The most interesting tax issue on the Harrisonville ballot is a local gas tax. Local gas taxes are a little-used option for funding roads for municipalities. Harrisonville would be the eighth city in Missouri to enact such a tax for its roads, according to Show-Me Institute research. Not surprisingly, many of these municipalities are located along major highways where people frequently stop for gas. In the same way that Prussia was called “an army with a country,” Foristell and Matthews could be considered truck stops with their own cities.

Local gas taxes require a 60 percent threshold for voter approval. The funds raised by the tax can only be spent on roads within the city. Obviously, getting 60 percent of the vote for any new tax is difficult, and that is likely one reason local gas taxes are so rare. Foristell, for example, needed multiple attempts before voters approved its gas tax.

Funding roads with user taxes like a gas tax is good public policy, and this includes local roads. It is smart policy to connect the cost of driving with the act of driving as much as possible. When you pay for roads with unrelated taxes, such as a property tax, a general transportation sales tax, or a targeted transportation development district (TDD) sales tax (which sounds like a transportation tax but is often just a form of corporate welfare), you subsidize increased driving by lowering the relative cost of driving.

As electric vehicles become more common, adjustments to the gas tax system will have to be made. But in the short term, more cities should consider adopting very low gas taxes in order to fund local roads. This table has more information on the local gas taxes implemented by Missouri cities:

While not every municipality can raise hundreds of thousands of dollars a year, it is worth considering in any municipality with a gas station. Similarly, the state should consider lowering the threshold for voter approval of local gas taxes to the standard 50 percent plus one.

The other two taxes and bonds being considered are much less beneficial. Harrisonville already has a local sales tax rate of 2.375%, and it is asking voters to raise it another 0.25%. However, the ballot wording is very confusing. The ballot says, “Shall the city of Harrisonville, Missouri impose a city sales tax of one and one quarter of a percent?” That would seemingly indicate a tax increase of 1.25%. However, the city website says it is only a 0.25% increase, leading to a total tax of 1.25%. But that conflicts with the other city website (link above), which lists the city sales tax at 2.375%. It may be that the city general sales tax is being increased, but then the city is clearly misleading voters as to the current sales tax rate by saying it is just 1% when it is 2.375%.

This sales tax rate increase is particularly high considering that Harrisonville also levies a moderately high property tax rate. Other cities with extremely high sales taxes tend to have very low property tax rates, such as Ashland. Whether they want the tax increase or not, Harrisonville residents should know they are living in a city with very high total municipal taxes. In particular, Harrisonville should remove some of its 1% TDD sales taxes, which would make its local sales tax almost 5%, if voters approve the tax increase.

Finally, voters are being asked to approve a bond issue for the Harrisonville municipal water and sewer system. This blog post is long enough, but suffice it to say residents of Harrisonville would be better served by privatizing their municipal utilities instead of continuing to go further into debt for them.

The post Harrisonville Goes for a Local Gas Tax appeared first on Show-Me Institute.

Port districts exist, in theory, to build and manage port facilities along rivers. When they actually focus on that job, I have no complaints. But in reality, many of the port districts are focused on other things, such as granting tax subsidies or engaging in government corruption. (The latter is less common, thankfully.)

The City of St. Louis’s port authority legitimately operates port facilities along the Mississippi. However, it is also substantially engaged in the granting of tax subsidies, usually for businesses that have absolutely nothing to do with rivers or shipping. For example, the port authority passed a one-cent special “port” sales tax for the St. Louis soccer team to be charged at the soccer stadium that the team gets to keep for its own purposes. (The soccer team has stated that it will use those funds to fix groundwater issues, so I guess it’s at least related to water.)

That was the city’s first “port” sales tax. Now there is a hotel, retail, and condo redevelopment downtown that also wants in on the game. The Jefferson Arms redevelopment has also requested a “port” sales tax of one percent. This is on top of the tax-increment financing subsidy it has already received, as well as the state and federal historic tax credits it got, and the community improvement district and transportation development district extra sales taxes it has applied for and will likely receive. Could it be that the developer wants to socialize the risk and cost, while privatizing the profit?

But a strange thing happened when the developer and its consultants tried to get the sales tax approved by the port authority. The port board said, “Wait, not just yet.” (Trust me, I wish I could say it said “no,” but the vote was tabled, not defeated.)

As Commissioner William Kay Jr. noted at the hearing: “If all three districts are approved, the Jefferson Arms building would have the highest sales tax rate in the city at 12.67%. We’ve got the CID, we’ve got the TDD—the tax rate right now will be 11.67%,” Kay said. “That’s the high mark for the city. I do not think the port authority needs to get into the business of subsidizing these projects.”

Let me reiterate: the Jefferson Arms project has nothing to do with a port. The use of port authorities to create one more tax subsidy opportunity in St. Louis, Kansas City, or anywhere else is terrible public policy. It’s great to see one agency say “not yet.” Hopefully, that “not yet” becomes a “no” in the future, both for this instance and many other subsidy proposals around the state.

Furthermore, the state legislature should remove the ability of port districts to issue tax subsidies or institute new sales taxes. Ports should be funded with user fees to the largest extent possible, and should not be another tool in the corporate welfare toolbox.

The post Denied Entrance at the Port of Call appeared first on Show-Me Institute.

Fast forward to today and nothing has changed. Property assessment data received from Jackson County through an open records request show the aggregate annual market value of Kansas City’s downtown streetcar Transportation Development District (TDD) is largely growing at the same rate as the county as a whole.

In other words, the streetcar is still not driving economic development in any substantial way. Were that the case, you’d see market values in the TDD rising at a much faster rate, as properties are quickly snatched up and redeveloped to take advantage of all that commerce and excitement.

There may be arguments for expanding the Kansas City streetcar. But those arguments aren’t about transit (all the streetcar routes were once and could be again served much more economically by buses) and they aren’t about economic development. And because 66% of Missouri electricity is generated by coal, the streetcar isn’t green, either.

Unfortunately, as the FTA reported, few streetcar operators actually check to see if their claims are true. That remains the case in Kansas City.

The post The KC Streetcar Still Isn’t Driving Economic Development appeared first on Show-Me Institute.

It is important to learn from one’s mistakes, and when it comes to special taxing districts in the Springfield area, there are plenty of mistakes to learn from. Special taxing districts (SDs) are tax districts established to support one specific function or program, such as a school district. In recent years, however, most new SDs have been nothing more than vehicles for corporate welfare, and their use in Springfield has been anything but an example of good government.

Springfield is now considering a gift basket of new tax subsidies for the Sports Town youth sports complex. This included the recent city council approval of a new community improvement district (CID) to use tax dollars to subsidize the private development. First, the city gerrymandered a map to make sure the new CID didn’t include any voters to get around the voting requirements. Next, city leaders decided to give the developers $2 million in upfront subsidies even though the city’s own guidelines recommend against doing exactly that. The upfront subsidy by the city means that all Springfield taxpayers are paying for this project, not just the ones who may use the facility.

Remaining on this expensive list is a request by the developers for $4 million more subsidies from federal stimulus funds. Shockingly, the developers have decided that their project qualifies for federal funding. Maybe it’s for the sewers, or for tourism, or perhaps this project will help fight the COVID pandemic. Youth sports may be infrastructure now. Whatever the feeble excuse is, the lure of “free” federal money is strong. If a private development such as SGF Sports (the company behind Sports Town) cannot succeed without multiple subsidy programs, it’s not the job of taxpayers to ensure it goes forward.

With such a large subsidy upfront, Springfield is basically trying to be a real estate developer. The city should have learned from Greene County that government real estate speculation is a bad idea. That county previously subsidized the private Jamestown development by creating a neighborhood improvement district (NID) to pay off bonds the county issued in support of the proposal. It assumed the future taxes from the NID would suffice to pay off the bonds. It assumed wrong. When the Jamestown project failed, Greene County taxpayers were on the hook for the unpaid debt. Springfield should have learned from this costly mistake.

This SGF Sports CID would be the 17th CID in Greene County, most of them in Springfield, along with at least four more transportation development districts (TDDs). Despite the public-sounding names, many CIDs and TDDs consist of just a few parcels of property with sales taxes imposed on the public for the private benefit of one property owner. These tax dollars are often used for essentially private purposes, such as retail parking lots or landscaping.

How have these other SDs worked out in Springfield? Not very well. Missouri state auditor Nicole Galloway specifically cited Springfield’s HyVee store CID for improperly collecting almost a quarter million dollars of tax money. Galloway also identified Springfield’s College Station TDD downtown for multiple abuses, including failures to notify shoppers of the tax. Based on research on SDs generally in Missouri, the other SDs are likely functioning as corporate welfare schemes here in the Queen City of the Ozarks.

Springfield is a vibrant, growing community that does not need to rely on tax subsidies to boost its economy. If Springfield wants to help all businesses succeed rather than just a select few, it should work with Greene County to lower its commercial property tax surcharge rate, which is high compared to those of other Missouri communities. The CID for Sports Town was not necessary, and $4 million more from federal funds would be an even worse decision. The evidence is clear that these subsidy programs produce more financial mismanagement than economic growth. Springfield should learn from its history and stop repeating the same mistakes.

The post Springfield Should Reject Subsidies for Sports Town appeared first on Show-Me Institute.

