Missouri State Auditor Nicole Galloway released an audit of the Independence Events Center Community Improvement District (CID) in the city of Independence. The audit raised concerns about excessive administrative fees paid to the city and lack of board oversight related to project expenses.
"Special taxing districts need to be held accountable for every public dollar they collect and spend," Auditor Galloway said. "My audit found the Independence Events Center CID can do more to ensure taxpayer dollars are managed wisely."
The taxing district was established by the city of Independence in 2007 to fund land acquisitions and construction of the Independence Events Center through a bond issuance to be repaid by taxes on retail sales within the district's boundaries. The CID, which is the largest in the state, collected more than $5.7 million in revenues in 2016 from taxes on district sales and has agreed to repay more than $89 million in outstanding bonds.
Members of the CID Board of Directors are appointed by the mayor with the consent of the city council. Through an agreement signed the day after the CID was established, the city provides administrative and management services for the district. The fees, which are based on a percentage of sales taxes collected, are significantly more than what other CIDs pay for similar services from private firms.
In 2012, the CID increased the sales tax rate from a half-cent to three-quarters of a cent, which resulted in a 47 percent increase in fees paid to the city without any additional administrative services being provided. Since 2012, annual fees paid by the district to the city have exceeded $100,000 annually. Auditors conducted a survey of the boards for the next ten largest CIDs, which reported they each pay, on average, $12,000 annually for similar services.
"These excessive fees, collected from taxes paid by customers shopping in the district, represent a significant new revenue stream for the city that taxpayers didn't vote for," Auditor Galloway said. "Significantly higher fees paid to the city mean less revenue available to invest in the Independence Events Center district itself."
The report recommends that the district competitively bid these services to ensure the fees are fair and reasonable. Competitive bidding would also remove the appearance of a conflict of interest, since the city is represented on the board that approves the agreement.
The audit also found that the board did not review or approve the $67 million in expenses related to the construction of the events center. While the city was responsible for the design and construction of the center, the board is responsible for review and oversight of the projects' expenses.
In 2016, a new law authorized the State Auditor's Office to audit CIDs without requiring citizens to initiate the audit through the petition process. An audit is currently underway for the Ward Parkway CID in Kansas City.
The complete audit report is available online here