ST. LOUIS • Transportation development taxing districts in Missouri are riddled with conflicts of interest and have no oversight to prevent self-dealing, state Auditor Nicole Galloway said Monday.
Many of them also appear to be in violation of state law when it comes to businesses failing to notify the public of special sales taxes being collected, Galloway said.
“A lot of this isn’t illegal, but it should be,” Galloway said at a news conference at the Wainwright state government building in downtown St. Louis.
The conflicts of interest generally involve district board members being allowed to vote to award themselves contracts for construction development, as well as approving the payments of those contracts. The law does not require the districts to put such contracts out to bid publicly.
“The General Assembly needs to completely overhaul these laws,” Galloway said. “The law as it exists allows for these things to happen.”
Galloway said transportation development districts are the only such political subdivisions in the state in which these conflicts of interest aren’t prohibited by state law.
More than 100 districts out of 205 responded to an auditor’s request for documents for this study, Galloway said. In each of them, at least one business collecting the special sales tax did not provide information to customers that the tax was being charged.
In 2015, the state collected $73 million in TDD sales taxes that were then remitted back to the taxing districts.
Transportation development districts are one of several types of special taxing districts that have become increasingly popular statewide and in St. Louis. Activist and research groups, such as the East West Gateway Council of Governments, have for years been calling for reforms to TDDs as well as community improvement districts — also known as CIDs — and tax-increment financing.
“We’re told they’re creating jobs or tax revenue for the communities but there is no reporting that shows us if these outcomes are actually occurring,” East West Gateway manager of regional policy research Mary Rocchio said. “The legislation needs to be changed to do that.”
Galloway said there are three transportation development districts in St. Louis, all along Washington Avenue downtown, that were carrying out “egregious” practices. Chairmen or executive directors of the three boards mentioned by the auditor either declined to comment or did not return a reporter’s calls Monday.
Two, named the Washington Avenue TDD and 1225 Washington Avenue TDD, respectively, are both set up around parking lots and collect taxes to pay the parking lot owners “rent” for public parking, while the parking lots still charge the public to park, Galloway said. Galloway said that means the public is paying the owner twice to park in these lots, once through fees and again through taxes.
A 2014 state audit slammed the Washington Avenue TDD for providing inaccurate information on finances as well as the public accessibility of a parking lot at 1100 Washington Avenue that the district was formed to pay for. The district also made changes to the project that should have first been approved by the city, which was never notified, according to the report.
Two weeks after an October 2013 visit by the state found the Washington Avenue parking lot was not open to the public, the entire TDD board resigned. It was later discovered the parking lot and adjacent building had been sold to new owners, who were unaware the property was part of a special taxing district.
New board members were appointed in May 2014. The district includes four properties on Washington Avenue between Tucker Boulevard and 11th Street.
The 1225 Washington Avenue taxing district was previously criticized for poor financial record keeping in a 2015 audit by the state that said the district was likely in violation of state law. From 2012 to 2014, the district did not include tax collections or disbursements from the preceding year in its annual budgets, as required by state law.
A third, named the St. Louis Convention Center Hotel TDD, was established in 2010 with the understanding it would collect a one-cent sales tax for 13 years. Four years later, the board on its own was able to extend the sales tax to 40 years.
“Really, this is taxation without representation,” Galloway said. “Citizens have no input.”
The St. Louis Convention Center Hotel district is not affiliated with America’s Center or the Dome. The district, formed originally to pay off $15 million in debt on the construction of a parking garage, includes Marriott Hotel businesses at the intersection of Washington Avenue and Ninth Street.