Auditor Galloway identifies conflict of interest in North Oaks Plaza Shopping Center CID audit

Lack of financial reporting resulted in failure to identify district's financial troubles
September 20, 2017

Missouri State Auditor Nicole Galloway released an audit of North Oaks Plaza Shopping Center Community Improvement District (CID) in the city of Northwoods, located in St. Louis County. The audit identified a significant conflict of interest in the way project expenses were reimbursed. 

"Taxing districts must be accountable for every tax dollar they collect," Auditor Galloway said. "When public money is being utilized, even the appearance of a conflict of interest is deeply troubling. Laws governing special taxing districts must be fixed to end this concerning behavior."

The taxing district was established to fund improvements to the existing shopping center and parking lot through a $1.6 million bond issue to be repaid by a 1 percent tax on shopping center sales.

The property owner, who is both the operator of the shopping center and the chairman of the board, was reimbursed by the district for project expenses. Rather than having the full, five-member board that governs the district approve project expenses, the board gave authority to the board chairman/property owner to approve all payments for project expenses to himself.

Lack of oversight in this process led to questionable payments. In one case, the chairman approved $84,000 to be paid to another member of the board for parking lot repairs. The project was not competitively bid, as required by state law.    

The report also identified the taxing district has not collected sufficient revenue to pay all the interest owed on the bonds issued in 2008. Over a five year period, the district failed to pay $179,000 in interest and will likely be unable to fully make future principal and interest payments. The board has also consistently failed to submit required financial reports with the city and state.

"This serves as yet another example of a special taxing district using public dollars with little transparency," Auditor Galloway said. "Taxpayers are handing over their hard-earned money to support this project, but are not able to access basic financial information that would have revealed a taxing district in financial distress, unable to meet its financial obligations."  

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. Audits are currently underway for the BaratHaven CID in Dardenne Prairie and two CIDs in Jackson County.

The complete audit report, which received an overall performance rating of poor, is available online here.    

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