There are ways to fund local road maintenance other than sales taxes. As the National Surface Transportation Infrastructure Financing Commission has noted, paying for road maintenance with taxes largely unrelated to road usage creates problems. If people aren’t charged for using roads directly, people will drive more, which in turn leads to higher road maintenance costs.

A local fuel tax is a good solution to the problem of paying for road maintenance—a fuel tax is directly related to driving. Additionally, local fuel tax revenue is constitutionally required to be spent on local road maintenance, decreasing the risk of financial misuse.

Seven Missouri cities already have local fuel taxes; none are higher than 2 cents per gallon. According to my calculations, Kirkwood could raise over $266,000 per year from a 2 cent per gallon local fuel tax on gasoline and diesel fuel. A downside of a local fuel tax is that you don’t collect any revenue from large trucks that may not stop to buy gas in Kirkwood, but still damage the roads when passing through.

No matter how Kirkwood residents and officials decide to raise money for local road maintenance, the city should carefully manage the money raised and ensure that all proper reporting, transparency, and auditing rules are observed. The proposed TDD has redeeming qualities and could be a viable option for funding needs. Nontheless, Kirkwood officials and residents should also consider other transportation policy options.

The post Kirkwood Should Consider the Pros and Cons of All Transportation Funding Options appeared first on Show-Me Institute.

The fact that the developers have requested eminent domain should disqualify it from the start. From the article about the proposal (emphasis added):

The developers have asked the city for the power to use eminent domain to force property owners to sell, but said they are not considering it now.

So they want the power of eminent domain, but as of now they say they don’t plan to use it. Until they deal with a property owner who does not feel like selling, of course. Just the threat of eminent domain impacts the entire process negatively.

They also want tax subsidies:

They need approval for $35 million in tax incentives, plus an extra sales tax.

So, a big TIF, plus a CID or TDD (to be determined), so that average people throughout the region can subsidize this development.

I don’t know if there is a real market for new apartments, condos, shops, etc. in this part of Webster Groves. There may well be. But if the project has to have huge tax subsidies and the threat of eminent domain, then I would doubt it.

The TIF commission should deny the TIF and the Webster Groves City Council should refuse the eminent domain and oppose any CID, TDD, etc. Then the developer can talk with the property owners and move forward or not.

The post Webster Groves Has Some Decisions to Make appeared first on Show-Me Institute.

Dierbergs has decided instead to use the TIF that was approved for the site in 2016 for a different developer but was never acted on. The previously approved TIF is for $15 million, a slightly higher amount than the one in Dierbergs’ proposal. But TIF projects can only be active for a maximum of 23 years, and because this one was approved in 2016, it will only have 18 years available. It appears that there will still not be a request for funds for the residential portion of the development

The 2016 proposal also included a $5 million CID and $5 million transportation development district (TDD). A Dierbergs representative said the company will be asking for a CID that is less than $5 million and will not use both a CID and TDD to develop this site. If this remains true, the overall size of the subsidy package will be slightly smaller than the overall $25 million proposal in 2016. But it’s possible that this new avenue will give Dierbergs access to even more taxpayer dollars than its proposal from a few months ago.

It’s unfortunate that taxpayer dollars are being used to develop this area at all. Sure, there’s a shorter timeframe for the TIF and no subsidy for the residential portion, but that’s small consolation. What was true in 2016 is still true today: A TIF at this location is just a way for lawmakers to look like they are “doing something” about this long-empty location at the expense of taxpayers.  Hopefully in the future, Crestwood can do better for taxpayers by not offering their dollars to developers at all.

The post Crestwood TIF Update appeared first on Show-Me Institute.

Currently, local roads are funded by a combination of fuel taxes and local property and sales taxes. Sales taxes are the worst way of the three to fund road maintenance.

Paying for roads with taxes only tangentially related to road usage promotes inefficient vehicle and travel choices, which leads to faster road deterioration, wasted fuel, congestion, and air pollution. If people aren’t exposed to the true cost of something, they will overconsume it. For a market to work properly, true price signals are needed.

Instead of a TDD, Kirkwood officials should consider implementing a local fuel tax. Local fuel taxes allow markets to work by connecting how much you drive with the cost of driving. Buying a gallon of gasoline has more to do with driving than buying a TV or a loaf of bread.

Additionally, money raised from local fuel taxes is constitutionally required to be spent on road maintenance and safety, reducing the risk of the money being spent on other, potentially wasteful projects. The biggest challenge in implementing local fuel taxes is that they require a two-thirds majority among voters to pass. Kirkwood’s TDD would only need a simple majority.

