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Capital City has unique economy, lags in recovery

Capital City has unique economy, lags in recovery

Jefferson City officials to explore new revenue sources

May 19th, 2013 in News

Jefferson City is projecting flat sales tax revenues in the next fiscal year, while the state and many other Missouri cities are seeing their numbers grow.

Last week, City Administrator Nathan Nickolaus released his draft of the 2014 budget for Jefferson City, which predicts sales tax revenues remaining at $9.7 million and declining property and utility taxes.

Those numbers make Jefferson City somewhat an anomaly from other Missouri cities that are seeing their revenues begin to come back from the nationwide economic crash a few years ago.

"It's hard to say what's happening right now," Nickolaus said. "We don't seem to be recovering the way that other places are."

General growth

A look at five other Missouri cities shows a steady trend of economic growth, with each city projecting increased sales tax revenues for the 2013 and 2014 fiscal years.

• University City, which has a population of 35,365, is projecting a 4 percent increase in sales and use tax revenues for the 2014 fiscal year. According to University City's proposed 2014 budget, the city's sales tax revenues are projected to increase from $8.5 million in this fiscal year to $8.9 million in the next fiscal year.

• St. Joseph, which has a population of 77,185, saw sales taxes come in nearly $1 million above projection in the 2012 fiscal year. The city has projected $35.1 million in sales tax revenue for the 2013 fiscal year and is projecting a slight increase for the 2014 fiscal year with sales taxes estimated to come in at $35.4 million.

• Chesterfield, which has a population of 47,471, projected a 3 percent increase in sales tax revenues for the current fiscal year, estimating $6.3 million in sales tax revenue, compared with $6.1 million in 2012. Information on the 2014 fiscal year was not available, and officials in Chesterfield did not return calls for comment.

• Cape Girardeau, which has a population of 38,402, projected sales tax revenues would come in at $9.5 million for the current fiscal year, which is a more than $600,000 increase from 2012. According to the city's 2013 budget, increased revenues are expected in part because of a new casino that opened late last year.

Information on the 2014 fiscal year was not available, and officials in Cape Girardeau did not return calls for comment.

• Columbia, which has a population of 110,438, projected a 2 percent increase in sales tax revenues for the current fiscal year, estimating $21.3 million in sales tax revenues compared with $20.8 million in 2012. Information on the 2014 fiscal year was not available, and officials in Columbia were unavailable for comment.

Effects of state government

Richard Sheets, deputy director of the Missouri Municipal League, said he has spoken with city managers who are seeing increases in their sales taxes, but Jefferson City really is not comparable to other Missouri communities.

"Jefferson City is a little bit different," Sheets said. "We're so tied to state government ... it's hard to compare with those other cities."

He said other cities see their sales taxes increase with tourism, and it largely follows national economic trends. But Jefferson City's trends are tied to the state - if state employees are unsure of their future and unwilling to spend a bit more, then the local economy will not see revenue increases as other cities do.

"They're holding back because they're not sure what the future's going to be," Sheets said. "Sales taxes are a real big indicator of what people's perceptions are ... that's why Jefferson City is a little bit unique."

But the state itself is showing signs of increased revenues. In early May, the state budget director, Linda Luebbering, announced that general revenue collections had increased 2 percent for the year, from $1.52 billion to $1.55 billion.

Nickolaus said Jefferson City tends to lag behind those state increases, because the upswing in revenues will not trickle down to employees right away. He said for many cities, it's only a matter of months before their local economies begin to reflect trends from the national and state levels, but Jefferson City takes much longer to show those same trends.

"There is a definite lag ... In Jefferson City, it's sometimes two years," he said.

He said it's because the state's budget won't reflect any changes, either good or bad, in the economy until the following fiscal year. Nickolaus' explanation of how that lag works would mean the state's recent announcement of seeing increased revenues will be reflected in the next state budget for the 2014 fiscal year, but Jefferson City may not see those positive trends until the 2015 fiscal year.

Need for new revenue

In Nickolaus' letter to Mayor Eric Struemph presenting his draft budget for 2014, he wrote "that the city must begin to seek new revenue sources. This will be critical to our future."

Nickolaus said the City Council will have a work session at the end of the month, currently scheduled for May 28, where staff plans to present some ideas of ways to find new revenue sources.

"In my opinion, we can't cut our way out of the fiscal situation that we're in," Nickolaus said.

But a serious issue is whether that will mean new taxes.

Jefferson City voters have steadily voted down any proposed new or increased taxes for the last year.

In February 2012, voters rejected 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.

Nickolaus said he would hope people would take a close look at the situation and decide if they want to adequately fund city services that are important to them.

He noted that many other cities use dedicated taxes to free up funds in general revenue. Jefferson City does have a half-cent parks sales tax as well as a half-cent capital improvement sales tax.

Like Jefferson City, Chesterfield has a half-cent parks sales tax and a half-cent capital improvements sales tax.

University City and Cape Girardeau both have a fire department sales tax. University City also has an economic development sales tax, while Cape Girardeau has a parks/storm water sales tax.

Columbia has a transportation sales tax and a parks sales tax.

According to the 2014 proposed budget for St. Joseph, the city plans to ask voters to approve a half-cent public safety tax Aug. 6 to pay for the addition of 20 commissioned officers and two civilian staff to the police department.

Nickolaus did not specify what ideas would be presented at the end of the month as ways to seek new revenue sources, but said it would provide a starting point for the City Council to begin thinking about how to increase Jefferson City's revenue streams.

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