Kansas City Community Improvement Districts as Economic Development Tools
A Community Improvement District, or CID, is a business area which typically consists of businesses who generate a sales tax revenue. These businesses will collect an extra .5% to 1% in sales taxes which is sent to the Missouri Department of Revenue and then dispersed to the CID for use in "community improvements". The CID is governed by a board of directors which typically consists of business owners within the district. The board is responsible for deciding how the revenues will be allocated.
The Waldo CID in Kansas City is an example of a successfully created and operated district. It's a large district, encompassing over 50 different businesses within its boundaries. The board is consistently made up of various business owners within the district who all decide how to allocate their funds. They use it for added security in the area, as well as a clean up crew that picks up the area daily and cleans graffiti. Funds are also used in advertising to drive more people in to the businesses to boost revenues. The CID is also consistent in their reporting to the city and the state.
As a result, the Waldo area has become a thriving destination for families and young people buying their first home. Many areas have been truly thriving as a result of the CID tool.
However, in 2018, the Missouri State Auditor's Office conducted an intense study and found that CIDs are at risk for severe mismanagement.
Not only that, but there are so many CIDs being created in Missouri that the Department of Revenue can’t keep up with processing them all, causing an unnamed cost on our resources, and severe shortages in oversight and reporting.
You can read the study for yourself right here- https://www.auditor.mo.gov/content/auditor-galloway-urges-reform-cid-laws-after-discovering-pattern-self-dealing-and-lack
State law allows sales taxes to be imposed without voter approval. During the year ending December 31, 2017, 314 CIDs received sales tax revenue totaling approximately $57 million.
The problem isn't necessarily with traditional CIDs like the Waldo CID, but with those created by a single owner for the sole purpose of creating a new development or as a way to finance an upgrade to their business. Single-owner CIDs still have a board of directors, however they are not vested in the community and are frequently just personal acquaintances of the business owner or members of the bank which will fund the development.
Not only that, but in Kansas City we are seeing single-owner CIDs being created on top of an already existing, traditional CID, causing a double-taxation in these areas. For example, in the Waldo CID, we now have 2, new Single-Owner CIDs on top, both collecting an additional percentage of sales taxes: the Price Chopper at 85th and Wornall Road, and the Romanelli Shops at Gregory and Wornall Road.
This double-layering of CIDs has caused many in the area to protest the creation of single-owner CIDs and meanwhile, the process is now evolving to fund completely new developments on buildings that aren't even generating a sales tax revenue. The process has turned into a speculative market in which banks are willing to loan money which will eventually be paid for by the revenues from the CID.
6th District At-Large Council member Andrea Bough initiated a study of CIDs in Kansas City in order to get an idea of where the weaknesses were, especially with regards to the many CIDs who didn't even report on time and eventually created Resolution 200309.
Resolution 200309 directs the City Manager to make recommendations to the City’s existing CID policy to address recently proposed community improvement districts and the City’s general oversight role; directing the City Manager to engage public stakeholders to inform his recommendations; directing the City Manager to recommend a comprehensive and consolidated CID policy; and directing the City Manager to present his recommendations to City Council by September 1, 2020.
Below you can see a detailed presentation by the city staff to talk about the current state of CIDs in the city which was given to the Neighborhood Planning & Development Committee on April 29, 2020:
This resolution moved on and was adopted by the City Council the next day.
Meanwhile, in Jefferson City, Missouri, House Bill 1854 sits on Governor Parson's desk, waiting to be vetoed or signed or simply left to be enacted. It contains a provision that requires that new taxes created by CIDs or TDDs be approved by the majority of the voters within the municipality that contains the taxing district, not just the voters within the taxing district, as reported by the Show-Me Institute. If this is allowed to pass as law, it would severely impact the formation of all CIDs, not just single-owner.