Community improvement districts, a popular method of raising sales taxes or property assessments to benefit commercial developments like shopping locales or hotels, get little in the way of oversight from City Hall in Kansas City, according to a recent audit.
Kansas City Auditor Doug Jones told the city council on Thursday that as community improvement districts have proliferated — there were only three in 2002 and now there are 74 scattered across town — City Hall should adopt policies that provide more scrutiny of the districts.
“The public wants more accountability and transparency from CIDs,” Jones told the Kansas City Council as he presented his audit.
Members of the council asked no questions and held no discussion about the audit on Thursday.
In 2018, Missouri Auditor Nicole Galloway looked into CIDs and also found there was lax oversight of the program, having identified instances of conflicts of interest and self-dealing.
CIDs are created when a majority of property owners in a certain area ask for one. Most CIDs collect increases in sales taxes or property assessments within a district. That money is then spent on areas like landscaping, security, trash collection and marketing.
CIDs are credited with maintaining and improving areas like downtown, Westport and Waldo, where large districts were created to provide a common benefit to businesses and visitors.
In recent years, however, several CIDs have been created to benefit a single property owner or developer. In 2016, for example, the Intercontinental Hotel at the Country Club Plaza created a CID for itself to raise taxes earmarked to pay for upkeep of deterioration that the ritzy hotel argued had created blighted conditions. A similar CID was approved for the Romanelli Shopping Center in Waldo in 2019.
Both were criticized for using taxes to subsidize property maintenance. More than half of the existing CIDs in Kansas City benefit a single owner or developer, as opposed to community-based districts like those covering Westport or downtown.
Kansas City’s audit showed that City Hall lacks a process for evaluating whether CIDs use the money they raise for public benefits. And there are enough CIDs now that many overlap with each other or other special tax districts, which has the effect of pushing sales taxes upwards. In some CIDs, the audit said, sales taxes are pushing 11.6%.
The audit also noted that several CIDs — more than a third — have not submitted their annual budgets to City Hall, a requirement under Missouri law. That leaves the public no sense of how the districts plan to spend public funds.
And while Missouri law requires CIDs to prepare and submit a budget, there are no fines or penalties for not doing so.
The audit recommends the city issue fines to districts that don’t submit a budget on time or at all. It also recommended that the city create an evaluation process for approving new CIDs, shorten how long they can last and require reporting of how public money it raises gets spent.