The Capital City will have to make some tough financial calls as it recovers from the May 22 tornado and record-level flooding, and Jefferson City Council members have varied ideas on how to address the city's financial challenges.
The City Council approved a $65.1 million budget in September; the general fund budget for FY2020 is more than $32.9 million.
The city's revenue sources include several types of taxes, fines and donations including sales taxes, intergovernmental taxes, franchise and utility taxes, lodging taxes, property taxes, and fines and forfeitures.
A number of the city's taxes are projected to come in about $72,000 under budget for Fiscal Year 2019 — including the sales taxes, franchise taxes and cigarette taxes, according to the finance committee's August report.
Other taxes like franchise taxes, which include gas and electric utility licenses and telephone taxes, are projected to be $520,000 under the $7.4 million budgeted in the FY2019 budget, according to the finance report.
Over a third of the city's revenue comes from sales taxes. For FY2020, which begins Nov. 1, sales taxes should bring in nearly 38 percent — almost $12.5 million — of the city's revenue, according to the council-approved budget.
Loss of revenue from tourism sites, hotels and sales taxes this summer contributed to restraints on city funds, Mayor Carrie Tergin said. While some taxes are expected to come in under budget and the city continues to gather disaster expenses, staff and council are preparing for a tight budget year.
City staff estimates more than $4.2 million in disaster costs so far from the tornado and flooding, according to a memorandum City Administrator Steve Crowell sent Tergin and City Council last week.
To offset the growing amount of yearly expenses, the city will have to increase revenues, decrease expenses or dip into its reserves.
The preferred path for a budget solution varies among council members.
Reconsider a use tax
Some council members and Tergin said increasing revenue, such as revisiting a use tax, would make a significant change in revenue.
The city proposed a use tax to voters in August 2018; it failed at the ballot box. The use tax would have placed a 2 percent tax on all out-of-state purchases to be used, stored or consumed in Jefferson City.
"The city tried to enable a use tax to be charged so that the local people would be equalized with the companies that sell by mail," said Randy Allen, president of the Jefferson City Area Chamber of Commerce.
Cole County has a 1.5 percent use tax, Allen said. Missouri has a 4.2 percent use tax for people who store, use or consume tangible personal property in the state, according to the state Department of Revenue.
Ward 1 Councilman Rick Prather said he would favor putting a use tax back on the ballot. With the increase in online purchases, the city is seeing a decrease in sales tax revenue.
"The (revenue) growth is slowing down, but the expenses are not," Prather said. "If we could possibly get a use tax like the county has, I think that would go a long way to offset (loss revenue)."
Ward 1 Councilman David Kemna said he would support a use tax.
"With a lot of companies selling goods or services that are being used or consumed or stored within the state and us not receiving any tax — we don't make a profit from that," Kemna said.
Expenses for the flood and tornado are coming in, and Kemna said he is concerned about the city dipping into its unreserved general fund.
At the end of a fiscal year, departments' unspent funds go into the unreserved general fund balance — similar to a savings account. Those funds are used mostly for one-time large projects. The city's policy recommends the city put a minimum of 17 percent of unexpended funds in the unreserved fund balance.
With the unknown of how much the Federal Emergency Management Agency and the State Emergency Management Agency will reimburse, the city won't have a clear picture of its finances until the end of the year, Kemna said.
The city is tabulating expenses from the tornado and flood, Jefferson City Finance Director Margie Mueller said.
The expenses from both natural disasters will continue to be a factor until those expenses are paid, Tergin said.
"As a community, this is something we've never been through before," Tergin said. "We really have been through some challenges, and those challenges will also be felt financially as a community. We're prepared, and we're ready, but there are still some unknowns."
Before the city receives any reimbursements, ongoing funds and planning are projected beyond FY2020, she said.
Loss of revenue from tourist sites is an added concern this fiscal year, Tergin said.
The Missouri State Penitentiary tours and Special Olympics Missouri are two tourist attractions for Jefferson City and they contribute to the city's revenue, she said.
MSP tours were canceled from May 22 through Sept. 30. Two-hour prison tours and two-hour ghost tours reopened Oct. 1.
The Special Olympics canceled its summer games after the Training for Life campus was severely damaged by the tornado.
"If those busloads aren't coming to our Jefferson City, they're not eating at our restaurants, they're not shopping in our stores, they're not getting gas at our gas stations," Tergin said.
The council has not discussed direct ways to increase revenue recently, she said.
Local support is key
Creating more business opportunities and increasing local spending will lead to increased city revenues, Ward 3 Councilman Ken Hussey said.
Economic development partners, such as the Chamber of Commerce, are important to adding new employers and income to the community, he said.