Seven cities in Missouri currently have local fuel taxes. Most are just one cent per gallon and, depending on traffic, can raise hundreds of thousands of dollars annually. Kirkwood is significantly larger than any of these cities and thus may be able to raise even more money.

If Kirkwood officials want to raise money for local transportation fairly, they should kick the TDD to the curb and become the eighth city in Missouri to adopt a local fuel tax.

The post Kirkwood Should Consider a Local Fuel Tax to Fund Its Transportation Needs, Not a TDD appeared first on Show-Me Institute.

When troubled or sickly aristocratic English youth needed a place to recuperate in private away from their cruel stepparents, they would go to Secret Gardens, where magic and mystery would solve all of their problems. We don’t need mysterious places to address our transportation needs in Missouri, and most of our “Secret Gardens” are actually illegal meth labs. But, amazing as it may seem, there really is a local transportation funding option that is unknown to most municipal officials in Missouri. Local gas taxes are a little-used yet very efficient method of funding important local transportation priorities for cities like Lake Ozark as it considers ways to improve Bagnell Dam Boulevard and Valley Road.

I know what you’re thinking. If there is tax that most politicians don’t know about, why would you tell them? Our gas taxes are low in Missouri, and Missouri voters clearly like them that way, as attempts to raise our second-lowest-in-the-nation rate have consistently failed at the polls.

That low tax rate has benefits and costs. If you stop at a gas station near the state border, you can’t help but notice the large percentage of license plates from border states gassing up over here in Missouri. Those drivers do much of their driving in other states but choose to give us their tax dollars for Missouri roads.

But the low gas tax has costs, too. Missouri’s roads and bridges could certainly be in better shape. A 2019 report from the Federal Highway Administration ranked our roads as 8th worst in the nation. We don’t want to commit the logical fallacy of drawing causation from correlation, but there might be a connection between those 2nd-lowest taxes and those 8th-worst roads. Even for roads in good condition, increases in population, tourism, and more can burden a system.

The fact is, we need to invest more in our road and bridge system in Missouri, and our local roads are no exception. Local roads are maintained by cities and counties, not the state, and are funded by a mixture of the state gas tax, local property taxes, and sales taxes. Unfortunately, local sales taxes are the mechanism most frequently expanded to fund local roads, and they are the worst option of the three. Funding roads by sales taxes subsidizes the act of driving by charging shoppers in a manner unconnected to driving. Walkers, bikers, or carpoolers will pay just as much as solo drivers for road improvements. People who can drive on roads without directly paying for their upkeep will drive more than they otherwise would, with the resulting extra traffic, pollution, and other road issues.

Ideally, the cost of driving should be connected as closely as possible to the act of driving. Lake Ozark city leaders are currently considering a sales tax-based transportation development district (TDD) to fund improvements to Bagnell Dam Boulevard and Valley Road, both key roads for the region. A better option for funding local roads like these would be a local gas tax. A local gas tax fixes the discrepancies that sales tax funding methods generate and, more importantly, can raise substantial money for road improvements.

Seven cities in Missouri have adopted local gas taxes. By law, the money raised from these taxes can only be spent on roads within those communities. All of the local gas taxes enacted have been very low—none higher than two cents per gallon. Even at that low level, they can raise significant money, but none of these seven cities have the combination of local population and tourism that Lake Ozark has. With those tourists, a local fuel tax of just two cents per gallon could potentially bring over one hundred thousand dollars per year on top of the existing road revenue sources. That money would fund a substantial amount of road improvements for Lake Ozark, all while properly maintaining the connection between the act and cost of driving. Or, if Camden and Miller county leaders have similar concerns, countywide gas taxes could be implemented that would raise even more money.

Lake Ozark is the heart of an area vital to our state. The residents who live there and the tourists who visit need and deserve quality roads. A local gas tax would be an efficient and beneficial way to fund road maintenance and improvement. Community leaders and residents should strongly consider passing one this year. Lake Ozark does not need a hidden code or a secret garden to deal with its transportation issues, just community support to address these key improvement needs.

The post Local Gas Taxes Are the Secret Garden of City Road Funding Options appeared first on Show-Me Institute.

The city claims it needs $3 million to repair an important local road but lacks the funding to do so. The city’s leaders are considering a transportation development district (TDD) to raise money for the road through an extra sales tax, which would effectively subsidize road maintenance via shopping. My colleague David Stokes has already written about why a TDD is a poor remedy for this problem.

Fortunately, there is a better solution—local fuel taxes. Fuel taxes can be an economically sound and fair way to raise money for roads. They ensure that those who benefit from the roads also pay for them.

