The Joint City-County Task Force met Wednesday to discuss recently passed state legislation that if signed into law could erode the local sales tax base. The group attempted to answer the question, "Is there a legitimate cause for alarm at the local level?"
Officials on hand gave a resounding "yes" to that question, after the finance departments of both the City and County did an initial fiscal analysis.
The legislation in 10 bills makes many purchases previously subject to sales tax, tax-exempt. Sales tax is a significant revenue source for both the City of Springfield and Greene County.
The City heavily relies on sales tax revenues as its main source of revenue to fund vital services, such as Police and Fire operations, Municipal Court, Building Development Services and other citizen service departments. In Springfield, approximately 60% of the revenue in the General Fund comes from sales tax and use tax. That is about $44 million of the fund's $77 million dollar budget.
In the County, approximately 50% of total revenue, with 34% of the General Fund being funded with a sales tax. That is about $11.7 million of the $34 million General Fund budget. These revenues also fund vital public safety and other departments.
The tax exemptions detailed in the 10 bills, were passed in the final hours of the state legislative session – many without fiscal notes or public hearings – and would apply to all sales taxes passed by Springfield voters.
City and County lobbyist Scott Marrs said it isn't unusual for bills to be passed during the "11th hour," but that the large number and wide scope of the bills with sales tax exemptions this session caught education and government leaders and other stakeholders off guard. He also pointed out that some of the bills were dramatically different than their original drafts.
City and County leaders analyzed four of the 10 bills. Local fiscal analysis is challenging due to the broad scope of some of the bills and the lack of availability of information. Governor Jay Nixon's fiscal analysis was utilized for purposes of discussion; no other fiscal analysis was provided to the City or County for review and consideration.
The local estimated losses pertaining to the four bills were derived for Springfield and Greene County by taking the percentage of the local total to the state total and applying that to the individual statewide estimates per bill.
The estimated losses include:
City of Springfield
- General Sales Tax - $5 million or 7% of total general fund revenue
- Capital Improvements Sales Tax - $1.3 million or 13% of total 1/4-cent revenue
- Transportation Sales Tax - $630,000 or 7% of total 1/8-cent revenue
- Police-Fire Pension Sales tax - $3.8 million or 13% of total 3/4-cent revenue
Greene County
- General Sales Tax – (1/2 cent split 50/50 between General Fund and Road & Bridge)
$1.5 million or 4.3% of total general fund revenue - Law Enforcement Sales Tax - $2.25 million or 13% of total LEST revenue
- 911 Emergency Communications - $745,000 or 13.6% of total 911 sales tax revenue
- Parks Sales Tax - $1.5 million or 14% of total Parks sales tax revenue
Impacts of these losses in revenue would affect services ranging from 911 emergency communications (which is supported by a countywide tax) to Parks operations to public safety services.
"We owe it to our voters to let them know what the local impact would be if these tax exemptions remain in place," said City Manager Greg Burris. "There are a lot of taxes that the local voters have approved that will be impacted by this, such as the City's 1/4-cent capital improvements tax, 1/8-cent transportation tax and the recently renewed Police-Fire Pension sales tax. Reductions in these revenues would affect our ability to honor our commitments to local voters on projects promised through these tax revenues."
Marrs said that if the Governor vetoes these bills, there is still a potential for an override. But those chances are slim, he says.
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