected to the Missouri Department of Revenue.
Developer/owners often control the board of directors for CIDs, too. “The Park Ridge CID, located in Lee’s Summit, paid over $75,000 for lawn and landscaping services to a company owned by the board chairman,” according to the audit.