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CITY OF ST. LOUIS EARNINGS TAX DISCUSSIONS WAYS AND MEANS COMMITTEE MARCH, 2010

CITY OF ST. LOUIS EARNINGS TAX DISCUSSIONS WAYS AND MEANS COMMITTEE MARCH, 2010. Revenue Structure. Typical of most large municipalities, City revenues are comprised of a mix of taxes, licenses and fees. Earnings Tax - $138.4M Property Taxes - $51.1M Sales Taxes - $48.0M

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CITY OF ST. LOUIS EARNINGS TAX DISCUSSIONS WAYS AND MEANS COMMITTEE MARCH, 2010

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  1. CITY OF ST. LOUIS EARNINGS TAX DISCUSSIONS WAYS AND MEANS COMMITTEE MARCH, 2010

  2. Revenue Structure Typical of most large municipalities, City revenues are comprised of a mix of taxes, licenses and fees.

  3. Earnings Tax - $138.4M Property Taxes - $51.1M Sales Taxes - $48.0M Payroll Tax - $35.5M Franchise (Utility) Taxes - $61.4M Service Fees - $18.5M Intergovernmental Aid - $18.4M Sources of General Revenue (actual FY09) Revenue Structure

  4. Revenue Structure • Goal of revenue structure is to maintain a diverse base that grows with economy at a rate sufficient to maintain City services

  5. Revenue Structure • Desirable characteristics for individual revenues include: o Equity and fairness: (e.g. not imposed most heavily on those least able to pay, incurred by users of services, residents and non-residents, etc..) o Ability to grow with economy o Reasonableness in relation to impact on economic activity o Ease of enforcement and collection

  6. Revenue Structure • Over 70% of City general revenue is distributed among five top sources • Each has strengths and weaknesses in meeting desirable characteristics • Collectively represents a diverse base that grows modestly with economy and distributes tax burden among those that benefit from City services

  7. Revenue Structure City Services Have a Regional Reach • Home to major sports venues, Busch Stadium, Edward Jones Dome, Scottrade Center • Arch and Riverfront • Forest Park • Zoo / Art Museum / History Museum / Science Center and Botanical Garden • Grand Center and other performing art venues • Convention Center

  8. City Earnings Tax • Imposed in 1959 • Individual tax of 1% of earnings of residents and non-residents of the City for work done or for services performed in the City • Corporate tax of 1% of net business profits from City businesses or business conducted in the City

  9. City Earnings Tax • Individual earnings tax equal to approx. 85% of total earnings tax receipts

  10. Other Major Cities Imposing Earnings and/or Income Taxes: Baltimore Cincinnati Cleveland Columbus Denver Louisville Kansas City New York Pittsburgh Philadelphia City Earnings Tax

  11. City Earnings Tax • Growth rate over 3 year, 5 year and 10 year period less than property tax but more than sales taxes. Growth Rates 3yr. 5yr. 10yr. Earnings Tax 1.7% 2.7% 1.9% Property Tax 4.5% 3.4% 2.8% Sales Tax 0.5% 1.4% 0.2%

  12. City Earnings Tax • As the largest source of general revenue ($138.4M in FY09) the earnings tax provides the most funds for City services. • Equivalent to: o Just over the FY09 total general fund costs of the Police Dept. @ $137.3M

  13. City Earnings Tax • Or Equivalent to the costs of these services: o Fire Department - $61.1M o Corrections - $35.7M o Refuse Department - $13.5M o Forestry Div. trimming / weed & debris - $7.1M o Park Maintenance - $8.5M o Building Code Enforcement - $7.7M o Street and Alley Lighting - $5.0M

  14. Property Tax As Replacement? • Est. Earnings Tax Receipts (FY10rev) (A) $136,000,000 • Estimated Property Tax Revenues (B) $287,573,759 (incl. City, schools, library, zoo/museum, etc..) • City Property Tax Rate* per $100 AV (C) $6.6465 *City portion (excl. debt) = $1.279 • Additional Rate to Compensate for Earnings Tax A / (B/C) = $3.143 • Would exceed current statutory cap – City portion of $1.279 at 86% of $1.49 limit

  15. Property Tax As Replacement? Business Homeowner #1 Homeowner #2

  16. Sales Tax As Replacement? • The sales tax is similarly restricted as City’s current rate reflects most sales tax options • Historically weak growth rate

  17. Sales Tax As Replacement?

  18. Other Considerations • Credit risks related to uncertainties in revenue stream and continued need to reauthorize tax (higher borrowing costs?) • Impact on financed TIF developments • Current budget challenges

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