Two Missouri cities are reviewing Community Investment Districts (CID) to generate sales taxes or collect property taxes to pay for services.
One CID might be created on Nov. 15 to pay for $2 million in infrastructure at a private development. The other expires Dec. 31 and annually collects $3.6 million in property taxes for safety and security, infrastructure, management of public space and economic development.
“I think most CIDs are really just an admission that government is not working,” said David Stokes, director of municipal policy at the Show-Me Institute. “After an admission that government isn’t working, we’re going to tax ourselves more to potentially try to do some other things. Or, it’s just corporate welfare.”
In Springfield, the city council will vote next week to create a CID to collect a 1% sales tax on purchases made at a 114-acre youth sports complex under construction. In addition to athletic fields and a 94,000-square feet indoor complex, an adjoining 26-acre area will have a hotel, restaurants and retail shops. The city is providing $2 million for construction of public utilities and traffic improvements for the entire development.
“This is more of the city recouping funds for public infrastructure,” said Stan Leidel, president of L5 Management & Consulting, the developer of the Betty & Bobby Allison Sports Town. “This project is over $20 million and the city is giving a small portion of that. They will get their money back through the CID.”
Stokes believes Springfield and other cities shouldn’t be providing millions to private developers on speculation it will repay the money.
“I don’t know why Springfield thinks it should invest $2 million of taxpayer money to help a private operation make money,” Stokes said. “I wish the business nothing but success. And I wish businesses would create their own CIDs that are covered only by the developers.”
“Citizens for a Greater Downtown St. Louis” was formed by a group of 14 residents, businesses, developers and investors committed to changing the operating structure of the Downtown St. Louis Community Improvement District. Property owners in the district paid approximately $30 million during the last 10 years. The citizens group believes approximately $3.6 million in annual property taxes could have been better spent. It seeks changes to ensure the future CID is more effective, transparent, better managed and more deeply engaged with downtown issues.
“The existing CID’s Management Plan has focused primarily upon ‘clean and safe,’ yet programs and strategies have been ineffective or inefficient and have not successfully engaged in critical issues in important areas such as safety and security, infrastructure, management and maintenance of public space, and economic development,” the citizens group stated on its website. “By almost any objective measure, conditions Downtown have deteriorated, a circumstance painfully reflected by declining property values and rents. While it is tempting to blame deteriorating conditions Downtown on the current pandemic, negative economic, physical, and social trends were evident long before the pandemic began and will not disappear when it ends.”
Stokes highlighted the CID paid for extra security, but it was provided during workdays and not on weekends or at night.
“In this case, it’s just a complete admission that city government is failing to serve the people who live and work downtown,” Stokes said. “I hope the current (CID) gets it defeated, not renewed. If they do renew it, I hope it’s much more responsive to the residents and transparent with their spending.”
Leidel, the Springfield developer, is also applying for $4 million in federal COVID-19 relief funds from the American Rescue Plan Act under sections affecting tourism. He said construction of the building was delayed and steel and construction costs are approximately 300% higher than before the pandemic.
“We’re asking for funds because we feel we qualify,” Leidel said.
In addition to attracting tourists, Ledidel said the complex will spur additional development in the surrounding area.
“It’s a significant benefit for Springfield taxpayers,” Leidel said. “We feel like we’re helping develop the area and I don’t know why anybody would be against that. The 1% sales tax is just for the sports complex and the commercial development. The tourism dollars we’re going to bring in significantly outweigh the actual 1% increase in sales tax in that area.
“I would talk to anybody against it and try to figure out their point of view of not wanting to spur sports tourism, and bringing in a significant amount to Springfield and building up the western and northwestern corridor.”
Stokes pointed out state audits, conducted by auditors of both parties throughout the years, criticizing poor fiscal management of CIDs and other special taxing districts. Missouri Auditor Nicole Galloway in 2019 audited 86 CIDs in St. Louis and rated the financial management “poor.” The report said St. Louis “does not have a comprehensive economic development plan that provides a strategic approach for establishing and evaluating local taxing districts. City officials allow CIDs to form and operate without adequate public scrutiny to ensure these districts are in the best interest of the public. The city does not have procedures in place to ensure CIDs in the city provide annual budgets and annual performance reports as required by state law.”
Stokes is concerned Springfield will follow the trend set by St. Louis.
“Springfield seems to be following in the tradition of St. Louis and Kansas City, which is to start subsidizing everything,” Stokes said. “I’ve heard people from Springfield at state legislative meetings saying, ‘We do things right, so don’t apply reforms in our area.’ I’m here to say they don’t do it right. They don’t do it any better.”
