JEFFERSON CITY, Mo (Aug. 9, 2018) Missouri State Auditor Nicole Galloway today released a citizen-requested audit of the City of Bethany, which found that poor planning in tax increment financing projects (TIF) spearheaded by the city resulted in delays and lack of oversight.
“Economic incentives can be valuable for communities, but they must be presented transparently and used effectively as part of a comprehensive economic development plan,” Auditor Galloway said. “In this case, lack of planning resulted in significant delays. When promises are made to taxpayers about projects to spur the local economy, they should not be left waiting nearly 15 or 20 years before seeing progress.”
Tax increment financing is an economic development tool that redirects local tax revenues to support specific development projects. After a TIF district is established by municipal ordinance, increases in property value and economic activity are used to fund the designated project. The audit report identified concerns with two TIF projects to build new roads: the West Interstate Addition – South District (South TIF) and the Northwest Interstate (North TIF).
The South TIF, established in 1994, was designed to include multiple roads and connections to U.S. Hwy. 136. However, construction didn’t take place until more than 20 years later, between August and November 2017, and resulted in a single, 3/4-mile road that connects to no other road. The report found there were no specific financing plans in place when the South TIF was formed, and the TIF did not collect applicable economic activity taxes that should have gone towards the project. These additional funds could have resulted in the project being undertaken and completed sooner.
Poor planning also affected the North TIF, established in 2001. Specific financing plans were also not in place at the time this TIF was formed to construct a new road linking U.S. Hwy. 136 to the U.S. Hwy. 69 spur. Engineering proposals were not received until 2015, 14 years after the district was formed. The project is complete and the TIF Commission is currently paying off the debt to the city for the amount advanced to finish the project.
The audit also questioned the cost effectiveness and transparency of a contract with a private company to operate the city’s water and sewer systems. Additionally, the audit highlighted concerns with a $25 fee added to all sewer billings in 2015 without voter approval, a potential violation of the Missouri Constitution.
The city utilized funds restricted for utility operations to subsidize other parts of city government, so utility rates may be higher than necessary. The city used Gas, Sewer and Solid Waste Funds to refinance a bank loan for a pool and used revenues from the Electric Fund for ballfield lighting projects.
The Auditor’s report recommended improving oversight of financial records, implementing better procedures to ensure restricted funds are used properly, and ensuring the Board of Aldermen complies with state law when going into closed session.
The complete report on the City of Bethany, which received an overall rating of “fair”, can be found here.