Arnold, Missouri Ran a Road-Tax District as a City Slush Fund
Summary
A Missouri State Auditor investigation -- opened after whistleblower complaints and completed only after issuing three subpoenas -- found that Arnold, Missouri city officials, sitting as the board of their own transportation sales-tax district, diverted $3.3 million to pay off the city's unrelated debt with no benefit to the district, drew the district's boundary specifically to exclude the residents whose homes it needed to buy, and routed those purchases through a shell company so sellers would not know a government was buying. None of 10 retailers tested displayed the tax to customers as state law requires, and the city attorney was referred to a county prosecutor for allegedly lying to auditors. The district has collected $33.2 million since 2014; the auditor rated the city's performance in the areas reviewed "Poor."
A tax district that pays the city's bills, not its own
The TDD charges a 1% sales tax on every business inside its boundary and has collected about $33.2 million since fiscal 2014⧉ -- money that, by law, is supposed to fund the district's own transportation projects. Instead, from June 2009 through June 2025 the district's board, made up entirely of city officials, funneled $3.3 million of that revenue into paying off the city's own tax-increment-financing (TIF) debt, an obligation the auditor found had 'no benefit to the district.' The city debt is still not close to paid off: as of August 2024 it stood at $9.48 million, nearly three times everything the TDD ever put toward it. Auditors also found the board had agreed not to let the TDD dissolve until that city debt is retired in full -- even though the district has no outstanding debt or viable project of its own left to justify its continued existence.
Carved out of their own district
The clearest sign of who the district was built to serve is its map. Auditors found the ARC TDD's boundary was intentionally drawn⧉ to exclude the residential streets the city needed for a planned connector road -- the same properties the district would later try to buy. Because those homeowners were outside the boundary, they never got a vote when the district was created and have no seat in its governance. Asked why, the city attorney told auditors the area was 'strategically carved out . . . so as to limit the number of voters in the district.' When the district went to buy those homes anyway, it did not do so directly: it hired a third-party company, the Arnold Acquisition Company, to purchase them on the open market first, because officials 'did not want the residents who were selling their homes to know the purchase was for the TDD' -- worried sellers would ask for more money if they knew a government was the real buyer. Of 50 properties the district identified for the project, it had purchased 17 as of August 2025.
View data as table
| Total ARC TDD revenue since FY2014 | 33.2 | Sales tax collected under the district's 1% levy on businesses within its boundaries |
|---|---|---|
| Paid toward city's own TIF debt | 3.3 | Diverted from June 2009-June 2025 to a city debt unrelated to any TDD project, with 'no benefit to the district' |
| That city TIF debt still owed | 9.5 | Outstanding as of Aug. 31, 2024, despite the years of TDD payments |
Nobody told the shoppers, either
Missouri law requires every retailer inside a transportation development district to prominently post the extra sales tax rate at the register. Auditors visited a sample of 10 of the ARC TDD's roughly 90 active retailers⧉ and found none of them posted the tax at the door or the register; at one store where auditors made a test purchase, the tax did not appear on the receipt either. Neither the district's own executive director nor its board members said they knew the disclosure law existed. The report's sharpest finding involves the city attorney, who has no official role with the TDD but billed the city for TDD work at least 340 times between 2022 and 2024. During a March 2025 interview he told auditors he was the district's procured legal counsel; four months later he told them the opposite. Auditors called it an intentional misstatement made to interfere with their investigation -- a violation the state auditor referred to the Jefferson County Prosecutor as a possible class A misdemeanor.
- The Arnold Retail Corridor TDD has collected $33.2 million in sales tax since fiscal 2014, run by a board made up entirely of Arnold, Missouri city officials.
- From 2009 to 2025 the district paid $3.3 million toward the city's own unrelated debt -- money auditors say provided "no benefit to the district" -- while that debt still stood at $9.48 million as of August 2024.
- The district's boundary was drawn to exclude the very residents whose homes it wanted to buy, and it routed those purchases through a third-party company so sellers would not know a government was the buyer; 17 of 50 targeted properties were purchased as of August 2025.
- None of 10 retailers auditors tested displayed the required TDD sales tax notice, and the city attorney -- who billed the city 340-plus times for TDD work despite no official district role -- was referred to a county prosecutor for allegedly lying to auditors about his role.
- The Missouri State Auditor rated the city's and the districts' overall performance in the areas audited "Poor," its lowest tier, after officials' lack of cooperation forced auditors to issue three subpoenas.
All figures, quotes, and findings trace to the Missouri State Auditor's Office's April 2026 performance audit of the City of Arnold and its two Transportation Development Districts (Report No. 2026-035), which was opened following whistleblower complaints the auditor's office determined to be credible. The City of Arnold and the TDD disputed the auditor's recommendations in a formal written response, included in the audit's Appendix F; the auditor's published rebuttal to that response is reflected where it bears on the figures and characterizations used here. This piece does not independently verify the ongoing property-owner lawsuit against the TDD referenced in the audit's background section, which remained pending as of the report's release.
Sources(1) ▾
- Missouri State Auditor's Office (Scott Fitzpatrick), City of Arnold and Arnold Transportation Development Districts, Report No. 2026-035 (2026-04-01) — The Missouri State Auditor's April 2026 performance audit of the City of Arnold and its two Transportation Development Districts (TDDs) -- opened after whistleblower complaints and requiring 3 subpoenas to complete -- is the source for the TDD's revenue history, the $3.3 million diverted to the city's unrelated TIF debt, the intentionally exclusionary district boundary, the undisclosed retailer sales tax, the shell-company property acquisitions, the City Attorney's misleading statement to auditors (referred to the county prosecutor), and the report's overall 'Poor' rating. auditor.mo.gov · original document
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A Missouri State Auditor investigation⧉ -- opened after whistleblower complaints and completed only after issuing three subpoenas -- found that Arnold, Missouri city officials, acting as the board of their own Arnold Retail Corridor Transportation Development District ( TDD), used the district's sales-tax authority to fund the city's own goals: unnecessarily paying $3.3 million toward the city's unrelated debt, buying land through a company designed to hide that a government was the buyer, and drawing the district's boundary specifically to keep the residents whose homes it wanted from ever getting a vote.