Nix The NIDs

A variety of innocuous-sounding names and acronyms are springing up like weeds in communities all over Missouri. They are a threat to the upkeep of sidewalks and streets, and to the well-being of schools and libraries. What is this new but rapidly spreading pestilence?

Neighborhood Improvement Districts (NIDs) are just one of many types of special taxing districts sprouting like weeds in Missouri (and expensive weeds at that). Like Transportation Development Districts (TDDs), Community Improvement Districts (CIDs), and Tax Increment Financing (TIF) districts, NIDs serve as a method for governments to increase taxes without any accountability while getting involved in areas often best left to the private sector or community groups. Greene County officials decided in 2004 that it was the job of county government to play the role of real estate investor via a NID, and taxpayers in the county are now feeling the pain of that decision.

Greene County backed $22 million in bonds for the Jamestown housing and office development in Rogersville, Mo., and another similar development in 2004. Greene County officials believed that the increased taxes from the NIDs created for the developments would cover the cost of the $22 million in bond payments that the county guaranteed. Why did county officials think it was appropriate to use tax dollars to guarantee the private Jamestown real estate development? You will have to ask them that, but what is not in question is the colossal failure of the deal. Unfortunately, the Jamestown development failed, and county taxpayers are on the hook for the remaining $14 million in bond payments without any new tax dollars coming from the development. (The other development also failed, but the foreclosure process worked better in that instance and county taxpayers are not responsible for the bonds. Not yet, at least.) This year, Greene County does not have enough money in its bond reserve fund to cover the current $1.1 million bond payment due. Either general tax dollars will have to make up the shortfall or taxes will have to be increased if Greene County cannot find its way out of the fiscal impasse.

The main criticism is not Monday morning quarterbacking that Greene County made a poor choice of which project to back. Some projects succeed, some fail, and risk is inevitable with development. No, the main criticism is that Greene County thought it was appropriate to get involved at all. More unsettlingly, Greene County is far from alone in its decision to be a real estate speculator. Local governments’ decision to play a role they should not play has sparked controversy around the state.

In Lake Lotawana, outside Kansas City, a CID defaulted on bonds and the CID officials were accused of ethical violations. A TIF in Ellisville, a suburb of Saint Louis, ripped the community apart and led to lawsuits, impeachments, and recall efforts. A TDD in Neosho, near Joplin, has sparked a contentious lawsuit between the TDD board and its former attorney, who is also the Neosho city attorney. These particular controversies may be the extremes, but they are not the exceptions. The fact is that most of these subsidies and special districts fail in the goals of economic development because local governments simply are not equipped to make private sector business decisions. Why they continue to do so is the real question.

Greene County officials’ current plan is to take control of all the parcels in the Jamestown development at an upcoming tax auction, and then to sell the property for enough money to cover the bond payments. I hope they succeed. But what I really hope for is that Greene County officials, as well as officials from cities and counties around the state, will learn from this example and cease getting government involved in business proposals best left to the private sector.

County officials do not have a right to put other people’s tax dollars on the line just because they think a certain proposal will succeed. That is not the role of local government, and it is about time elected officials throughout Missouri acknowledged that.

David Stokes is the director of local government policy at the Show-Me Institute, which promotes market solutions for Missouri public policy.