TDDs concentrate taxing power in the hands of few

Also by Jacob Barker

A quick glance at the boards of directors of five transportation development districts in Columbia shows the same names over and over again.
Hiram Watson, Jack Maher, John Hancock, Michael Link, Marc Kirchoff and Otto Maly.

All these real estate agents serve on the boards of TDDs that encompass property owned by Columbia billionaire Stan Kroenke.

They all work for Otto Maly’s realty firm, which leases much of the space in and around three of the districts.

And they all control TDDs that over the next 35 years will collect and spend more than $100 million in sales taxes paid by shoppers, according to a Missouri State Auditor’s report.

It’s easy to get confused about who does what on each board because the names for the most part remain the same. Only their positions change. Watson serves on all five boards, and he chairs four.

Attorney Craig Van Matre, whose firm represents seven of Columbia’s 13 transportation development districts, attends every board meeting for all five TDDs established by Kroenke companies.

Van Matre, whose firm also represents Blue Ridge Town Centre TDD and Northwoods TDD, estimated TDDs represent about 10 percent of his firm’s workload. He said the propriety of the districts relies on the integrity of the attorneys who manage them.

The TDDs have specified conflict of interest policies that forbid direct or indirect compensation to directors from district sales tax revenue. And it’s OK that real estate agents with close relationships to property owners serve on boards whose decisions affect the owners’ developments, Van Matre said, because he takes many precautions to safeguard against conflicts of interest and abuse. No one benefits directly from choosing one contractor over another when it comes to granting contracts, he said.

“They’re going to benefit from it if the development’s successful and they lease it out and they get a commission,” Van Matre said. “But in terms of them giving a damn who gets a pavement contract or an engineering contract, they don’t care. They just want it done as fast as possible.”
When the risk they assume is factored in, Van Matre said it makes sense that the developer wants to know and trust the businessmen who run transportation development districts.

But the concentration of taxing power in so few hands is odd in a state with such a strong commitment to citizen approval of tax increases, said Joe Martin, chief of staff for Missouri State Auditor Susan Montee.

“If you look at Missouri, we’ve got this Article 10 provision in our constitution that essentially every tax has to be voter-approved,” Martin said, “and the theme in our constitution and our statutes and our lawmakers is we’re not going to increase taxes, and if we are, then they are going to be voter-approved, and people are going to know about them. (The structure of TDDs) kind of runs a little bit contrary to people having a part of the process.”
Fourth Ward City Councilman Jerry Wade thinks allowing developers to handpick boards that control millions of taxpayer dollars is simply wrong.

“To me it’s a question of transparency,” Wade said. “And I think the public needs to know who’s making money off their sales tax.”

Wade was referring to the ability of developers to be reimbursed with sales tax for money spent to establish TDDs. That includes legal, engineering and accounting fees, which are not subject to open bidding and often run up to hundreds of thousands of dollars.

“The problem is that when you don’t have real transparency and real accountability, the potential for abuse is huge,” Wade said. “What, in fact, I would consider abuse on some of these is actually legal.”

An example: Companies with connections to Kroenke establish TDDs. Later, those companies, or others owned by Kroenke, loan operating money to the districts they created. The districts repay that money at interest rates that have reached as high as 9.75 percent, according to records obtained by the Missourian.

That’s just TDD business as usual, Van Matre said. And it’s legal.

“Constitutionally you can’t charge more than 10 percent. I usually peg it to 2 percent over prime, not to exceed 10 percent,” Van Matre said. “Prime is usually the rate banks charge their best corporate customers. The 2 percent is the risk factor.”

Because sales tax is the district’s only revenue source, Kroenke is getting taxpayers to fund roadwork that benefits his property. And he’s being repaid, with interest, all the money he puts into the projects.

“It’s a practical matter,” Van Matre said. “At that point, only a developer wants to make that loan because no bank is willing to do it. … Until you’ve got a store up and operating, collecting sales tax revenues, you’ve got nothing at all to make a bank interested in making any loans.”