As the National Surface Transportation Infrastructure Financing Commission has noted, funding roads through methods not related to their use (such as sales taxes) promotes inefficient vehicle and travel choices. This, in turn, leads to faster road deterioration, wasted fuel, traffic congestion, and air pollution. If the sales tax (via the TDD) is a ploy to get tourists to help foot the bill for road maintenance, it should be noted that the same tourists would also pay the fuel tax. However, fuel taxes connect the cost of driving and the cost of using the roads.

Local fuel taxes allow localities to raise money for roads within their jurisdictions. When enacted, an additional fee is added to the price at the pump in a given jurisdiction. And since the Missouri Constitution requires that money raised from local fuel taxes be spent only on road construction and maintenance, it reduces the risk of this revenue being spent on other, potentially wasteful projects.

One potential challenge is that local fuel taxes can be tough to enact. The Missouri Constitution requires that local fuel taxes be passed with a two-thirds majority among voters. If it chooses to pursue it, Lake Ozark would be one of the first localities in Missouri to enact a local fuel tax. Foristell tried to enact one several years ago, but the measure fell just short with 65 percent voter approval. However, it was able to pass a 1 cent local fuel tax the following year.

Ultimately, before sales or other tax increases, local fuel taxes are an option worth considering as a fair solution to the City of Lake Ozark’s funding predicament.

The post The City of Lake Ozark Should Consider a Local Fuel Tax appeared first on Show-Me Institute.

A recent state audit of TDDs highlights the problems with these districts. Five of the twelve TDDs mentioned in the report collected incorrect tax amounts. I’ll let you guess as to whether they collected more or less than authorized. (Hint—it was more.) Statewide, 92 percent of TDDs have been formed by developers and were not subject to any votes or public involvement. Not surprisingly, when you allow private developers to raise tax dollars for private purposes (like improved parking lots for their own developments) they are going to act like it is private money, not tax money, and often spend it improperly. Audits on these types of special taxing districts by state auditors of both political parties have consistently found that they frequently violate the Sunshine Law, do not competitively bid out contracts, make errors in tax collections, and more. They are designed in the first place to act like fiefdoms, with little oversight of the tax dollars being collected and spent for private purposes by the developers that almost always dominate the board. The problems with these districts are, in fact, so consistent that they must be considered a feature, not a bug.

This proposed TDD will require voter approval in the April 2021 elections. Seeking voter approval here is, obviously, a good choice. However, only voters who live within the TDD itself can vote on the proposal, not all  Lake Ozark voters. I would expect the district to be gerrymandered until it looks like the lake itself in order to limit voter participation and help guarantee passage of the TDD. That is the prior experience in Missouri.

In a news story on the new TDD, supporters cite the “high quality of roads within the Horseshoe Bend Special Taxing District” as an example of why the TDD would be beneficial. The high quality of roads in that district may well be true, but Horseshoe Bend is not a TDD—it is a traditional, property tax-based special road district. The distinctions are important. Special road districts like Horseshoe Bend are subject to voter input, property tax rollback mandates (when assessed valuation increases), and much more comprehensive budgeting and financial reporting requirements. If Lake Ozark residents want better roads along with oversight, transparency, checks, and balances, the creation of a taxing district like Horseshoe Bend is a legitimate option. Other good options include passing a local gas tax to pay for the road improvements or simply raising city or county property taxes to fund the road improvements.

Honesty demands that I admit the Lake Ozark Community Toll Bridge is a TDD and has been successful for the community. In this case, the tolls collected pay for the bonds that built the bridge, and most importantly, the act of driving is connected to the cost of driving. Sales tax TDDs, such as this proposal, do not have that connection.

If people want a new taxing district with questionable dealings, little oversight, and limited voter involvement, then a TDD is the way to go. While Marty Byrde might approve of that, I trust the rest of the residents and taxpayers of the Lake Ozark region do not.

The post Lake Ozark Area Going in the Wrong Direction with Transportation Funding appeared first on Show-Me Institute.

As the process currently works, CIDs and TDDs are approved by a vote of only people within the proposed taxing district. This bill would have subjected CID and TDD approval to a vote of the people in the city in which the district is located. This would have solved one of the biggest problems with these taxing districts: Many are not subject to a broad-based, representative vote for approval. Some districts can even be approved by only a handful of property owners if the district is small enough, yet the costs are externalized to all taxpayers who spend within the district.

As Show-Me Institute researchers have mentioned before, special-taxing districts like these are on the rise. According to financial reports received by the Missouri State Auditor, there are 495 CIDs and 237 TDDs in Missouri. CIDs collected over $56 million and TDDs collected more than $73.5 million in 2018. Hundreds of districts are taking millions away from Missourians, and they may not have had a say in it.

The problems with CIDs and TDDs are clear, and lawmakers should act. There is still an opportunity to give taxpayers increased representation in a special legislative session, but it seems that for now, the problems with CIDs and TDDs will continue.

