Report No. 2010-22
February 2010
Complete Audit Report
The following findings were included in our audit report of Transportation Development Districts (TDDs).
As of December 31, 2007, 139 transportation development districts (TDDs) had been established in the state of Missouri, including 18 TDDs established in 2007. 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 statutory changes 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, with the rate of growth peaking in 2005 and declining since that time.
Of the 139 TDDs established as of December 31, 2007, 134 (or 96 percent) were initiated by a petition filed by the property owners. In a survey of those TDDs, officials or representatives of the TDDs reported total estimated transportation project costs of over $1.26 billion. In addition, those TDDs reported total estimated revenues of over $1.54 billion would be collected over the lives (ranging from 5 to 40 years) of the respective TDDs. In addition, 42 percent of the TDDs established as of December 31, 2007, 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 sale tax revenue to its own transportation project costs.
Our initial audit of TDDs (Report No. 2006-12, Transportation Development Districts, issued in March 2006), reported various issues in the areas of public awareness and 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 (SAO), and other governmental entities to make necessary revisions to the TDD-related statutes. During the 2009 legislative session, legislation was passed which addressed several of the most significant issues/concerns reported previously. This new legislation requires (1) the petition filed to initiate the creation of a district to set forth details of the budgeted expenditures; (2) at least one public hearing regarding the creation and funding of the proposed district, if the petition was filed by the property owners; (3) the Department of Revenue to be responsible for the administration and collection of TDD sales taxes; and (4) the imposition of a fine not to exceed $500 per day for the failure of a TDD to submit a copy of its annual financial statement to the SAO on a timely basis. This legislation was subsequently signed by the Governor and became effective August 28, 2009.
Our current audit reviewed 14 TDDs established in 2005 or prior. Various concerns were noted related to the competitive procurement of construction contracts. In some districts, competitive bids were either not solicited during the procurement and selection of the construction contractor or appropriate bidding procedures could not be determined. In one instance, the contractor was a related party and work on the projects had already begun prior to the establishment of the district. In another instance, construction materials were purchased from a related party without competitive bids.
Requests for proposals (RFPs) for various professional services were not properly solicited in several instances, with substantial costs incurred prior to the establishment of the applicable districts. These services were provided primarily by engineers, legal counsel, and bond underwriters.
For two districts, members of the districts' boards were not Missouri residents, as required, and two district boards failed to meet annually. Two other districts borrowed from their debt service accounts to pay for a portion of principal and/or interest due on bond issues because the initial sales tax revenue projections for both districts were inaccurate. As a result of these borrowings, these districts reported material events to the Securities and Exchange Commission, as required by federal regulations.
Various problems were noted related to the annual budgets of many of the selected districts. In addition, many of the TDDs (20 percent of all districts established) had not filed one or more annual financial reports with the SAO, as statutorily required. Other findings in the audit report related to prevailing wage issues and monies not fully collateralized.
Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov
