When people spend money at Ballpark Village or Union Station, they are paying two percent more in sales tax — or 11.679 percent total, the highest in the state.
This is because those retailers are located within “layered incentive districts,” explained state Auditor Nicole Galloway in a recent audit of the City of St. Louis’ local taxing districts.
In theory, areas that collect additional taxes — local taxing districts — are largely supposed to fund public improvements or private projects in blighted areas, according to state law. But in practice, the tax revenues are going to developers for projects in the city’s central business corridor, the audit shows. And, “the city does not evaluate if the use of these tax dollars are in the best interest of the public,” Galloway states.
Overall, Galloway graded the City of St. Louis with a “poor,” the lowest possible grade.
“It’s outrageous that, for too long, these districts have operated unchecked,” Galloway said. “Taxpayers deserve to know their money is being used efficiently, effectively and for the benefit of the entire community. It’s up to the city to put processes in place to protect taxpayers and ensure projects have meaningful oversight.”
Repeatedly, the city’s responses — which are included in the report — state they are in compliance with state law, which does not require any specific analysis to evaluate the merits of a proposed taxing district. To this Galloway said, “Approval by the city is required and would allow officials the ability to provide additional scrutiny. As a result of lack of oversight by the city, some districts have formed with vague purposes.”
Galloway found that none of the city’s 21 Special Business Districts (SBDs) — which largely collect additional property tax — were established in accordance with state law.
“What the audit found wasn’t a new kind of problem,” said Glenn Burleigh, a volunteer with the grassroots movement Audit STL. “This stuff has not been done correctly for a long, long time. Every single Special Business District was not put together correctly. This means multiple mayors, multiple city counselors, multiple clerks. Nobody has been doing that job.”
Galloway’s findings are a good example why the Audit STL urged the state auditor to conduct a citywide audit, Burleigh said. In addition to the SBDs, the report looks at Community Improvement Districts (CIDs) and Transportation Development District (TDDs) projects. The majority of CIDs and TDDs are funded through increased sales taxes on purchases within the district, while SBDs are funded by increased property taxes and business license taxes. There are 138 of these districts located in the city.
The audit found that the city does not have a comprehensive development plan or strategic approach to establish taxing districts. In response to this, Linda Martinez, the deputy mayor for development, stated that such a plan is not required by state law but one is expected to be completed by January 2020.
Galloway also found that there is little transparency regarding what these districts are actually doing.
“Lack of oversight in CIDs and TDDs allow spending decisions to be made by those that benefit the most,” according to Galloway’s press statement. “The city does not require anyone independent of the developer or property owner to serve on the boards that oversee the districts. The report found 96 percent of CID boards in the city are developer-controlled, and 92 percent of TDD boards in the city are developer-controlled.”
The report recommended that the city ensure these districts are formed to include independent oversight.
Nearly none of these taxing districts are located in North St. Louis — in areas that need to fund public improvements or private projects in run-down areas the most.
According to the state auditor’s 2018 report of Community Improvement Districts, only three out of the city’s more than 60 CID locations listed were located in North St. Louis. (There is a total of 86 CIDs as of June 2018.) All three of these CIDs are governed by people associated with the Green Street St. Louis development company, according to the city ordinances establishing the CIDs, and those revenues are going towards Green Street’s development project costs.
The “rampant use of taxing districts in St. Louis,” as Galloway states, impacts citizens in various ways daily, advocates said.
“If I’m going into a coffee shop and paying extra cents — obviously that is coming directly out of my pocket,” Burleigh said.
However, many of the districts are also part of larger tax-incentive packages for developers, which also include Tax Increment Financing (TIFs) and tax abatements.
“That’s money not going to the school districts,” Burleigh said. “Kids aren’t going to get what they need. At the end of the day, what we have seen from the Board of Aldermen and various mayors is that there is little concern about saving taxpayers money, but there is a lot of concern about getting developers as much subsidies as much as possible in each project.”