Lessons From The Last City Audit
The news of the City of St. Louis potentially facing a new state audit is probably welcome to the many city taxpayers who have watched recent news about St. Louis Development Corporation (SLDC)’s poor contracting decision around the northside small business and nonprofit grant initiative. After years of waiting for a list of recipients to be reviewed and released, the public has watched in astonishment as the politically-connected contractor obviously failed to do their jobs. To say that there was a lack of due diligence on the part of SLDC is a massive understatement. In light of these recent stories,it is totally understandable that city taxpayers would want to see the agency audited, and recent reports indicate that petitioners have the required number of signatures to trigger a state audit.
I would like to offer a word of advice to the petitioners seeking a new audit: don’t expect that Missouri’s State Auditor’s office will actually do a decent job at auditing SLDC. Why do I say that? Personal experience. I was the lead petition organizer on the previous drive to audit the city, much of which was also driven by a desire to have SLDC audited. In the midst of ridiculous corporate welfare being given to developers working in upscale neighborhoods, myself and dozens of other volunteers began gathering signatures to trigger an audit. While we were well on our way to gathering the needed signatures, city leaders decided to acquiesce to our demand and passed a resolution through the Board of Aldermen, which requested the state auditor proceed with the review that we were seeking.
As you can guess, we were thrilled to see that the city would be audited. We were hopeful that a state examination of SLDC and their practices would reign in what we saw as runaway corruption that had normalized the practice of routinely granting politically-connected developers unnecessary tax abatements, Tax Increment Financing (TIF), and other forms of real estate development incentives, thereby starving our school district and city of much needed revenue. After the audit began, we met with then state auditor Nicole Galloway, the last statewide elected Democratic official in Missouri. At the time, she was running for governor. We weren’t ignorant of the politics involved in our having triggered an audit during an election season. We hoped that the state auditor would ignore the normalization of corruption for her own political advantage. Coming down on city officials who were helping the already wealthy become even wealthier would have been a great piece of campaign positioning, both showing outstate voters that she was independent of the Democratic machine in St. Louis and showing city taxpayers that she would go to bat for them.
After that meeting, we waited. We also followed up with the State Auditor’s office, though we didn’t hear a lot back. During this process, a now former SLDC employee, who must’ve felt some guilt about how poorly they were stewarding taxpayer dollars, reached out and supplied me with an internal document that indicated a prominent developer on the near southside was giving different parts of the city government differing numbers about how much they were spending on their projects. The result would be that the developer would have either been getting awarded undue abatements or they were paying too little on their permits. Given what we knew about the developer’s dealings with the city and potential sums at play, most of us speculated that it would have likely been the former. It seemed like exactly the kind of information that the auditor would be interested in investigating. The final report mentioned nothing of problems with verifying the costs cited by developers. In fact, there didn’t seem to be any actual digging into the process used to award tax incentives. Instead, Auditor Galloway decided to highlight already well known problems with special taxation districts like Community Improvement Districts and Special Business districts that levy additional taxes. SLDC merely got faulted for some minor accounting issues.
Some of the volunteers involved thought the CID story would simply be an appetizer, but that didn’t turn out to be the case. In the end, the agency avoided pretty much any accountability. In fact, the lack of any significant complaints from the State Auditor became a feather in their cap. They had submitted to the audit and been found to be almost completely on track. SLDC could feel good about their clean bill of financial health and use the relatively positive audit findings to say that resident concerns about excessive corporate welfare were unfounded.
Fast forward just a few years, and a number of city aldermen and the former President of the Board of Aldermen were indicted on schemes to trade bribes and favors for getting tax breaks through SLDC. The process was so routine that the elected officials were sure they would be able to get basically any deal approved. In fact, they did get the incentives approved. The indictment clearly mentions former Alderman Jeffrey Boyd simply telling them to inflate the prices on redevelopment costs. He obviously didn’t think these numbers would be subject to much of any scrutiny. This was the exact kind of fraud that we had suspected was going on at SLDC. In the aftermath, SLDC subsidiary LRA’s property sales were paused and a senior leader at LRA was asked to retire. The portion of SLDC most directly related to the fraud continued as though nothing really happened. There were announcements that things were being “tightened up”, that a “new scorecard” was being developed, and other euphemisms for fixing problems. They didn’t even really bother with announcing much in the way of procedural changes that would prevent similar fraud in the future.
All this to say that the petitioners shouldn’t expect that this will fix corruption at SLDC. The agency was already fabulously corrupt, back when the last audit was triggered. It is still a primary nexus in the city’s culture of corruption. The audit did next to nothing to change that fact. SLDC’s position as an agency with the power to provide developers with corporate welfare means that it is the pathway that a lot of the city’s corruption is funneled through. This was true during the Krewson administration, has remained true throughout the Jones administration, and will continue to be true in the next administration, whoever that may be. It doesn’t matter if a candidate tries to feign shock and offense by what is happening at SLDC.
Not that you have to take my advice, but I recommend that the new petitioners avoid the mistake that we made: don’t stop hounding the State Auditor’s office. Demand that they actually do their jobs. Don’t let them get away with just meeting you once and handing you a business card. Do this publicly and repeatedly. Keep the SLDC and the Auditor’s office in the public spotlight, so that they know taxpayers expect something to actually be done. The corruption that has permeated our political system isn’t partisan. Stealing from the public has essentially been normalized as “just how things are done”, and this is just as true in Jefferson City as in St. Louis. Any assumption that the state auditor won’t also turn a blind eye for campaign contributions is naive.
Otherwise, you are likely to finish this process as we did: empty handed. That was biggest lesson that I took away from the experience. Even when citizens do things the “right way”, we can’t count on our elected officials and their employees to work in the same good faith. I wish we could. I really do. It would be wonderful to live in that kind of place. Unfortunately, we don’t.
Congratulations on collecting enough signatures to trigger the audit. Now comes the hard part: making it matter.
