Missouri State Auditor's Office

State estimated to lose $6 million on Community Development Tax Credit program; auditors recommend state let credit expire

This audit reviewed the cost-benefit to the state of the Community Development Corporation (CDC) tax credit program and found the credit would not create enough economic activity to offset the tax credits used. Legislators meant for the credit, started in 1994, to create community development centers, which would invest in small businesses, housing and redevelopment projects. As of December 2004, state officials had issued $4.6 million in tax credits for this program, and $4.4 million had been redeemed. State law requires state auditors to perform a cost-benefit analysis of all state tax credit programs, and this report is a part of such ongoing work.

CDC will not increase jobs or state revenue to offset credits

Auditors found the state will lose an estimated $6 million after its $9.5 million investment into CDC projects. The state's revenue will only be positively effected for 2 of the 15 years of the program. (See page 10)

Tax credit will only create an average of 9 jobs over 15 years

Auditors used economic software to analyze total economic impact of this tax credit program. The software found the program created a projected total average of 9 jobs for the 15-year program. (See page 10)

Audit recommends no new funds for the tax credit

program

The CDC tax credit program has about $1.3 million in tax credits left to be issued as of December 2004. Due to the $6 million revenue loss, auditors recommended the General Assembly allow the tax credit to expire without authorizing additional tax credits. (See page 12)

State not holding CDC participants to requirements

Program guidelines required CDCs to submit annual reports, job creation reports and a listing of all investors in the CDC, as well as the state to perform random audits of the job creation reports. But state officials have not enforced reporting requirements and random audits have not occurred. (See page 14)

State officials say tight state budgets kept oversight minimal

State officials overseeing the CDC tax credit program said they have known since 1998 about the need for greater oversight of the program, but needed more staff to accomplish this task. They have tried since 2001 to find funding to staff program oversight, but have been unsuccessful due to tight state budgets. (See page 15)