Report No. 2008-66
October 2008
Complete Audit Report
The following problems were included in our audit of Transportation Development Districts (TDDs).
As of December 31, 2006, 122 transportation development districts (TDDs) have been established in the state of Missouri, including 24 established in 2006. Almost 70 percent of the districts are located in the St. Louis and Kansas City metropolitan areas. Although the Transportation Development District Act was enacted in 1990, the first TDD was not established until 1997, apparently the result of a statutory change made that year that allowed the owners of real property located within a proposed district to petition for its creation, if there were no registered voters residing within the district. This statutory change resulted in a dramatic increase in the number of TDDs established in recent years, though that trend changed in 2007, with only 13 additional TDDs being established in 2007.
Of the 122 TDDs established as of December 31, 2006, 96 percent were initiated by a petition filed by the property owners, and all of them have imposed sales taxes, with rates ranging from one-eighth of one percent to one percent on retail items sold within the respective districts' boundaries. In a survey of those TDDs, officials or representatives of the TDDs reported total estimated transportation project costs of over $1.19 billion. In addition, those TDDs reported that total estimated revenues of over $1.45 billion would be collected over the lives (ranging from 5 to 40 years) of the respective TDDs. In addition, 39 percent of the TDDs established as of December 31, 2006, were located either completely or partially in a tax increment financing (TIF) redevelopment area. State laws provide that 50 percent of the additional tax revenues generated in such areas are to be used for the purposes of that TIF area; however, in some instances, the applicable city has allowed the TDD to apply most, if not all, of its sales tax revenue to its own transportation project costs.
Our initial audit of TDDs (Report No. 2006-12, issued in March 2006) reported various issues in the areas of public awareness/involvement, accountability, and compliance. We recommended the General Assembly review these issues and work with the Missouri Department of Transportation, the State Auditor's Office, and other governmental entities to make necessary revisions to the TDD-related statutes. However, during the 2007 legislative session, only one change was made to the TDD statutes that addressed any of the issues reported in that initial audit. During the 2008 session, additional TDD legislation was introduced, but not passed.
Our current audit reviewed nine individual TDDs that were established in 2004. Various concerns were noted related to construction contracts and/or project management services involving transportation projects. Competitive bids were either not solicited during the procurement and selection of the construction contractor or appropriate bidding procedures could not be determined. In addition, proposals were not solicited for project management services in some districts, including one instance in which the project manager was a related party. In another instance, the only proposal received for the project management services was a related party.
Requests for proposals for various professional services were generally not solicited, with much of these costs being incurred prior to the establishment of the applicable districts. These services primarily were provided by engineers and legal counsel.
In one district, substantial progress had not been made as of early 2008 in the completion of the district's transportation projects, even though the district issued revenue bonds in 2005 to finance the projects, and the retailers in that district have been charging a sales tax on all purchases since June 2005. Further, the costs now projected to complete the projects are significantly higher than the original estimated costs. In another district, the revenues of the district may not be sufficient to meet the financial obligations/debt of the district or fully reimburse the developer for transportation-related costs incurred.
For several other districts, adequate documentation to support the project costs incurred had not been provided, some involving the purchase of land and/or right-of-way. In another district, customers of the major retailer within the district were incorrectly charged sales tax for three months prior to the sales tax becoming effective, resulting in an overpayment of sales taxes to the district of approximately $96,000 for this time period.
Various problems were noted related to the annual budgets of several selected districts. In addition, many of the TDDs (23 percent of all districts established) had not filed annual financial reports with the SAO, as statutorily required. Another concern reported related to one district's lack of compliance with the Open Meetings Law.
Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov
