Developers turn to special sales taxes

The original Downtown Springfield CID, formed in 1999, now has two sister CIDs – the Northwest Area CID and the Airport Plaza CID. And Springfield city officials say more of these districts are in the works.

“We’re doing a CID for College Station and the Heer’s (Tower), and we’ll see that in other developing areas,” said Mary Lilly Smith, Springfield’s economic development director. “We recently had a zoning case at Campbell and James River Freeway, and part of the discussion of that case was doing a CID there.”

That development, a commercial addition to Quail Creek subdivision at the southwest corner of Campbell and James River, is one of several that are capitalizing on a 2004 change in state legislation. Developers now can collect special sales taxes in new CIDs. For instance, the Northwest Area CID can assess up to an extra one-half percent while the Airport Plaza CID can add a full 1 percent to retail purchases.

Galen Pellham, commercial broker at CJR Commercial Group and developer of Airport Plaza at Kearney and West Bypass, said the money is essential to ensure the viability of new developments.

“The revenue is used for streets, sidewalks, site lighting, and utilities, which (are) a tremendous expense to a developer,” Pellham said. “The streets and the utilities will be turned back over to the city, so the developer is just compensated for designing and constructing those site improvements, which will then become public property.”

Developers pay for the infrastructure upfront and are reimbursed by the sales taxes generated within their developments.

CID revenues will pay for several city-required improvements at Airport Plaza, including a $300,000 street extension and a $150,000 new traffic signal. Revenue from the extra sales taxes in the district, which will house offices, multifamily units and a Baymont Inns & Suites, eventually will help to offset those costs.

Filing for a CID

Forming a CID requires specific steps that are based on Missouri law.

A petition must be filed with the city, representing more than half of the property owners in the proposed district and more than half of the assessed value in the district. The petition must lay out a five-year budget plan, citing how much revenue the district expects from special taxes or assessments and how that money will be spent.

The city council then votes on the petition, as a CID is an official government subdivision. The new districts are able to avoid some of the hassle of the original downtown CID, because these districts are owned by single developers or developer groups.

“Downtown is a really different animal in that you have 100-plus property owners, and you’re never going to get 100 percent agreement on what should happen,” said Jeff Schrag, a downtown property owner and member of the downtown CID board since 2001.

But the large number of landholders also has its advantages.

“The beauty is you can get together and decide you’re going to take some money, put it in a pot and use it to better the whole area,” Schrag said. “A rising tide raises all boats.”

The downtown CID currently only receives revenue from property taxes based on front footage. The funding raised by the district has been used for services including sidewalk cleaning, free public parking and marketing for the area.

Schrag said that when the district’s current agreement expires in June, there will be some changes.

“I anticipate the dependence on front footage taxation will decrease considerably, and we’ll look at the other types – business license tax, sales tax, and perhaps more reliance on assessed valuation than on front footage,” he said.

Even with the increased movement toward extra sales taxes, Smith doesn’t feel there will be a consumer backlash.

“Doing these special taxing districts is really becoming very standard throughout Missouri to try to pay for improvements at developments,” she said. “When you buy something for $25 and it costs you an additional quarter, are you going to drive across town to save a quarter? You’d spend that starting your car.”