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Special taxing district ‘unlawfully’ used $300K for private business projects, debts, audit finds

   

Nearly $300,000 in taxpayer money meant for a community improvement district (CID) was instead used for a myriad of private business expenses, including a new walk-in beer cave and remodeling of a convenience store, the Auditor’s Office said Monday. 

The report from State Auditor Nicole Galloway said the Black Mountain CID, which was created in August 2010 in Van Buren, was intended for public infrastructure, storm water controls, and “other eligible site costs” within its 17 acres. 

However, the audit found $296,937 was spent outside of what is allowed by state law, including: more than $100,000 in private business loans for equipment purchases and cash flow for operational expenses and repairs to a convenience store owned by three members of the CID board at the time. 

Nearly $126,000 of CID funds were spent on the convenience store in 2013 and 2014. The funds were used on new fuel pumps, covers for the pumps, electrical work, and remodeling of the restrooms, the audit said. Nearly $10,000 was also spent on a new walk-in beer cave. 

The store was sold to new owners six months after the work was completed, and the public funds used for renovations to the store were not reimbursed, the audit said. 

“We discovered several members of the initial Black Mountain CID board used taxpayer money for their own benefit,” Galloway, the 2020 Democratic contender for governor, said in a statement. “CIDs are meant to fund projects that benefit the community. They aren’t supposed to be illegal personal piggy banks for board members or anyone else, especially for spectacularly improper projects like a $10,000 walk-in beer cave.” 

The audit also noted the board did not follow state law in posting its meeting minutes and agendas or submit annual budgets to the Department of Economic Development for the 2010-2017 years. 

The auditor’s conclusion stated: 

“Members of the CID Board violated state law by using public monies to enrich themselves by paying off previous private business loans, renovating a convenience store (a private asset) prior to selling the store, and providing public money to a previous business associate to build a private asset. The petitioners of the district misled the public by telling the city the district would be used to fund public improvements. Other expenditures lacked adequate documentation to determine their purpose, but also involved companies related to the former Board members. All of these issues would have been detected sooner if the district had a governance structure without significant conflicts of interest and a significant lack of oversight.” 

Overall, the audit gave the entity the lowest rating of poor. It recommended the current CID board work with law enforcement officials regarding the audit’s findings and ensure future meetings and expenditures are properly documented, among other things. 

The board has agreed with all of the auditor’s recommendations. 

There are more than 400 community improvement districts across Missouri, the auditor said. Van Buren is about 126 miles southeast of Springfield.

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