Are special taxing districts ripping off Missouri taxpayers? KC should hit the brakes

The Intercontinental Hotel on the Plaza claimed blight, and asked for a CID tax bump.
The Intercontinental Hotel on the Plaza claimed blight, and asked for a CID tax bump. File photo

Missouri State Auditor Nicole Galloway has released a devastating and important report on the use — or misuse — of a widely used but seldom studied economic development tool.

It’s called the Community Improvement District program, or CID. And it’s a fuzzy, multimillion-dollar mess.

There are more than 400 CIDs in Missouri, including more than two dozen in Kansas City. Inside the boundaries of a CID, taxpayers pay additional money — almost always a sales tax — to finance a wide range of projects: malls, parking lots, even sculptures and fountains.

The system is ripe for abuse, and Galloway found it.

CIDs are formed without serious oversight or review, often without a clear purpose. They can last forever, in some cases providing windfalls to local governments once the original project is finished.

Developers don’t have to prove a CID is really necessary. The board supervising a CID can have significant conflicts of interest. Taxpayers aren’t told about the extra taxes they’re stuck with.

More? Record keeping is poor. Spending from CID funds is often hidden from the public. Oh, and often, there isn’t a public vote on a CID because real voters don’t live in the district.

“There is no law to ensure developers are accountable for the public dollars they receive,” Galloway said Wednesday. “State laws must be reformed to ensure taxpayers get the protection they deserve.”

We agree. In fact, we’d go further: Kansas City should enact a six-month moratorium on establishing any new CID. That will give the Missouri legislature time to review the current laws governing this development tool.

It will also give the city time to review its own procedures for considering these districts.

The Intercontinental Hotel on the Country Club Plaza claimed blight and asked for a CID tax bump. The performing arts center is inside a CID. So are downtown, the River Market and the Ward Parkway Shopping Center.

The districts can be useful. But every time the city adds a penny to the sales tax in a special district, it becomes harder to consider regressive sales taxes for citywide needs such as police protection or early childhood education.

And taxing districts have an absolute responsibility to explain their spending and make sure tax dollars are used as promised.

Like other development tools, what began as a good idea has turned, in many cases, to abuse and mismanagement. The City Council should put the brakes on the system for a time, and state lawmakers should ensure CIDs are transparent, necessary and yield a public good.