The post Districts Denied Once Again appeared first on Show-Me Institute.

Every quarter, the Missouri Department of Revenue releases sales tax rates for all jurisdictions across the state. Because of the growing number of special taxing districts, such as community improvement districts (CID) and transportation development districts (TDD), sales tax rates have been shooting through the roof.

Data for the latest quarter (July-September) pegs Missouri’s average sales tax rate at 7.71%. While that doesn’t sound particularly high, it is important to note two things. First, at this time in 2017, the state average rate was 7.42%. For a statewide average, that is a significant jump for such a short period of time.

Source: Missouri Department of Revenue, Sales/Use Tax Rate Tables, numerous years

Second, these figures represent averages: many sales tax jurisdictions have rates higher than even 10% or 11%. For example, in Kansas City where the streetcar TDD overlaps with the Convention Hotel and Performing Arts CIDs, the total sales tax rate is 11.6%. In St. Louis the rates reach 11.68% in places like Ballpark Village and Washington Avenue. What the statewide average does a good job of tracking is the impact of additional special taxes in the hundreds of CIDs and TDDs across the state. If the addition of CIDs and TDDscauses such significant jumps in the tax climate of the state as a whole, that means these taxing districts are not just nickel and diming taxpayers—they are significantly changing Missouri’s tax climate.

In a recent paper, Patrick Tuohey and I discuss reforms to help curb the growth of special taxing districts. Some reforms have proposed a sales tax rate ceiling, and while they would help, they wouldn’t prevent taxpayer abuse in areas with lower sales tax rates than the proposed ceiling. This much is clear: the longer policymakers take to address the state’s out-of-control sales tax problem, the worse it is going to be. The time to act is now. 

The post Up and Up: Sales Taxes Across the State appeared first on Show-Me Institute.

Last month, the Hazelwood City Council passed a resolution approving the redevelopment of the failing and deeply indebted St. Louis Outlet Mall. After failing to secure financing for the same project in Chesterfield, the developer, Big Sports Properties (BSP), now plans to convert the mostly vacant mall into a 138-acre youth sports complex called POWERplex, with the help of taxpayer money.

The deal includes nine sources of public financing, which can be divided into four types of incentives:

• The first type of incentive used is special taxing districts, including a community improvement district (CID) and transportation development district (TDD), and they would together levy a 2% sales tax.
• Second, the existing tax-increment financing (TIF) district (from the original mall development in 2003) would also collect half of all economic activity taxes paid at the sports complex, and the agreement includes tentative approval of a new TIF, slated to go into effect next January if the project is on schedule.
• The third type of incentive used involves Hazelwood assisting the developer with debt financing, using economic development loans, Chapter 100 property tax abatement, and property assessed clean energy (PACE) financing.
• Finally, the fourth source of incentives comes directly from the City of Hazelwood and St. Louis County in the form of $3.6 million to revitalize infrastructure.

If this all sounds too complicated, it’s because it is.

There’s plenty of reason to doubt this project will be a good investment. When the mall was first built in 2003, it received public funds totaling $52.5 million from a TIF and TDD. However, the mall sold for $6 million in 2015, just 6% of its original cost. Earlier this year, it was announced that the mall would be closing, and the TDD was mired in debt. In fact, the TDD’s bondholders agreed to settle the debt for $10.5 million, a reportedly substantial discount, which will be paid by the newly formed CID.

The mall was a taxpayer-subsidized failure, and the city is asking for us to trust them again. Even if BSP manages to see the project through this time (part of the reason the development in Chesterfield failed last year was that BSP missed an important deadline) and the first few years are successful, the long-term risk is substantial. Hazelwood might find itself in a similar situation another 16 years from now.

Besides the risk to taxpayers, government should not be picking winners and losers. Hazelwood pulled out nearly every subsidy in the book to help build a private business with no guarantee of success, and taxpayers got to bear the cost. It’s hard to imagine a time when businesses relied on market forces to decide where to build. Instead, it has become a competition between cities to see who can give away the most taxpayer money, and Hazelwood has done an exemplary job showing us where that leads.

The post A Field of Subsidies appeared first on Show-Me Institute.

Because of special taxing districts like community improvement districts (CID) and transportation development districts (TDD), many shoppers pay up to an extra two percent in sales taxes.

Over the past few years, my colleagues and I have written extensively about CIDs, TDDs, and other special districts. In short, most special districts are created by developers to funnel additional sales tax revenues into developments. Most shoppers don’t know about the taxes because they never voted on them and because many businesses in CIDs and TDDs don’t post statutorily required notices.

