CIDs, TDDs, and other districts undoubtedly need better public oversight. There also needs to simply be fewer of them, oversight or not. Hopefully the second part will be as important as the first part for the committee. An audit of CIDs by the Kansas City auditor in 2021 detailed the many issues with them in Kansas City, and a similar report from this committee would be beneficial.

I will be at this first committee meeting to enter into the record the  2019 report on special taxing districts published by the Show-Me Institute. It is great that the city has formed this committee, and hopefully both better oversight and reduced usage of special taxing districts will be the result.

(As a child of the 80’s, the hardest part of writing this blog post about a special committee studying special taxing districts was avoiding making a bunch of church lady references.)

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Like most special taxing districts in Missouri, the Buc-ee’s CID will use public funds for private infrastructure. The new sales tax rate at Buc-ee’s will only benefit the company itself—the tax dollars collected at the gas station will mostly go toward constructing the building, access road, and parking lot. From its first day of operation, corporate welfare will support the business one Springfield resident referred to as “a beaver Walmart.”

Most residents of Springfield will have no say in this matter. The city drew the boundaries of the CID in such a way that all voters are excluded—only the city council got to vote on this. Show-Me Institute Director of Municipal Policy David Stokes called this “tax gerrymandering” in his testimony on this issue. In addition, four out of the five members of the Buc-ee’s CID board are listed as “Owner Representatives,” leaving only one seat for a citizen to provide a public perspective. Even once the CID is in effect, most of Buc-ee’s customers will likely have no idea about the extra hit to their wallets, since the CID Act doesn’t require any posting of added sales taxes.

Years of writing and research from Institute analysts on CIDs prove that proposals such as these are nothing new. Private developers use the public’s money to subsidize corporate interests with almost no public input. This process with special taxing districts has played out countless times before, both in Greene County and around our great state. You can see for yourself just how widespread CIDs are in Missouri by following the link to this interactive map from the Missouri Department of Revenue. Hopefully Springfield, and cities across the state, will soon learn that this isn’t a mistake worth repeating.

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Special taxing districts are generally defined as public entities that are created to do one thing only, such as a street light district, as opposed to general districts such as cities or counties. Obviously, the latter get much more attention than the former. We discuss Kansas City far more than we discuss the Cape Girardeau–Bollinger County Joint Recreational Lake Authority.

What does this debate in Florida have to do with Missouri? Well, we actually have an enormous number of special taxing districts in Missouri, although none as large and all-encompassing as Reedy Creek in Orlando. Special taxing districts fall into two broad categories in Missouri: ones that perform a single public service, such as fire, ambulance, street light, and road districts, and ones that essentially funnel corporate welfare to various private entities under the guise of public improvements. The latter are primarily Community Improvement Districts (CIDs) and Transportation Development Districts (TDDs).

The latter two are also the ones expanding most rapidly in Missouri. Right now, there is a debate in Jefferson County about the Bear Ridge Community Improvement District, which is essentially a taxing district that, according to my sources in Jefferson County, will fund infrastructure improvements for a new subdivision. What’s wrong with that? Well, until very recently developers would fund these improvements themselves and recoup their investment and profit upon sales of the homes, rental of the office buildings, etc. Now, developers have figured out that they can transfer many of these costs to taxing entities, based on either property or sales taxes, and use these public tax dollars for what are essentially private services.

Missouri Auditors from both parties have documented the abuses and mismanagement that inevitably come with so many tiny taxing districts with hardly any oversight. Show-Me Institute analysts have covered this issue for years. There is at least one bill before the legislature this session that has needed changes to many special taxing districts. Hopefully, the dispute at Disney World can help shine some light on special taxing districts in Missouri.

Why? Because we need reform, too.

The post Special Taxing District Don’t Stop Coming appeared first on Show-Me Institute.

The state’s department of revenue previously determined that for the smallest CIDs—CIDs that only have a few parcels and property owners—releasing tax information is the same as releasing an individual’s personal tax information. So, as you can see in this report on CIDs from the state auditor, certain CIDs have their information redacted, as if secret details from the Gulf of Tonkin are buried in Missouri CID reports or something.

Senate Bill 1066 has been introduced to address this issue and clarify that all CID revenues, which, if I didn’t make this clear enough the first time, are all public tax dollars, can be collected and shared by various state agencies. This is a good bill for government transparency, something that has long been important to the Show-Me Institute.

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Apparently, the problems that led to the initial postponement of the project have been overcome as the plan for the $27 million development with retail, restaurant, and office space is moving forward. The land for the proposed development was only annexed into the City of Springfield in June 2021.

The obvious question is: Why would the city annex an area only to spend millions of taxpayer dollars subsidizing the development of the land?

