How Missouri’s Special Taxing Districts Promote “Legal Plunder”
In the land of the blind, the man with one eye is king. When it comes to Missouri’s rapidly proliferating special taxing districts, one-eyed kings pick millions of dollars out of the pockets of unseeing and unsuspecting consumers / taxpayers.
Who preys upon the sightless with such cruel impunity? More often than not, it is leading citizens and business organizations, taking advantage of poorly conceived laws with the stated purpose of promoting economic development.
Under Missouri laws established in the 1990s, transportation development districts (TDDs) and community improvement districts (CIDs) operate as micro-governments that direct tax revenues to private interests to use for the supposed benefit of their local communities. A primary benefit of a TDD – from the viewpoint of a single property owner or a group of owners banding together to form a district – is the ability to impose a tax on people with no vote in the matter.
Over the past two decades, more than 200 TDDs and nearly 300 CIDs have sprouted up in big cities, small towns, and suburban enclaves across the state. In 2014 and 2015, TDDs collected more than $175 million in tax revenue, according to the Missouri State Auditor’s Office. “Given that TDDs have been operating this way for nearly 20 years,” Show-Me Institute Policy Analyst Graham Renz has observed, “their collective impact is in the billions.”
Before becoming a city councilman and later mayor of Neosho (pop. 12,000), south of Joplin, Richard Davidson served on the town’s school board from 2004 to 2008. He was shocked when supporters of a TDD sought an $800,000 contribution from the school district to support the building of new roads. “We educate kids,” he told the TDD proponents. “We don’t build roads.” Later he wrote a column for the Neosho Daily News titled, “TDD Spells Trouble for Our Schools.”
The Neosho TDD was set up in 2009 to fund $6.9 million in transportation projects, with a projected $4.5 million coming from a half-cent sales tax from businesses within the district and another $2.4 million from the Missouri Department of Transportation. Like many TDDs, this is a special taxing district with no residents. Within its boundaries, the 550-acre district includes the city’s golf course, wooded areas, and mostly uncropped farmland, along with a small commercial strip with a Wal-Mart, a Lowe’s, and some other shops and restaurants. Through the half-cent sales tax, customers of those businesses have paid in excess of $500,000 a year to support the TDD’s activities.
So far, those efforts have not stimulated any new business development. But who is to say that the millions of dollars spent by the TDD on roads and transportation won’t at some point turn woods and idle farmland into valuable commercial property?
Davidson, who served as mayor of Neosho from 2010 to 2016, regards the TDD as a clear case in which the end (not so much economic development as the enrichment of a small number of private property owners) does not justify the means (taxing unseeing and unsuspecting consumers).
Community improvement districts work in a similar way. Examples include the luxurious Intercontinental Hotel on Country Club Plaza in Kansas City and the Cardinals’ Ballpark Village in downtown Saint Louis. CIDs allow both of these commercial ventures to collect a one-percent sales “tax” from patrons, which is really just an artfully disguised part of the selling price.
It is time to jettison two-decade-old Missouri laws that promote taxation without representation and provide a textbook example of what the 19th-century economist Frederic Bastiat called “legal plunder.”