DALLAS - St. Louis County, Mo., officials are drafting a legislative proposal that would change the way the county and 90 cities split nearly $100 million generated by a one-cent countywide sales tax.
County Executive George Westfall has outlined a plan that officials believe would eliminate inequities built into the system when it was adopted in 1978. Critics want to change a system they say favors cities with large shopping or retail centers at the expense of other cities.
"Right now, we are asking for input on this plan from the communities," said Mac Scott, a spokesman for Westfall. "The bottom line is that 73% of the municipalities would benefit from this reallocation."
Next month county officials expect to formally introduce legislation that would, if passed by state lawmakers, gradually reduce the disparity in cities' revenues from the sales tax, while giving officials through the county the ability to ask voters to approve an optional sales tax to offset any losses.
The county would also benefit by being permitted to retain a portion of the revenues it loses under the current system.
If the proposal is approved, Wall Street analysts say they would monitor what impact it would have on the budgets of the 90 municipalities in St. Louts County. The city of St. Louis would not be affected because it is not part of the county.
"Any revenue gain or loss to each of the municipalities will be evaluated on an individual basis," said Steven Bocamazo, assistant vice president at Moody's Investors Service. He estimates that the cities fund an average of 30% of their budgets from sales taxes.
"It actually could benefit some communities," said Steve Murphy, managing director for Standard & Poor's Corp. "But I would have to see the whole plan."
Analysts said they were not aware of any bonds backed specifically by sales tax receipts, but agreed that shifts in a major general fund revenue stream could affect general obligation bond ratings in St. Louis County.
County officials, hoping to build a consensus and legislative support for the Westfall plan, are counting on the fact that the plan would help more communities than it would hurt.
The proposal would allow for phasing in a system to decrease the amount of money paid to cities that now receive as much as three to four times the annual countywide average of $208 per capita.
For instance, Fenton currently receives $747 per capita largely because the city is home to a Fabick tractor plant. That is 10 times the $73 per capita received by Florissant, one of the county's largest municipalities.
Under the plan, Fenton would have its per capita share cut nearly in half, while Florissant's share would essentially double.
Randy McDaniel, finance director in Florissant, said the city gets about 40% of its $11.1 million budget from the county sales tax. However, his city's share is limited because it is a so-called pool city that splits tax dollars based on population rather than the amount generated in its own community.
"The pool communities are basically getting the leftovers," he said, reflecting a common criticism of the current system.
The Westfall plan would limit cities with a high share of sales tax revenues to twice the $208 per capita average and redistribute excess moneys to pool cities. It would also freeze cities with a strong reliance on the county sales tax at their current level of funding.
The plan would also allow cities to ask voters to approve a one-eighth- or one-fourth-cent option sales tax. Funds from the option would remain with the local municipality and would not be subject to the countywide sharing system.
A final provision would protect St. Louis County, whose share of the pool is currently about $26 million annually, but shrinks whenever its unincorporated areas are annexed or form new cities.
For instance, when Hazelwood incorporated last year, the county no longer could count the city's 11,000 population in calculating how much it receives from the sales tax. Currently, about one-third of the county's 996,000 residents live in unincorporated areas.
Joe Cavato, the county's planning director, said the proposed legislation would allow the county to keep some of the revenues it now loses.
"Now if there's any annexation or incorporation, we lose," said Cavato, a former investment banker at St. Louis-based A.G. Edwards & Sons. "This would change how we are affected. "
It is not the first time that local officials have tried to rewrite the formula for sharing the sales tax, though past efforts have failed. Last year, for instance, the Missouri Municipal League advocated a system that would have included an increase in the countywide sales tax so that no one lost revenue.
The plan failed because state legislators were opposed to mandating a higher sales tax countywide. The Westfall plan has an optional higher tax, but not a mandatory one.
Local officials are hopeful that cities in St. Louis County can reach a consensus this year. "This is a 15-year-old problem," said Cavato. "Several proposals have made it to the legislature, but not through the legislature."
