Cities try to get creative with revenue ideas
City administrator identifies five possibilities of new revenue
Sunday, May 26, 2013
Stagnant revenues are leading Jefferson City officials to look at ways to find new revenue streams, an issue facing many municipalities.
City Administrator Nathan Nickolaus has said the city needs to look at new ways to find revenue, as predictions for the next fiscal year show flat sales tax revenues and falling revenues from property and utility taxes.
Nickolaus had said staff planned to make a presentation on ideas to find new revenue sources at a work session this month, but that item is not on the agenda for Tuesday’s work session.
Nickolaus said he had identified about five different possibilities that could be considered by the City Council for ways to increase revenue, most of which are tax-based.
The possibilities are a transportation tax, a 911 charge on phones, a use tax, raising the property tax or creating a storm water utility, he said. Nickolaus noted many of the ideas identified are already used in other communities and Cole County has its own use tax already in place.
“The council needs to know what their options are,” Nickolaus said. “None of them are really unexpected.”
He said he would prefer to make that presentation before the council gets too far in the budget process, but he will do “what the council wants.”
Jefferson City’s position of needing to find new revenues is not a unique one for municipalities. A nationwide look at creative ways cities have tried to find new revenue shows a variety of methods, from looking at new ways to incorporate advertising to specifically targeted sales taxes.
Richard Sheets, deputy director of the Missouri Municipal League, said cities rarely are able to get away from the traditional revenue streams: taxes and economic development.
“Cities are pretty much tied in to taxes. That’s just how governments are funded,” Sheets said. “It’s really finite.”
Many Missouri cities try to capitalize on activities of parks departments, where fees are charged, Sheets said. In Jefferson City, the Parks, Recreation and Forestry Department financially operates as nearly a separate entity, with its own funding and its own budget, meaning activity fees do not go into general revenue.
Cities largely look at how to expand their local economies and get people to spend money within city limits, he said, as the primary way to increase revenue.
“When they look at new revenue, they look at economic development, bringing new jobs in,” Sheets said.
Because Jefferson City is a charter city, Sheets said it has more leeway than other cities that are strictly bound by state statutes on what they can and can’t do to raise revenue.
But some revenue generating ideas are risky for a municipality.
According to the New York Times, cities in three states entered into agreements with KFC where the company would pay the costs of repairs to fire hydrants and filling potholes in exchange for advertising on each filled pothole and repaired hydrant.
Last year, Baltimore considered selling advertising space on city fire trucks to bring in revenue, and many cities often sell naming rights to stadiums and transit stops.
Sheets said he had heard of one city in Missouri trying out advertising on police cars, but the practice never caught on.
Sheets said municipalities have to be careful when they get into the advertising game. As a government entity, he said, a city would be unable to turn down an ad based on content, because it could be viewed as limiting one’s First Amendment right to free speech. At the same time, he said, a municipality may not want to be seen endorsing every ad that comes along.
The other aspect, Sheets said, is that a city cannot go into private business or compete with private businesses.
“They have to stay within the function of a city providing municipal, public services,” Sheets said. “Exploring areas other than tax revenues and expanding the economy, you start getting into the private sector and cities can’t go into private business.”
Another standard method for cities, Sheets said, is simple cost-cutting measures.
When Nickolaus released his draft 2014 budget earlier this month, he said he believed the city could not cut its way out of the financial situation it’s in.
Fifth Ward Councilman Ralph Bray said efficiencies are exactly what he’s looking for.
“I think we need to make sure we’re efficient with what we have already,” Bray said. “And that does not require new taxes.”
Jefferson City voters have voted down proposed new or increased city taxes recently.
In February 2012, voters rejected Transformation, a half-cent, 10-year economic development sales tax that sought to pay for 30 different projects throughout the city.
In August 2012, voters rejected a quarter-cent sales tax that would have provided funding for the city’s Fire Department.
Third Ward Councilman Ken Hussey, who also co-chaired the failed Transformation sales tax campaign, said voters have voiced their opposition to new taxes and the council has heard that loud and clear.
“The public has been pretty clear to us that they’re not really looking for new tax increases,” Hussey said.
Hussey said the city needs to look at efficiencies and ways to grow the local economy and increase tax revenues, as opposed to increasing tax rates.
Fifth Ward Councilman Larry Henry said the question of how to find new revenues is difficult to answer, but clearly taxes have not been working. Henry said the city needs to find new ways to tap resources, but the council will need to hear ideas from community members who may be able to offer a solution city officials have missed.
Fourth Ward Councilman Carlos Graham said the council can’t keep doing the same things over again and hopes that as a group, they can find something new.
“We most definitely have to be creative,” Graham said. “We have to be able to think outside the box.”
Sheets said Missouri cities have yet to find that untapped resource or new funding source so many are searching for.
“If you find some new revenue sources, please give me a call,” Sheets said. “It’s something we all struggle with.”
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