In a recent paper, Patrick Tuohey and I detailed the growth of these districts and their tax collections. But more recent data on last year’s collections provide even more evidence that CIDs and TDDs have gotten out of control.

The graphs below depict revenues for CIDs and TDDs. From 2017 to 2018. Statewide CID revenues jumped nearly $10.7 million, the single highest year-to-year increase in Missouri’s CID history. Over the same period, TDD revenues jumped a more modest $2.5 million, but are nonetheless at their highest levels to date, at $73.5 million.

In our paper, Patrick and I detail reforms to help curb CID and TDD abuse. I would encourage readers to learn more about them here. Policymakers should recognize the sizable burden these districts place on taxpayers and enact reform sooner rather than later.

The post CID, TDD Collections Jump by More than $13 Million appeared first on Show-Me Institute.

These additional streetcars will be added to the current fleet of four that travels the two-mile loop from Union Station to the River Market. While the fleet currently has four streetcars, only three are usually in use; the remaining streetcar is brought out only during busy occasions. The two streetcars that were just ordered would increase the normal number in use from three to four.

Mike Hurd, the marketing director for the Downtown Council of Kansas City, explained the purchase:

We have so many times of the year that we have big events going and the current rotation of streetcars really is not enough to handle the demand. So being able to add streetcars and still being able to keep the service free is just fantastic.

Hurd’s comments need a correction. While the streetcar may not charge a fee to riders, it is not a free service—it is paid for by taxpayers. Instead of receiving funds from a small user fee, the Kansas City streetcar is funded by special taxing in an area called a transportation development district (TDD). Researchers at the Show-Me Institute have written frequently about these districts, and previously explained how a TDD is created.

The taxing rates within this TDD are not going up to pay for these new streetcars. Instead, the official position is that the KC Streetcar Authority will be using existing funds saved  from previously received TDD income. This raises a question: If the Authority is able to save more than $10 million dollars from this TDD, doesn’t that indicate that the district tax rate is higher than needed to fund normal operations?

Additionally, no data has been released to confirm wait times will be significantly reduced by adding two new streetcars to the fleet. If the goal is to add an extra streetcar to the daily rotation and hold two back for special events, why not test the idea by running the current fleet of four streetcars on a daily basis and measuring the results? It appears Kansas City officials are touting an untested solution to a potentially nonexistent problem, and using taxpayer dollars to bring it to life.

If there really are $10 million dollars in excess funds, maybe the Streetcar Authority should lower the tax rates in the TDD. Instead, residents are being asked to pay for expensive additions to an already expensive scheme. Is that really a good idea?

The post Should Taxpayers Pay $10 Million To Reduce Streetcar Waiting Times? appeared first on Show-Me Institute.

Taxes will not be collected until construction is ready to begin.

But the tax funds will not come close to covering the cost of building the new line. The KC Streetcar Authority will also seek $100 million in federal funds. Earlier this year Congress rolled back the Trump administration’s proposed deep cuts in transit funding. But the outlook for help from Washington remains uncertain.

That assertion isn’t wrong, but it is woefully incomplete. As we’ve reported previously, the Jackson County court ruling allowing for the creation of the transportation development district that will levy taxes for the streetcar includes an important restriction: No taxes or assessments are to be collected from within the district until enough external funding—in this case federal funds—is available.

And those federal funds are indeed uncertain. The Trump administration position seems to be that it won’t hand out construction money for transit capital grants unless a previous administration signed a full-funding grant agreement, and no such agreement is in place for Kansas City’s streetcar. The Federal Transit Administration has previously called for the New Starts/Small Starts grant program—on which the Kansas City effort is dependent for funding—to be scrapped. As of now it is authorized only through 2021, after which it will cease to exist. Congress seems unwilling to reauthorize it.

Even if the occupants of Congress or the White House change significantly in 2018 or 2020, we are a long way from receiving any federal money for the streetcar, money necessary to permit the TDD to collect taxes and assessments. In the meantime, expect streetcar advocates to start looking elsewhere for their financial support.

The post The Asterisk in Streetcar Reporting appeared first on Show-Me Institute.

Thankfully, reforms are being passed and Missouri’s shadowy sales tax mosaic may soon come into view. HB 1858 was signed into law this past Friday. The law will require all political subdivisions (such as counties, cities, TDDs, and CIDs) to submit maps of their boundaries to the state Department of Revenue. The result will be a clear and concise presentation of the myriad sales tax jurisdictions littering our state. The map should be available by July 2019.

A map of all the jurisdictions collecting sales taxes may not sound like a big deal, but it is. While it’s easy to know what county or town you’re in, it hasn’t been so easy to figure out whether you’re shopping in one or more TDDs or CIDs. These districts are required to present maps of their boundaries only when petitioning to form, and so it is often nearly impossible to figure where they are exactly later down the road. They can also be as small as a single shopping center or district! In short, you could have been paying an extra two percent in sales taxes and had no way to find out where to shop to avoid it (other than an expensive sort of trial and error).

