Self-dealing. Conflicts of interest. Taxation without representation.
Missouri Auditor Nicole Galloway pointed to all those problems this week in a scathing review of an obscure governmental entity called transportation development taxing districts. Basically, state law allows district board members to approve sales taxes for construction projects.
But they’ve been abused for years.
As Galloway put it this week at a news conference, developers can create the taxing district, elect a board, impose a sales tax on citizens without a vote, then go out and seek bids for the work.
You shouldn’t be surprised to learn that the person winning the bids often is either the developer who serves on the board or a related party.
“Outrageous” is the word Galloway repeated over and over again.
“A lot of this isn’t illegal, but it should be,” she said.
These transportation districts are everywhere across the state. In fact, there are 205 of them, including 21 in Jackson County that generated at least $14.7 million in sales taxes in 2015. One covers the Country Club Plaza, where it’s used primarily to fund parking garages. Several dot the intersection of Interstate 70 and Adams Dairy Parkway in Blue Springs.
Platte County had eight districts, according to the audit, while Clay County had five. The amount of sales taxes generated by each was difficult to determine in some cases because of restrictions on what can be reported.
Galloway has rightly called for an overhaul of the transportation district law. For some reason, the districts are the only political subdivisions in the state in which Missouri law doesn’t prohibit conflicts of interest. In 2015, the state collected $73 million in sales taxes that wound up being remitted back to the districts.
“The average citizen is getting taken advantage of here,” Galloway said. “It’s outrageous that there’s almost $1 billion in project costs that taxpayers are on the hook for. They don’t know about it, and they didn’t vote for it.”
The districts have been around since the General Assembly passed a law creating them in 1990. It requires that at least 50 percent of residents file a petition with the courts to set up a district. Problem is, the districts often have no residents within their confines. So a property owner or developer can set one up.
Galloway’s office found that 94 percent of the transportation districts in the state were formed by either a property owner or developer. Registered voters filing a petition did not create any districts.
In other words, the districts have become another tool of developers, along with tax-increment financing, community improvement districts and the like.
Galloway uncovered something else: State law requires businesses within the districts to post at cash registers that an added sales tax is being charged. But many businesses don’t comply.
If lawmakers are as outraged as we are by all this, they could push legislation through before adjourning next month. They should consider more rigorous standards for creating the districts. A conflict-of-interest provision should be included.
This is the second notable audit in recent weeks that spotlighted legitimate issues within state government, the first being $1.2 million in incentive payments to top University of Missouri administrators.
It’s a sign that Galloway, who was appointed to her post by then-Gov. Jay Nixon almost two years ago, is hitting her stride.