I’ll admit that the area seems to be in pretty bad shape, so it may legitimately be considered “blight,” a designation that would qualify the project for TIF. (Blight designations for TIF projects are frequently not legitimate.) But there are other programs intended for environmental remediation that the land’s private owners could pursue that are much less harmful to taxpayers.

Economic development incentives such as TIF put taxpayers on the hook to increase private business profits. While passing this TIF proposal may make Springfield lawmakers look like they are “fixing” this eyesore, it’s at the expense of taxpayers. Lawmakers should focus on keeping tax rates low for everyone instead of playing favorites and artificially lowering them for a chosen few.

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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.

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The downtown St. Louis CID has to be renewed at various intervals, and renewal requires the signatures of the property owners within the district. This includes all property—condos, businesses, parking lots, etc. Because this CID actually serves an area where people live (which is one of the good things about it), renewal requires lots of signatures. COVID-related changes and restrictions have complicated this process. In addition, an organized group of downtown residents and property owners has been opposing its renewal.

The downtown CID collects money via special property taxes. If the CID does not get renewed soon, those taxes won’t be on the 2021 property tax bills sent in a few weeks to property owners. That could be the death of the CID right then and there.

What a special taxing district like this CID really forces one to admit is that the local government is failing. City businesses and residents pay property taxes, sales taxes, income taxes, payroll taxes, utility taxes, occupancy fees, business licenses, and more. Yet those taxes are not enough to keep the trash off of the streets and help maintain law and order (the two main uses of the CID funds, along with downtown “marketing”). So the business owners and residents decided to tax themselves more to address some of these issues. Clearly, many of them do not feel that those additional taxes ($3.6 million each year, to be precise) are paying off, and a termination date and renewal process gives a clear path for ending a CID, which isn’t often the case for many taxes.

The problems with these types of special taxing districts have been well documented around the state. While this CID does not share some of the most egregious characteristics of other special taxing districts, it is great to see people fighting back against government that is not serving their needs. That is what this country was founded on, whether we are talking about tea in Boston, or CIDs in the historic Village of Ballpark.

It should be noted that the leading proponents of getting rid of the current CID want to replace it with a new and differently organized CID, but that would require a separate and independent process with no guarantee of success. In any case, downtown property owners may soon see whether those extra taxes they were paying were really worth anything or not.

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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.

The Missouri State Auditor’s office has documented numerous flaws in CIDs. At the public meeting on the Ferguson CID last week, one of the speakers even encouraged the city council to review one of these audits to give the city guidance. (I would be surprised if the city did that, but I’d love to be wrong.) Among the many issues with CIDs: lack of transparency; improper oversight once established; failure to follow required rules for dealing with tax dollars, including lack of public bids and private use of tax funds; and erroneous tax collections. Perhaps the largest problem with CIDs is that they are frequently used to fund private entities with public tax dollars. Things such as private business parking lots should be—and until very recently were—considered private items to be funded by businesses, not taxpayers.

The proposed CID in Ferguson is a new tax for only one parcel of land that will authorize a sales tax for the new stores going into the development. Essentially, this project will use public tax dollars for private purposes. The board of the CID consists mainly of representatives of the developer, so the private interests of the developer will be their focus, not the proper use of tax dollars. (To be clear, two of the five members of the board are public representatives, but—despite being no math genius as best I can telltwo is less than half of five.) The developers claim that this parcel is blighted, which is highly questionable. It is adjacent to the very nice campus of Florissant Valley Community College. There is no public vote on this CID—it is a mail-in ballot voted by only the property owner(s), who will likely vote to support the new, surreptitious tax on their own customers that will be used to benefit the property owners.

This proposed CID will have no public vote, little public benefit, and very limited public oversight. This is not the way to go forward for Ferguson. CIDs like these should be stopped and the state should make substantial reforms to the CID rules.

The post Ferguson, Missouri Will Not Be Improved by More Special Taxing Districts 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.

David Stokes joined The McGraw Show on The Big 550 KTRS to discuss the project.

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The Crestwood TIF Commission is considering a proposal to redevelop the land that was once the Crestwood Mall. The plan includes a Dierbergs grocery store and multiple retail spaces that would be partially funded with $13.5 million from tax-increment financing and $3.5 million from a community improvement district. There is also a residential component of the development that will not include public funding. There is a TIF Commission public hearing on this proposal at 7 p.m. on June 17th, 2021.

Read our Testimony on The Crestwood Mall TIF Proposal here: https://bit.ly/3wtnO3q

Read the commission meeting notes here: https://bit.ly/35sv7w8

More on the Crestwood TIF:

https://showmeinstitute.org/blog/subsidies/if-at-first-you-dont-succeed/

https://showmeinstitute.org/blog/subsidies/tax-hikes-to-fund-tax-cuts/

https://showmeinstitute.org/blog/municipal-policy/what-should-crestwood-do/

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Numerous state audits over the past decades have identified the shortcomings of these districts. Now, the Kansas City Auditor has reviewed the use of CIDs in Kansas City and found many of the same issues. Show-Me Institute analysts have written about the problems with CIDs and TDDs for years. Common problems with these special taxing districts include financial abuses, lack of transparency, egregious boundary drawing to avoid voter participation, and much more.

