Kansas City's community improvement districts spur development, but lack oversight
These special taxing districts are especially popular in the city's commercial and entertainment districts. But some reports have revealed a lack of accountability and oversight.
Over the last two decades, property owners and developers in Kansas City have used an economic tool to pay for things like infrastructure improvements, trash cleanup and increased private security in busy areas.
Community improvement districts — CIDs for short — are everywhere in Kansas City.
According to a 2023 fiscal report, there are currently 90 separate CIDs throughout the city. Like many of the city’s alphabet soup of economic development programs, community improvement districts are meant to fuel improvements on a specific property or throughout a certain neighborhood, either through a special assessment or a sales tax increase. They’re particularly popular for the city’s entertainment and commercial neighborhoods.
The city report shows community improvement districts collected $31.7 million in total revenues in the 2023 fiscal year.
David Johnson, a board member of the Crossroads Art District, is part of a group that wants to form a Crossroads CID.
He said community improvement districts can provide more resources to increase security and handle ongoing problems like vacant and derelict properties.
“Being under the stress of an entertainment district, where you've got people coming all the time to the neighborhood who are here to entertain themselves, parking and litter, you name it, there's additional stress that a lot of neighborhoods don't have to deal with,” Johnson said.
How CIDs work
A 2002 Missouri law established CIDs and gave local governments broad oversight power to approve or reject them.
CIDs can be as big or small as its property owners want them to be. The proposed Crossroads CID would stretch from Truman Road in the north to the Kansas City Terminal Railway tracks in the south, and Troost Ave. in the east to I-35 in the west.
More than half — about 58% — of the city’s CIDs only cover a single block or property, with a single owner. The Intercontinental Hotel at the Country Club Plaza established itself as a CID in 2016 and uses a 1% sales tax to address deterioration and improve unsafe conditions.
Creating a CID first requires a majority of property owners in the district to sign a petition.
Once the organizing group collects their signatures, it submits them to the city clerk. City council has to then give the OK. CIDs have a lifespan of 20 years, according to city code. CIDs are formed as a legal entity, either a not-for-profit corporation or a political subdivision. A board oversees the CID and its finances.
The district then generates revenue through a sales tax, special assessment or property tax. A Kansas City report in 2021 showed that 53% of CIDs at the time imposed a sales tax on consumers.
Voters living in the designated improvement district need to approve the sales tax through an election. Some CIDs are drawn without registered voters in the designated area, leaving approval power of a tax increase to the property owner.
Johnson said the Crossroads Community Improvement District would charge a half-cent sales tax and a special assessment.
If approved, the district would prioritize cleaning up trash, removing graffiti, planting more trees and increasing public safety through private security patrolling the neighborhood.
A community improvement district would also help the Crossroads further maintain and improve its First Fridays events, which draw thousands of people each month.
Criticism of CIDs
But as CIDs have proliferated in Kansas City and across Missouri, critics point to a lack of transparency and accountability in how CID money is spent and who benefits from the special taxing district.
David Stokes is director of municipal policy at the Show Me Institute, a Missouri-based policy think tank. He said CIDs are “a form of corporate welfare that masquerade as a public improvement.”
“Now they get to tax people unwittingly, in the vast majority of cases, for these things,” Stokes said. “The explosion across Missouri and in Kansas City has been just terrible public policy.”
State and local audits have also revealed oversight issues.
A 2018 report from Missouri Auditor Nicole Galloway found lax oversight of CIDs and a heavy burden on taxpayers. The report found that taxpayers were on the hook for about $2 billion in costs for more than 400 CIDs across Missouri.
A 2021 report from the Kansas City Auditor’s Office found officials were not looking at the public benefit of a CID or the potential sales tax burden before approving them. According to the report, the “City Council’s authority to approve or not approve a proposed CID is one of the city’s most important oversight tools.”
While single-beneficiary CIDs have grown in Kansas City, they’re unpopular with residents. In a 2020 survey on CIDs in Kansas City, 75% of respondents said they disagreed with allowing a single property owner to create a CID and impose a CID sales tax to pay for improvements on their property.
The audit said single-beneficiary CIDs may not offer “sufficient public benefits” and risk subsidizing poor maintenance practices, and that these CIDs could favor property owners and developers over the public.
The report also found the city council does not evaluate if a proposed CID is already located within existing economic development districts, like a tax increment financing district or a transportation development district. Nearly 49% of CIDs at that time overlapped with at least one other development district.
Consumers shoulder a higher tax burden, paying multiple sales taxes connected to a bevy of development districts. Stacked sales taxes from CIDs are also unpopular with residents — 70% of survey respondents said overlapping CIDs that result in a CID sales tax higher than 1% should be prohibited or limited to a specific number.
In response to the 2021 report, the Kansas City Council passed a comprehensive policy around approving CIDs.
It directs the city council to consider the public benefits of a proposed CID, whether there are existing CIDs in the proposed area and the tax breakdown in the district. CIDs that identify blight within their boundaries have to submit extra documentation to prove it.
The policy requires CIDs to submit annual fiscal reports to the city. 2023 was the second year CIDs had to fulfill these reporting mandates.
City Auditor Douglas Jones said the new policy included the recommendations made by the 2021 audit and are now established in the city code. Previous policies on CIDs were only passed via resolutions, which aren’t as enforceable as an ordinance.
“I think that is a huge first step towards accountability and transparency for how a CID is established and how it functions after that,” Jones said.
What CIDs can do
The Downtown CID was established in 2002 and is one of the oldest in the city.
Sean O’Byrne is executive director of the Downtown CID and the River Market CID, which was formed in 2006, and vice president of the downtown council. He said safety and cleanliness were the primary goals of the Downtown Community Improvement District.
“What a community improvement district allows you to do is have one entity as the voice, so that when there's things that need to be addressed, it can go through the community improvement district,” he said.
Property assessments on residential and commercial properties generate the revenue. The Downtown CID generated $4.2 million last year. The River Market district made $504,000.
The revenue pays for “ambassadors” in the River Market and Downtown — workers whose tasks include patrolling the area, interacting with visitors and residents, providing outreach to unhoused people, cleaning up graffiti and picking up trash. Throughout the years, these ambassadors have become fixtures of downtown in their yellow and black uniforms.
O’Byrne said the downtown community improvement district helped fund a homeless shelter at 8th and Paseo. Now called The Beehive, it functions as a resource hub where unhoused people can receive medical care, dental care, help finding housing and help with getting identification.
“I believe that the one reason why community improvement districts gained favor with urban areas like downtown Kansas City is, it gave that opportunity for over 600 property owners to speak with one voice, to have a direct funnel of communication,” O’Byrne said.
Midtown boasts its own share of community improvement districts. Nonprofit organization Midtown KC Now operates the Main Street and Broadway CIDs.
Stan Henry, operations manager with Midtown KC Now, said the community improvement districts largely pay for maintenance attendants to keep the neighborhood clean and deal with illegal dumping. Henry said awareness officers paid by the community improvement district work with city staff and the Kansas City Police Department to handle nuisance issues.
The Main Street district generates funding through an extra assessment on property taxes and square footage within the area. The Broadway district is funded through a one cent sales tax.
The Main Street district collected $830,000 in revenues during the 2023 fiscal year; the Broadway district generated about $455,000.
Henry said the community improvement districts have created a sense of ease among people in the area.
“It gives us the ability to talk for an entire business district or part of town when dealing with issues with the city,” he said. ”We're a stakeholder and we represent people who have a vested interest in the area.”