The city's revenue is increasing, but the gross receipts utility tax is flat, and the property tax stays the same, he said.
"Other revenue sources like fines and fees are designed to pay for the service," Hussey said. "It's not designed for the city to net from that. Whether we explore a use tax or other funding sources, the best way sometimes is to get more people to spend more of their income locally so that we collect on that sales tax. The use tax would have been a good option; the voters clearly didn't agree."
The community is supportive when the city is specific about where funds will go, Hussey said. The capital improvement sales tax is renewed every five years, likely due to the list of areas that those funds are going to be allocated to, he added.
"The public sees it, they support it, and then they see the finished product," Hussey said. "I think we need to explore a way to better communicate a message about what the needs are and what those dollars will go directly to and ask the public what they're willing to do."
Jefferson City is in a challenging position with a low unemployment rate, Ward 5 Councilman Mark Schreiber said. The city is lacking the workforce to have large manufacturers build factories within city limits, he added.
"We certainly need additional revenue now," Schreiber said. "Just how we're going to do that, I don't know."
To save money now, he said, the council should look at the big picture of things that support departments and residents while being efficient — addressing infrastructure needs and vehicles that serve departments.
Departments are also tasked with decreasing expenditures within their budgets each year, Ward 3 Councilwoman Erin Wiseman said.
"Yes, of course, we all would like to decrease spending," Wiseman said. "The fact is our departments have done a fantastic job in making sure we can be frugal but safe."
How much revenue the city makes is not always controllable, but local spending is, she said. If the city increased sales taxes, an increase in revenue would follow.
Although she is not in favor of a tax increase, she suggested the more people support the local economy the more revenue would increase.
"By tax increases, that's the only way we can assure we're going to have an increase in revenue," Wiseman said. "Otherwise, our increase in revenue is hoping that people spend more money. It's great when people put money into the community because not only does it mean additional revenue for the city, but additional revenue for the local businesses."
Bringing young people to Jefferson City would increase revenue, Ward 2 Councilwoman Laura Ward said. When individuals relocate to the area, they want to be in walkable, safe and diverse neighborhoods, she said.
The city is working to create those spaces like Community Park, the Community Block Grant Program, the Neighborhood Reinvestment/Incentive Program and investing in infrastructure, she added.
Ward 4 Councilman Ron Fitzwater said he doesn't think now is the time to propose raising taxes, as the city passed a school bond issue in 2017.
Two operating levy increases funded Jefferson City School District's new Capital City High School and existing needs within the K-12 system.
Now the city should focus on upcoming expenses and cutting back, he said. The city will have to make difficult choices in cuts before he's comfortable increasing taxes, he added.
"We've got to figure out how to live within our means," Fitzwater said. "We had to say no this year, and we're going to have to say no in the short term until we get a grasp on where the economy is going."
The city's revenue challenges led Jefferson City Administrator Steve Crowell to have department directors identify 7 percent decreases within their operating budgets for FY2020.
The decreases will impact the departments' contributions to the unexpended fund balance at the end of FY2020, according to Tergin's letter to the Jefferson City Budget Committee.
Ward 5 Councilman Jon Hensley said the committee analyzes expenditures each year. If cuts were made to decrease expenses, they would more than likely come from personnel services, which account for nearly 80 percent of the general fund budget, he said.
"If you're going to make a large adjustment, those are the places you're going to have to look. Those are hard analyses to do," Hensley said. "We have a growing community. We have new infrastructure needs; we have to maintain infrastructure needs. I think we pretty clearly have to do both (cut expenses and create revenue). We have to look at what our expenditures are, but we have to continue exploring ways to increase revenues to devote to our existing and ongoing and growing revenue needs."
The city needs to look at decreasing spending while funding important projects with the unreserved fund balances, Ward 4 Councilman Carlos Graham said.
The city's 17 percent savings policy is important; however, projects beyond that savings could be funded with the unreserved fund balance account, he said.
Taxpayers have entrusted the city with funds to spend wisely on items needed to keep the city moving forward, he added.
Ward 2 Councilman Rick Mihalevich said the city's revenue is basically flat with slight growth. A proposed solution would include taking a deeper look at departments' expenses.
"We're going to need to do long-range planning to maintain the delivery of services match the expectations of the citizens," Mihalevich said, "and how we're going to pay for the recurring cost of building maintenance and fleet replacement. We've got some challenges in terms of the long-range city budget."
Of the more than 130 pink sheets, 21 were funded in the FY2020 approved budget through the general fund and Capital Improvement Sales Tax G. Pink sheets are funding requests from city departments.