arkville residents should carve out a few minutes for even a cursory reading of a report by State Auditor Nicole Galloway in which she faults municipalities for overuse of tax incentives to developers, leading to widespread misuse of taxpayer money.
Why, in today’s over-scheduled society, would residents spend precious minutes reading a report by a statewide official about a complex, dry issue like development? The answer is simple: her report (a more concise version exists in the form of a news release: auditor.mo.gov/content/auditor-galloway-urges-reform-cid-laws-after-discovering-pattern-self-dealing-and-lacks) sounds suspiciously similar to the city of Parkville’s tactics in its dealings with a local developer. The cooperative effort has joined city leaders and a developer in mapping out a 350-acre residential, retail and light industrial planned development on vacant land at the intersection of Interstate 435 and Missouri 45 in Parkville.
“Taxpayers are on the hook for billions in project costs they did not approve and have little to no say in,” the auditor is quoted as saying in a news release about her report. Issued in August, 2018, the release lists a lack of accountability by city officials who are increasingly using tax incentives to skirt the burdensome and risky task of asking voters to approve such expenditures at the polls.
“Meanwhile, there is no law to ensure developers are accountable for the public dollars they receive and there are few requirements of municipalities that approve these districts,” she said. “State laws must be reformed to ensure taxpayers get the protection they deserve.”
But city officials, developer Brian Mertz of Parkville Development, and his attorney have said the project will propel Parkville into a new era and the city will financially gain from the growth spurred by this development. Members of an opposing citizens’ group echo warnings in Galloway’s report and claim the project is flawed and not in the best interest of citizens. Objections include design flaws, such as how the plan deviates from commonly-held construction practices in several ways, according to a developer who lives within the planned district. Clarence Housh, who owns a home that faces Brinkmeyer Road, said the plan is too dense and inconsistent with the city’s Master Plan. He said the plans are “unprecedented in construction” and added that builders pay for green space. Therefore, the project’s density makes it advantageous to Mertz.
However, the project is riddled with numerous instances that fall in line with Galloway’s warnings, including the use of tax incentives. To those not privy to development jargon, these perks sound like alphabet soup—TIF (Tax Increment Financing), CID (Community Improvement District, TDD (Transportation Development District)—but are tools often used by cities and developers to hide nefarious, undisclosed use of taxpayer money. In fact, one could argue these alphabet-ridden incentives are used to hide their actual intent—to financially benefit developers in the hope that “economic development” will miraculously lift cities out of burdensome debt.
Parkville falls into this category because the city was making bond payments on a portion of land after the city acquired the property following a failed development attempt more than a decade ago. That developer has been vocal about what he considers the city’s mismanagement of his proposed development, which led to its failure and left the city on the hook for bond payments, not to mention bankrupting the contractor.
As this piece is being written, Mertz is moving dirt for a project that could be argued, is a textbook example of Galloway’s warnings about overuse of tax incentives to lure development. So far, city leaders have orchestrated more than $60 million in tax incentives to Mertz for the project. The breakdown of the perks is as follows:
- This past winter, the Parkville Board of Aldermen approved a $10.5 million CID to be paid by residents of the proposed The Meadows at Creekside community, a development near Brinkmeyer Road. The CID charges residents for some improvements to the area, such as infrastructure, and acts as an incentive to the developer because it reduces his costs while transferring them to residents in the form of taxes. Half of this CID money will be used by Mertz to pay the city for the cost of the land.
- A second CID, which aldermen just approved last week, establishes a one cent sales tax, which, of course, will be paid by anyone making purchases within the district.
- Aldermen granted a $52 million TIF, in which the city diverts future property tax revenue increases in a development district. Parkville will incur a loss when tax revenue is diverted.
Galloway’s release warns against such developer incentives, often citing those that exist layer-upon-layer, with negative effects to residents. “Taxpayers will be burdened with increased taxes to pay for an estimated $2.2 billion” in more than 400 statewide CIDs, she said and calls for legislative action to protect taxpayers. “State laws must be reformed to ensure taxpayers get the protection they deserve,” she said.
More parallels exist between Galloway’s warnings and the actions of Parkville officials. Aldermen officially established two CID boards to govern the district and established governing boards which include the following members: Mertz, his business partner, and their spouses, and Alderman Dave Rittman, who has been a vocal opponent of the development and a vocal critic of Citizens for a Better Parkville. Half of the money in this CID will be given to Mertz to purchase the city-owned property. A second CID board has as members: City Administrator Joe Parente, Mayor Nan Johnston, and the city’s finance director. As if in answer to the establishment of Parkville’s CID boards and its roster of members, Galloway’s report states that “more than 80 percent (of CID boards) are developer-controlled.”
The problem with this formula is “spending decisions are made by the owners and developers who stand to gain the most from the districts’ tax collections,” she states. Members of Citizens for a Better Parkville contend the city has violated the state’s open meetings laws in numerous ways. That’s why the group filed numerous Sunshine requests for information regarding the development. Parente, the city administrator, said the requests were too numerous for city staff to manage and the city hired an IT (information technology) professional to search and find such records. But, Sunshine requests detailing the professional’s time disclosed he was paid for only a few hours of research while Parente and the city’s attorney clocked numerous hours sifting requests for which Maki argued the city was being selective about what information was being divulged.
The group’s objections were outlined in a nine-page letter to the Missouri Attorney General, which states the city has not been forthcoming with all requests for information, including cell, text, and email messaging about the development. Maki has said the city has inflated its fulfillment of requests by issuing many results more than once. In addition, Maki has, so far, paid the city more than $5,000 to fulfill open meeting requests. But city officials recently sent Maki a bill for an additional $7,000. His attorneys claim the figure over-reaches the intent of the law, which calls for nominal fees for copies.
Galloway’s report also addresses an alarming pattern between municipalities and CIDs—one which also is being played out in Parkville. “CIDs have routinely not complied with state laws regarding budget preparation, annual financial and performance reporting, Sunshine Law compliance, and holding an annual meeting,” according to the release, which was critical of many financial aspects of the establishment of such districts.
“CIDs consistently failed to provide required annual financial reports to the State Auditor’s Office and annual performance reports to the Department of Economic Development,” she states. “We determined 3 of the 15 (20 percent) CIDs reviewed did not comply with the Sunshine Law by failing to prepare board meeting minutes with all required information.” The lengthy, 38-page report, which includes graphs, charts and numerous examples, summarizes such shortcomings under the heading of “Lack of transparency.”