Town Plaza taxing district falls short of expectations amid little governmental oversight

Cape Girardeau city officials envisioned the tax-funded Town Plaza Community Improvement District would be a success story.

The reality has been far different.

In addition to revenue from a special sales tax, the developer also benefited from little-known “municipal contributions.”

The “municipal contributions” from Cape Girardeau city and county governments to the developer and property owner, Greater Missouri Builders, have lagged far behind projections.

The contributions are calculated on the basis of how much sales tax is generated in the district over the 2006 base year, according to city officials.

Since such contributions began in 2008, the city has paid more than $167,000 to the developer, and the county has chipped in another $27,000, city and county officials said.

Under a development agreement approved by the city council, the contributions were earmarked for reimbursable project costs associated with the opening of a now-closed call center in the shopping center. The arrangement covers up to 20 years and calls for a maximum contribution of $1.2 million.

The city is obligated to pay 85.71 percent of the municipal contributions, and the county’s share is 14.29 percent, according to the agreement.

Few payments

But the city and county have had to make few payments in recent years based on the funding formula.

Records obtained from Cape Girardeau city finance director John Richbourg show the city last wrote a check, totaling more than $3,700, as a municipal contribution July 24, 2015.

In all, the city has written 24 checks, with the last five-figure check occurring in July 2013 of a contribution of more than $13,900, city records show.

The Cape Girardeau City Council approved the setup of the Town Plaza Community Improvement District (CID) in 2007 to finance improvements to the then-vacant, former Sears store to attract a job-creating call center.

Since then, city and county officials have paid little attention to the taxing district. The CID board has submitted hundreds of financial records to the city over the years, according to documents obtained by the Southeast Missourian through an open-records request.

City staff have filed those records but done little else. No requests have been made by the city to audit or inspect the records, city officials said.

When answering questions about the CID months ago when the Southeast Missourian began researching the structure and oversight of the CID, Richbourg said his office had a single, annual financial report from the CID.

But in response to the sunshine law request, city clerk Gayle Conrad reported the CID had provided the city all of the required financial reports over the years except for one. City staff requested and received that report from the district’s law firm in September, then provided all of the documents to the newspaper.

County officials have said little publicly about tax incentives, particularly as it relates to 25-year property-tax abatements allowed under Chapter 353 of state law.

The property-tax abatement for this project started in 2010 and applies solely to the National Asset Recovery Services building, according to Roger Arnzen, who leads the mapping office for the county assessor.

State law provides for a 100 percent tax abatement for 10 years on the increased assessed value of the improvements on the property, excluding land. For the remaining 15 years, which in this case runs through 2034, the property is assessed at 50 percent of the assessed value of the land and improvements.

'Little benefit'

Paul “Scott” Campbell, president of GMB and a member of the CID board, wrote in an email “the taxing authority gets exactly what it would have gotten had the building remained vacant. During the time when NARS occupied the space, NARS enjoyed the lower taxes with no benefit to the landlord.”

He said, “We have received little or no benefit from the 353 to apply against the $3.5 million we have spent on the remodel.”

Arnzen said the St. Louis law firm of Armstrong Teasdale, which represents the taxing district, had indicated in writing Cape Girardeau County Collector Diane Diebold is required to annually “prepare and distribute” an estimate of what the tax bill would have been if the tax abatement were not in effect.

Diebold said she was not aware she had to prepare or provide such reports. She said she had never been told to do so.

Armstrong Teasdale representatives, including the custodian of records for the CID, did not return emails and phone messages seeking clarification on the issue.

Meanwhile, a 1 percent sales and use tax levied in the shopping district by a single vote of St. Charles, Missouri-based Greater Missouri Builders continues to funnel money to the district to reimburse improvements. The revenue, however, has been less than expected because of vacant storefronts.

The closure of a movie theater, the call center and more recently Tuesday Morning and Hastings stores have resulted in the loss of sales tax revenue, according to the developer.

Campbell said, “The CID is just not getting money in.”

Integrity Solution Services, formerly NARS, closed its Town Plaza call center in 2013. Under a development agreement, NARS, which did not pay any sales tax, was obligated to pay a “gross rental contribution” to the developer monthly starting in the sixth year to help reimburse developer costs. Such payments would have lowered the contributions required of the city and county, according to the development agreement.

But the business closed before any “gross rental contribution” payments were made, Campbell said.

The Town Plaza Community Improvement District (CID) received more than $1 million in sales and use-tax revenue from the start of the tax in 2008 through 2015, according to the Missouri Department of Revenue. That money was earmarked to pay down the CID debt.

Campbell said in July sales-tax revenue is not even paying the interest on the note. Projections provided to the developer indicated the funding plan would pay off, but that has not happened, he said.

Campbell said he hopes to recruit new businesses to the shopping center that would boost sales-tax revenue for the CID and help recover costs for his company.

Meanwhile, Cape Girardeau city government has seen its sales tax revenue grow about 2.3 percent annually over the past 10 years.

The Town Plaza CID is the first such taxing district used by GMB. Campbell said this summer his company likely would steer clear of such funding mechanisms in the future.

'Nothing to lose'

Jay Knudtson was Cape Girardeau’s mayor when the CID was formed. He said he and other city officials, along with Cape Girardeau Area Chamber of Commerce and economic development officials, suggested the CID funding plan.

When Sears moved out of the Town Plaza building, “we were ultimately left with a vacant building,” Knudtson recalled.

He argued the city faced little financial risk with a municipal contribution because it did not subtract from existing sales tax revenue the city received. It only earmarked money from additional sales tax revenue generated as a result of added development in the shopping center.

“In many respects you really had nothing to lose as a municipality,” he said.

The former mayor said without the creation of the taxing district, allowed under state law, the one-time Sears building would have remained vacant and “was going to continue to decay.”

The CID provided “an incentive to Greater Missouri Builders to build out the old Sears building,” Knudtson said.

The subsequent departure of NARS and other businesses from the shopping center has hampered the sales-tax-dependent CID, he acknowledged.

“That unfortunately did not come to an excellent outcome,” he said.

But he argued the district initially served as a catalyst “to kick start the whole Town Plaza.”

Knudtson said, “If I had to do it all over again, I think I still would have done it.”

mbliss@semissourian.com

(573) 388-3641

Pertinent address:

Town Plaza shopping center, Cape Girardeau, Mo.