Crestwood Point TDD - "Developers need more oversight, audit finds" article

Developers need more oversight, audit finds
By Elisa Crouch
St. Louis Post-Dispatch 08/12/2007

Problems • No-bid contracts, poor record keeping and overtaxing.
Effects • Taxes for road projects could be in place longer than expected.

A Missouri auditor's examination of special taxing districts used by developers to raise money for road improvements has revealed problems across the state, such as no-bid construction contracts that violate state law and poor record keeping.

In an audit of 17 of these districts, Missouri Auditor Susan Montee said some contracts were awarded to companies run by board members. In another district, a retailer overtaxed customers. Records weren't available in some cases, and in others, the taxes collected by the developers aren't enough to cover the cost of the transportation projects. This means taxes could be in place for years longer than initially expected.

"The single issue is total lack of public notice and oversight," Montee said. "Any time you're taking public monies, someone needs to be able to look over them."
Developers are levying their own taxes at more than 122 shopping centers across Missouri, to pay for things like new traffic signals leading into parking lots, wider roads and, sometimes, the parking spaces themselves.

In the St. Louis area, the additional taxes are being assessed at more than 45 retail centers, such as the Shoppes at Cross Keys in Florissant, the Promenade in Brentwood and Boschert's Landing in St. Peters. The amount ranges from an extra one-eighth to 1 percent on every dollar spent. State law stipulates that the money be spent on transportation-related expenses.
The tax is listed on receipts at a few stores as TDD, for transportation development district. But in most cases, it's either listed as an additional local tax or blended into state and local sales taxes.

Many shoppers are unaware they're paying higher taxes at these retail centers.
In interviews last week, some were unhappy to learn that districts aren't always looking for the lowest bidder, which could reduce project costs and end the tax sooner.
"It's money out of each of our pockets," said Kathleen Gundlach of Fenton, who was shopping Thursday at stores in one of several special taxing districts along Highway 141. "It shouldn't be spent like that."

LOOSE LEGISLATION
Transportation development districts have been around since 1997, the year that the Legislature eased the requirements on establishing them.
Forming a district requires no approval from nearby voters or elected officials. Property owners simply file a petition in circuit court, in the same county as the proposed district. A judge determines whether to grant the request.

Taken together, the districts' spending power is big. Montee's report said the districts statewide had $923 million in projects either done, under way or planned. Montee found no abuses in the projects themselves — all qualified as transportation projects.
For most cities, the districts have been a boost. They've paid for the Pearce Boulevard-Wentzville Parkway interchange in Wentzville and a two-story parking garage near Gore and Lockwood avenues in Webster Groves.

The 1 percent tax shoppers pay at stores in the Meridian at Brentwood center helped to pay for the widening of Eager Road to five lanes from two, and replaces a bridge that passes over MetroLink right of way.

In south St. Louis County, the half-percent tax charged at the Costco and Target retail development is paying for $12 million in improvements to Elm Road, Bi-State Industrial Drive and St. John's Church Road.
"They help pay for needs that otherwise might be a financial burden," said Tryla Brown, economic and community development manager for Crestwood, which has three of these districts.

In most cases, a city or county official sits on the district's board of directors, to provide some local oversight. Nevertheless, the audit revealed the following:
— The Hanley-Eager Road district in Brentwood, known as the Meridian shopping center, in 2003 awarded a $5.4 million construction contract to the company owned by the transportation district's treasurer.
The district advertised for bids, but received only one, from the treasurer's company. The audit did not identify the treasurer or the company. The district did not respond to the charge.
— A transportation district called CentreState in Columbia, Mo., paid $709,900 to a board member's engineering firm. Another district, Lake of the Woods, paid a board member's company $7,320 for architectural services.
— Home Depot, the only retail store in the Interstate 70 and Adams Dairy Parkway district, in Blue Springs near Kansas City, incorrectly charged a 1 percent sales tax on retail sales for eight months starting in September 2003, when the district should have imposed only a half-percent. The amount of overpayment was about $60,000, the state report says.

— The Crestwood Point district levies a 1 percent sales tax at Kohl's at Sappington and Watson roads in Crestwood to pay for $3 million in projects. One of those projects is rebuilding City Hall's parking lot across the street, which required buying land from the Crestwood Swim Club. The audit said the property deed was transferred improperly to the city, rather than to the district first.
"Ultimately, it was the developers' responsibility," said Robert Klahr, attorney for Crestwood Point. "They acquired it but not in a way that was initially described to the Board of Aldermen."

STRONGER OVERSIGHT
Catherine M. Barrett, a Crestwood resident, has been urging legislators to make it easier for citizens to track how districts spend money. To examine records from districts in Crestwood, she's had to travel to attorney's offices in downtown St. Louis, where they're stored.
"This is public sales tax money," she said. "Until we get accountability, how do we know where these sales tax dollars are going?"

All 17 districts audited were cited for irregularities. Other area districts examined in the report are: the Meramec Station Road and Highway 141 district in Fenton, the 370/Missouri Bottom Road/Taussig Road district in Hazelwood, St. John's Church Road district in St. Louis County and Shoppes at Cross Keys in Florissant.

Montee said her office plans to audit more districts next year. She expects to find similar problems, she said. She hopes the Legislature increases oversight of these districts, which she says would lead to accountability and a stronger certainty that tax dollars are being spent as they should.

In 2006, then-Auditor Claire McCaskill reported that without stronger oversight, transportation development districts have the potential for abuse.
"We've got an increasing number of these coming on board, so you're likely to have a whole area of grossly increased taxes," Montee said. "Do we want to have an increased number of districts out there without adequate controls on there?"
ecrouch@post-dispatch.com 314-340-8119