There’s a lot of blame to spread around for what Missouri Auditor Nicole Galloway says is St. Louis’ failure to enforce reporting and accountability compliance within its special taxing districts. Those are the 138 districts in the city that have special status to impose their own taxes or receive exemption from taxes as a way of spurring investment and reviving troubled commercial areas.
In theory, such districts can provide an important stimulus to redevelopment. They are responsible for the revival and preservation of several downtown blocks, including the Central West End and South Grand Boulevard. But no delegated authority like this should be trusted to operate on its own, free of government oversight — especially when such districts give developers a break on their taxes or grant them the right to impose sales taxes on the public.
A recent audit by Galloway’s office underscored multiple ways in which city oversight has fallen by the wayside. She said the city didn’t take followup action after 60% of those districts didn’t submit annual financial reports as required, and 99% didn’t submit a 2018 budget. Her audit looked at two special categories, community improvement districts and transportation development districts. Developers control more than 90% of the seats on the governing boards of each of these entities. The absence of independent oversight and rigorous government scrutiny is an invitation for lax accountability and even abuse.
For the Missourians who frequent those districts, the sales taxes they wind up paying can be galactically high. In 25 districts Galloway cites where overlapping special taxing entities exist, the sales tax rate is nearly 11.7% — the highest in the state. Without proper auditing and enforced accountability, how is the public to know that those taxes are being imposed and used properly?
“The rampant use of local taxing districts in St. Louis has resulted in the highest sales tax rates in the state. It’s outrageous that, for too long, these districts have operated unchecked. Taxpayers deserve to know their money is being used efficiently, effectively and for the benefit of the entire community,” Galloway said last week. “It’s up to the city to put processes in place to protect taxpayers and ensure projects have meaningful oversight.”
The absence of a comprehensive city economic development plan further hampers St. Louis’ ability to maximize the effectiveness of these districts, Galloway’s office found.
The state Legislature should share some blame. The city correctly counters that the state law that enabled the formation of districts with taxing authority failed to include mechanisms for the local government to enforcement compliance. That’s a flaw that only the Legislature can fix — which it should starting in January. Meanwhile, the city at least could make a point of publicly citing the entities that fail to comply instead of quietly letting them skate by.