That’s the word Missouri State Auditor Nicole Galloway used over and over to describe her office’s findings after an audit into the state’s 205 Transportation Development Districts.
“The average citizen is getting taken advantage of here,” Galloway said Monday at a news conference to release the report. “It’s outrageous that there’s almost $1 billion in project costs that taxpayers are on the hook for. They don’t know about it and they didn’t vote for it.”
Galloway, a Democrat, is calling on legislators to overhaul state law regarding Transportation Development Districts or TDDs.
The Missouri General Assembly first passed a law in 1990 to allow the creation of the districts, which can charge sales taxes for the construction or maintenance of transportation projects.
But while the law requires at least 50 percent of residents to file a petition with the Circuit Court to set up a district, TDDs often have no residents within their borders. Instead, the property owner or developer can file that petition or the local transportation authority.
The auditor’s report found 94 percent of TDDs in Missouri were formed by a property owner or developer and none by a petition of registered voters. Galloway says that has caused a situation rife with conflicts of interest.
“So you will have a developer that will form a TDD. They will elect a board for the TDD. They’ll impose a sales tax on citizens without a vote. Then they will go out to bid for construction contracts. Well, guess who’s getting the bids?” Galloway asked.
She then answered her own question: “The developer and other members of the board or related parties on the board.”
A survey sent out to TDDs found $941 million are owed in project costs, but that amount is likely low, according to Galloway. Only 60 percent of TDDs submitted the financial disclosure documents requested by the auditor’s office.
In 2015 Missourians paid $73 million in sales taxes within TDDs. The districts brought in $15 million in non-sales tax revenue, such as property taxes, special assessments, or tolls and fees.
And while state law requires businesses within TDDs to post at the cash register that a sales tax is being charged, the auditor’s report found many fail to do so.
“Every district that we reviewed in detail, 100 percent had at least one business that did not notify its consumers,” Galloway said. “Fifty-eight percent did not have a single business in that TDD comply with the state tax notification law.”
The audit looked broadly at TDDs across the state, but delved more closely into 12, including one in St. Louis. It found the St. Louis Convention Center TDD was formed in 2010 with a plan to charge a sales tax for 13 years. In 2014, the district board, controlled by the property owners, voted to extend the sales tax to 40 years.
Galloway pointed to municipal elections held this month, where voters in several districts were asked to sales taxes could be increased.
“Why would they be able to vote on those sales taxes but not the sales tax charged in TDDs?” she asked.
The state auditor pushed for legislation passed last year that toughens penalties for Transportation Development Districts that fail to file reports. Now, she said, she will send her office’s recent audit to lawmakers and push for an overhaul.
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