JEFFERSON CITY — The first floor of 101 E. High St. seems dead.
The lights are off. A partly torn banner that reads “Office Space” flutters in the wind.
Behind what meets the eye, however, the light gray two-story building in Jefferson City is home to dozens of donations flowing out of 13 political action committees, most of which are funded exclusively by one Columbia developer, Jeffrey Smith, who was awarded the most federal low-income housing tax credits in Missouri from 1987 to 2016, according to the Missourian’s analysis.
Before Missouri voters reinstated campaign contribution limits in November 2016, there was no restriction on how much money donors in Missouri could give to lawmakers. Instead of writing big checks to lawmakers, however, Smith adopted a less conspicuous method.
Between 2011 and 2016, Smith poured tens of thousands of dollars into 10 committees — some formed on the same day — through four of his companies, state records show. Some committees clustered together and donated similar amounts to the same candidates that amounted to tens of thousands of dollars.
The same method allowed him to bypass the contribution limits Missouri voters passed in November 2016 that capped individual donations per election at $2,600. Since 2011, he has funneled almost $1 million through these committees to fund mayoral and state Senate and House races.
Smith didn’t respond to several inquiries from the Missourian.
Now, the new Clean Missouri rules aim to stop such donations. The voter-approved law prohibits donations to senators or representatives made by several committees that are primarily funded by the same person or group.
However, pending an official interpretation of the law from the Missouri Ethics Commission, the effect of the law is in limbo.
At the center of the connections is longtime Jefferson City-based lobbyist Harry Gallagher, who has helped Smith funnel money through the committees for years.
101 E. High St., where the 10 Smith-backed committees are listed as being based, was Gallagher’s old office for his lobbying company for more than a decade, state records show. Gallagher and some of his employees would serve as treasurers of the committees over the years.
The current treasurer for all committees, Kim Akin, is a former employee of Gallagher’s lobbying company and is now working as the senior account director at Lathrop Gage Consulting, a company that Gallagher helped form in 2017. Gallagher did not respond to the Missourian’s multiple inquiries, and Akin offered no comment.
Smith’s funding was distributed evenly and dispensed regularly for most committees. In 2018, seven committees each received a series of donations from the four companies in the exact same amounts: $5,900, $1,000, $5,800 and $5,800.
Some committees then donated to the same candidates on the same days.
In some cases, several committees would each give $2,500 to the same candidate. Bundles of such donations amounted to a total ranging from $5,000 to $25,000 for different candidates.
Using this method, Smith provided funding for the current Missouri Attorney General Eric Schmitt in his race for state treasurer in November 2016. By spreading the fortune among 10 committees, Smith gave Schmitt two $25,000 donations in late 2015 and mid-2016.
The election guaranteed Schmitt a seat on the Missouri Housing Development Commission. Today, he remains on the commission as the state’s attorney general. The commission is in charge of the low-income housing tax credit program, from which Smith benefited greatly for years.
The contribution limits that Missourians put in place went into effect in December 2016 but barely slowed Smith down. Since then, Smith provided tens of thousands of dollars on the same days to candidates of both parties, such as St. Louis mayor Lyda Krewson, a Democrat; Sens. Caleb Rowden, R-Columbia, Tony Luetkemeyer, R-Parkville, Jamilah Nasheed, D-St. Louis; and House Speaker Elijah Haahr, R-Springfield.
A longtime staunch supporter of low-income-housing tax credit programs in Missouri, Smith helped write the law on Missouri’s Low Income Housing Tax Credit program in 1990. The federal program began in 1987.
Smith is among the top beneficiaries of the program. Between 1987 and 2016, the latest year data is available, Smith received more federal low-income tax credits than anyone else in the state, according to data from the Department of Housing and Urban Development. According to the Missourian’s analysis, he received 98 credits, or about 5.5 percent of the marketplace. The company in the second place, MACO Construction, received 62, or about 3.5 percent.
Smith, who received at least $26 million in tax credits from 2004 to 2009, was donating large amounts of money to several key decision-makers over the state’s tax credit programs, Tony Messenger from the St. Louis Post-Dispatch reported. Smith also benefited from selling and buying historic tax credits in St. Louis and Kansas City, Messenger wrote.
The program Smith helped invent in 1990 came to an end when the Missouri Housing Development Commission voted to kill the program in December 2017.
A June 2017 report produced by state auditors concluded the program was inefficient. A review of federal low-income housing tax credit data shows that some of the properties in St. Louis that received credits when the program was starting out are now vacant lots or derelict buildings.
Critics of the program argued that it allowed developers to gain too much profit. But at the same time that the state is no longer matching federal tax credits dollar by dollar, more than 100,000 Missourians are put on waiting lists for low-income housing around the state.
The battle over whether to reinstate the program is back in this year’s legislative session.
Senate Bills 28 and 269 propose to restore part of the state’s matching tax credits by placing a lower cap on the aggregated amount.
While lots of senators and housing experts argued for the necessity of such programs, the idea met opposition from lawmakers such as Sen. Bob Onder, R-Lake St. Louis, who previously said the developers “have gotten very fat over the years on this program.”
A similar bill is also working its way through the House.
Smith continues to be an active donor. His total contribution in 2018 peaked at $178,200, the highest compared to donations from the previous seven years.
Filling the void
In 2008, state lawmakers repealed the state’s campaign donation limits, which voters put in place in 1994. Missouri entered an eight-year period with virtually no curtailment against big donations, until Missourians voted to reinstate contribution limits in November 2016.
The voter-approved law, passed as Amendment 2, capped personal donations to candidates for state offices at $2,600 per election. It also capped the total amount of money a political party can receive from any person or committee per election at $25,000.
Yet the law didn’t cut off the money flow.
“One of the huge loopholes left in Amendment 2 was this ability for wealthy individuals or corporation or an industry to set up a bunch of PACs to circumvent the limits,” said Sean Soendker Nicholson, who led the campaign of Clean Missouri.
A provision in Clean Missouri prohibits donations made to state senators and representatives with the intent to conceal the donor’s identity. Under the provision, when a committee is “primarily funded” by a single source, meaning when more than half of its funding comes from the same person or group, the court would naturally assume the intent of the committee is to circumvent the contribution limits unless proven otherwise.
The provision was designed to stop the circumvention of contribution regulations, Nicholson said, using Missouri billionaire Rex Sinquefield as an example. Around 2006 and 2007, Sinquefield set up 100 different political action committees, most of which made the maximum allowed amount of contribution to Democratic attorney general candidate Chris Koster, Nicholson said.
“If the whole system is tilted in favor of big donors,” Nicholson said, “then the policy that gets passed is about those donors and not necessarily all of the constituents.”
Although the provision is written into Missouri’s law, Nicholson said it’s up to the Missouri Ethics Commission to interpret and decide “who to fine and how they reprimand the entities.”
Elizabeth Ziegler, the executive director of Missouri Ethics Commission, said the commission cannot interpret the law unless someone files a complaint or requests an advisory opinion related to any senator or representative.
Missourian editor Sky Chadde supervised this work and contributed to the reporting.