A new report from the state auditor's office calls into question how much accountability and oversight protect $1 billion worth of taxpayer money that Missouri transportation development districts will use to pay for projects like those on Shelby and Oak Grove roads in Poplar Bluff.
The Poplar Bluff Regional TDD had the third highest reported collections of any TDD in the state in 2016, at nearly $3.4 million.
While Poplar Bluff City Manager Mark Massingham agrees the state could do a better job of overseeing the TDD system, he believes the law was created to help communities fund projects that benefit public interest. Construction of Shelby Road, a Highway 67 interchange and entrance at Three Rivers College are examples of this, according to Massingham.
There are more than 200 of these special taxing districts in the state, with about 80 percent controlled by private individuals or developers, state auditor Nicole Galloway said this week.
Current laws fail to safeguard the public interest and a complete overhaul is needed, she wrote in documents that review portions of the TDD law.
The districts can be created without a public vote and are not required to prove they will benefit the public, Galloway explained. The law does not require the scope of projects be defined and has no safeguards to ensure tax collections stop after project debt is repaid.
Galloway says TDDs have morphed into a public funding source for private developers.
"The majority of TDDs are created and managed by the owners and developers that stand to gain the most from the districts' tax collections," Galloway said in a statement. "This creates an inherent conflict of interest, paired with little opportunity for citizen input and a lack of taxing transparency."
The state also redacts all information concerning any TDD that has less than seven retailers, Galloway said. This means that for 76 districts, about 37 percent, the public pays a sales tax and is not allowed to see how much is collected or exactly how it is used.
The total amount of TDD sales tax collected in Butler County is redacted because one of its three transportation districts meets this criteria.
The Oak Grove TDD encompasses one business at this time, Wal-Mart Neighborhood Market.
It was created by property owners/developers. This sales tax helped expand and improve Oak Grove Road, Massingham said.
The Oak Grove TDD board voted in the fall of 2016 to reallocate up to $600,000 in sales tax to a project that will extend Shelby Road.
Construction of the existing portion of Shelby Road is included in about $40 million in project debt paid for by the 5-year-old Poplar Bluff Regional TDD. Collections from the PBR TDD fell short of an estimated $10.5 million still needed to extend Shelby Road to Highway 53.
The PBR TDD was created by property owners/developers and the city.
Massingham and the city clerk sit on the boards of all three Butler County TDDs, along with property owners.
A TDD can be created by a petition filed with the county circuit court.
Galloway is correct that taxpayers are not asked to vote on the creation of some TDDs, according to Massingham.
"TDDs are voted on by the property owners within the proposed boundaries not the citizens," Massingham said. "The Poplar Bluff Regional TDD (PBR TDD) was voted on and approved by property owners along the Westwood Blvd. corridor."
From reading the information released by Galloway's office, it appears some TDDs take advantage of the system, Massingham added.
"I do not feel the local TDD does," he said. "The PBR TDD is made up of city and county officials that have specific projects that must be completed with the tax collections."
All meetings are posted and advertised so the public has the opportunity for input, Massingham continued.
"I feel the local TDD has operated the way the law was intended, to assist our community with public transportation projects," Massingham said.
A third TDD, Cripple Creek, has no sales tax collections reported in 2015 or 2014 and about $10,000 in other money.
There are no TDDs in Carter, Dunklin, Ripley, Reynolds, Stoddard or Wayne counties.
Galloway has proposed a series of changes she says would better protect the public interest, starting with the way districts are created.
A public body or public vote should be necessary, Galloway's report states.
The TDD law was created to help fund public transportation projects, but is now primarily used as an economic development tool for individual projects and private assets, it continues. Yet, no estimate of economic impact is required to form a TDD. This would help ensure the investment of public money will benefit the community, according to Galloway.
TDDs should also be required to prove the lowest and best bidder is selected. State TDDs have obligations totalling $941 million, Galloway said.
An analysis of a Cole County TDD showed a $2 million contract was awarded to a construction company owned by the TDDs members. The bid was submitted late and did not appear to cover all of the project specifications, Galloway said, but was accepted over a bid from a competing firm that did meet deadlines and specifications.
The collections and spending of this district are redacted from public view because it has less than seven businesses.
Galloway is also concerned TDD taxes can be extended without independent approval. A St. Louis district was originally created to operate for 13 years, she said. Within four years, the property owner/developer-controlled board extended the tax for 40 years. The information for this TDD is also redacted from public view.
Galloway's office conducted an in-depth review of 12 districts. They found all 12 included at least one business that illegally failed to notify customers of the sales taxes charged.