The recent audit of CIDs in KC found many of the same things. From the article in the Kansas City Star (emphasis added):

In recent years, however, several CIDs have been created to benefit a single property owner or developer. In 2016, for example, the Intercontinental Hotel at the Country Club Plaza created a CID for itself to raise taxes earmarked to pay for upkeep of deterioration that the ritzy hotel argued had created blighted conditions. A similar CID was approved for the Romanelli Shopping Center in Waldo in 2019.

Both were criticized for using taxes to subsidize property maintenance. More than half of the existing CIDs in Kansas City benefit a single owner or developer, as opposed to community-based districts like those covering Westport or downtown.

The audit also noted that several CIDs — more than a third — have not submitted their annual budgets to City Hall, a requirement under Missouri law.

Legislation just passed by the state legislature makes some modest reforms to CIDs. These reforms include mandating annual financial reports, competitive bids for contracts, and requiring at least one independent board member. Hopefully, the governor will sign it. But we need to go much further and ensure these taxing districts cannot abuse the public trust for private gain, which is all many of them are good for. (Yes, there are exceptions to that.)

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. 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 post More Evidence of Failures of CIDs appeared first on Show-Me Institute.

So I am excited by some recent, positive steps in the area of local tax subsidies. For too long, state and local governments in Missouri have erroneously believed that tax subsidies spur growth. In fact, the opposite is true. They almost always fail in their purpose of increasing economic growth. Slowly but semi-surely, more people seem to be realizing that.

In Kansas City, there is a serious debate over a bill to further tighten the subsidies offered by the city government (here is my testimony on this bill). When it was first introduced, the bill was stronger. The current version does not go far enough, but, hey: baby steps, man, baby steps. If the bill tightens up subsidy rules at all—and it does—then I think it would benefit Kansas City.

I have already written about Chesterfield rejecting a community improvement district (CID)recently. Hopefully, this is part of this larger trend, both in St. Louis County and statewide.

Earlier this week, the St. Louis County Council delayed a proposal to use tax dollars to support a private youth sports development in Hazelwood. This is a slightly different issue. The tax money at issue here is not an abatement or tax break. St. Louis County would be using hotel tax money raised via measures passed by voters to support tourism-related projects. Nonetheless, the questions raised by those on the council are valid. They want to be certain that if there is a shortfall in hotel tax money (a very reasonable concern in the present environment) that the developer is on the hook for any shortfall, not St. Louis County taxpayers via general revenue tax dollars.

That said, this is fundamentally a private development. While I wish the developers well as they attempt to replace the fiscal, environmental, and totally predictable disaster that was the Hazelwood Mills Mall, they should rely on private funding, not public tax dollars. The fact that elected officials of both parties are questioning the spending is heartening.

Now, time for that tonic and gin . . .

The post Signs of Progress on Local Tax Subsidies in Missouri? appeared first on Show-Me Institute.

Joking aside, the developer of Wildhorse Village (which includes Ruth’s Chris) is seriously angry that he did not get his tax subsidy from the Chesterfield City Council. That is how bad Missouri has become with the constant corporate welfare giveaways. The developer is actually mad that elected officials did not give him other people’s tax dollars to help him make more money from his development. He assumed (and past history in our area justifies his assumption, unfortunately) that those tax dollars were his for the taking. All he had to do was fill out some forms, make the required official statements, and Chesterfield would give him his tax subsidy.

But a funny thing happened on the way to the finance meeting. The city council finance subcommittee voted the subsidy down. Four votes against, zero in favor. As one councilmember said:

We don’t need to subsidize developers to come into Chesterfield and build. It’s some of the most desirable real estate with the best demographics in the area. We don’t need to bribe people to come in.

He is completely right about this. The same thing can be said about many other parts of the state where tax incentives and subsidies are ubiquitous. In the Central West End of St. Louis, for example, the tax incentives are so unnecessary that they are simply capitalized into a higher price for the property since it is just a given that the new owner will get tax subsidies. More money for the entity that makes the sale, less money for public services, all caused by an unnecessary government market distortion in the first place (the final part is the key point here).

There are very few cities in Missouri that typically take a hard look a tax subsidy requests. Most say yes to the proposals faster than a contestant on The Bachelorette. There are rumors the developers will come back and request money again—hopefully Chesterfield sticks to its gun here. If Chesterfield were to take the lead in turning down at least some of these requests, that would be a big step forward for municipal policy in Missouri.

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