Community improvement districts a growing trend in KC, but they’re bad for taxpayers | Opinion
The Kansas City Crossroads District recently announced it is in the “final stretch” of creating a community improvement district or CID. The district, which would stretch from Broadway Boulevard to Troost Avenue and Truman Road south to the railroad lines near 22nd Street, is the latest CID in a rapidly growing trend throughout Missouri and the metropolitan area.
At best, CIDs are an admission by local governments that they can’t provide basic services such as security and cleanup. At worst, they hand significant taxing powers to opaque, poorly regulated organizations prone to self-dealing.
Kansas City’s auditor reported in 2021 that CIDs often fail to file required reports with the city and state, submit budgets or provide annual reports, while the city does a poor job monitoring them. State audits from auditors of both parties criticize CIDs for burdening taxpayers with billions in costs without meaningful oversight, often long after the projects for which they were formed are completed.
And yet, CIDs in Missouri have exploded in number. A 2019 analysis for Show-Me Institute, a free market think tank where I am a senior fellow, found that over the previous decade, CID sales and use tax collections grew by more than 1,100%, with the number of CIDs rising from zero before 1999 to more than 400 by 2017.
Kansas Citians may remember when the Intercontinental Hotel on the Country Club Plaza sought a blight designation in 2016 to form a CID and to collect an additional 1% sales tax for cosmetic updates. Similarly, in 2019, a CID was approved for the Romanelli Shopping Center in Waldo. Both were designed solely to benefit the developer, not the community. They were greenlighted by a small number of property owners, allowing developers to secure favorable terms easily.
The problem with CIDs isn’t just self-dealing or potential corruption. In 2013, the Independence Avenue CID was formed to enhance security, beautification and trash collection, funded by a 1% sales tax. As a result, residents in this low-income community faced a higher sales tax on food — a regressive tax — than wealthier areas of the city paid.
This isn’t necessarily an indictment of the people running the Independence or Crossroads CIDs. They might be providing services competently. But the fact they feel the need to tax themselves for basic services — services that existing taxes should cover — highlights City Hall’s failure to fulfill core functions. Worse, this often shifts the burden of paying for these services onto those least able to afford it.
When misused, CIDs and similar special taxing districts erode public trust and distort markets. Local governments are easily lured into approving these districts — and why not? The city doesn’t lose tax revenue in these arrangements. It simply lets others pick up the slack.
The original idea behind CIDs might have been rooted in enabling neighborhoods and business districts to take control of their own needs. But instead of empowering communities, they are increasingly exploited by developers to enrich themselves and by city officials eager to offload responsibilities.
Reforming CIDs requires tightening eligibility, ensuring only districts that demonstrate clear public benefits are approved, and imposing stricter limits on revenue use. Transparency and accountability must be enforced, with significant penalties for noncompliance. Community approval processes should be expanded, with districts given a five-year limit and required renewal votes. Perhaps most crucial, local governments should be required to forfeit a percentage of taxes collected within the district. If the city can’t provide all the services, it shouldn’t be collecting all the taxes.
These reforms won’t eliminate all the problems, but they would restore some balance and ensure that community improvement districts serve the community, not just business owners. And if the reforms only disincentivize these districts in the first place and force people and businesses to demand more of their local governments? All the better.
Patrick Tuohey is co-founder of Better Cities Project, a 501(c)(3) nonprofit focused on municipal policy solutions, and a senior fellow at the Show-Me Institute, a 501(c)(3) nonprofit dedicated to Missouri state policy work.