While HB 1858 is a win for taxpayers and transparency advocates, there is still a lot of work ahead of us. TDDs and CIDs continue to be used for projects with questionable public benefits, have poor reporting standards, and operate with little to no public scrutiny. Missouri taxpayers deserve accountable, transparent government for the public good, and it’s time to give it to them.

The post A Fine First Step in the Right Direction for Special Taxing District Reform appeared first on Show-Me Institute.

First, these districts allow narrow special interests to tax the public for their own private gain. For example, a luxurious hotel in Kansas City instituted a CID in order to charge a 1 percent sales tax that it will use to refurbish rooms and replace carpeting.

Second, the districts are often drawn tightly around businesses, such as shopping malls, so that no local residents have to vote for the tax increase. The ability to draw district boundaries gives business owners a great deal of power to charge local taxes without public oversight. Without that oversight, SD boards can extend the length of their tax increases well past the initial project need.

Lastly, the Missouri State Auditor has pointed out that SDs are not transparent and that taxpayers are often not consulted in their creation and have no idea of their existence. For example, customers often choose hotels based on room rates, but rarely by tax rate—in fact, many customers do not even know they are paying these additional sales taxes.

The number of SDs is growing rapidly, and the combined impact of these small districts is adding to the tax burden of Missourians across the state.

THE SOLUTION: Stricter requirements for the creation of SDs and stronger reporting requirements to ensure accountability.

Reforms that will provide greater taxpayer protection include (1) requiring that a minimum number of residential voters live in districts; (2) requiring that the State Auditor or Director of Revenue compile an annual report that details statewide SD spending, revenue, and debt; (3) requiring all SDs sunset unless explicitly approved by district voters, and (4) requiring more transparent public bodies, such as city or county councils or commissions, approve all SD bids. To truly curb abuse, the sales taxing authority of SDs could be revoked so that only property tax revenue could support district projects.

THE OPPORTUNITY: Reforming these districts could increase transparency and provide protection for taxpayers. It would also result in lower taxes in Missouri’s largest markets by making sure that special taxing districts only act with the informed consent of voters.

KEY POINTS:

• In 2014 and 2015 alone, TDDs in Missouri collected more than $176 million in tax revenue—yet only 6% of those TDDs had residents within their boundaries. According to the State Auditor’s report, $125 million of that revenue was collected without residential voter approval.
• Of the 34 TDD audits the State Auditor’s office has completed over the past 10 years, one-third concluded the TDDs under consideration were in bad financial shape. And nearly all audits indicated other issues, ranging from conflicts of interest and uncompetitive bidding practices to a failure to comply with basic accounting standards.
• Requiring SDs to demonstrate they are meeting their job creation and tax revenue goals would keep them accountable to taxpayers.
• SD board members voting for and approving contracts for themselves is a potential conflict of interest. Requiring that contracts be put out for bid would ensure a competitive process.

SHOW-ME INSTITUTE RESOURCES

Missouri State Auditor’s Report: Transportation Development Districts (Report No. 2017-20)

Blog Post: Auditor’s Report Sheds Light on Special Taxing Districts

Blog Post: Missouri’s Troubling Sales Tax Mosaic

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

The post 2018 Blueprint: Special Taxing Districts appeared first on Show-Me Institute.

In this last streetcar election in Kansas City, residents who lived within the boundaries of the TDD were required to follow these steps in order to have their vote counted:

• Obtain and complete the official ballot request form
• Obtain proof of voter registration;
• Return the ballot request and the proof of voter registration by May 23 at 5:00 p.m.

When the ballot itself was received,

• The ballot had to be completed and placed inside a white envelope;
• That white envelope had to be placed inside a blue envelope; and signed in the presence of a notary;
• That blue envelope had to be received by the Court by 5:00 pm on August 1.

To put things in perspective, civil rights groups sued the state of Missouri simply for requiring photo identification to vote. But when the law required voters to request ballots, provide proof of registration and seek out a notary, those same groups were silent.

At least one Kansas City voter tried to play by these Byzantine rules and had his ballot discarded. According to KSHB, John Toms mailed in his ballot 5 days in advance only to have the court claim it wasn’t received on time. There was no USPS post-mark on the rejected envelope.

Multiply these burdens to voters by the 230 TDDs in Missouri that together collect an annual average of $50 million in sales taxes alone and it is clear that this is something that needs more stringent taxpayer oversight. HB 1234 is a move in the right direction.

Click below to read the entire testimony

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