Bill temporarily would exempt Fenton from sharing sales tax

Leara’s proposal could negatively impact unincorporated areas, council chair says.

By EVAN YOUNG

Fenton temporarily would be exempt from sharing part of its sales-tax revenue with other county cities under a measure a local lawmaker said he will try to push through in the final days of the current legislative session.

With his proposal to overhaul the entire county sales-tax distribution system stalled in the General Assembly, state Rep. Mike Leara, R-Concord, said he plans to attach a “carve-out” amendment for Fenton to all pertinent bills in hopes of getting it passed before the end of the legislative session on Friday, May 13.

The amendment would allow Fenton to keep for two years more than $3 million in sales-tax revenue that it currently shares in a pool with other county municipalities annually, said Leara, whose 95th District includes the city.

“I am pushing that amendment vigorously throughout all bills that have that section of the law open,” Leara told the Call, noting Fenton has lost considerable revenue since two Chrysler plants closed there in 2009.

He said the amendment would “break the barrier” of an “unfair” law that governs the distribution of revenue in the county.

A 1977 state law designated county municipalities that were levying a local sales tax as point-of-sale, or “A,” cities, while other cities and unincorporated areas of the county became pool, or “B,” areas. Areas annexed into a city after 1984 also became pool areas.

“A” cities until 1994 retained all of the revenue they generated from a countywide, 1-percent sales tax. Revenue generated from that tax in “B” areas is redistributed to those entities on a per capita basis. However, under state legislation approved in 1993, “A” cities now are required to share a portion of their 1-percent sales tax revenue with “B” areas in the pool based on a progressive sliding scale.

Areas annexed by point-of-sale cities after 1995 remain in the sales tax pool. Therefore, some cities, such as Fenton, have both point-of-sale and pool portions and are designated “A/B” cities.

One provision of the 1993 distribution reform gave both “A” and “B” cities the option of adopting a quarter-cent or one-eighth-cent sales tax as a way for point-of-sale cities to offset the loss of revenue they had to share, and to increase the size of the pool.

Twenty-four point-of-sale cities and 10 pool cities adopted a quarter-cent sales tax.

Data from the St. Louis County Municipal League show that point-of-sale cities received $54.2 million of the $67.7 million in revenue generated from the 1-percent sales tax in 2010, a loss of 20 percent.

Meanwhile, pool cities last year generated $43.3 million from the sales tax and received $47 million, an 8.4-percent gain. Unincorporated areas of the county generated $29.6 million and received $39.9 million, a nearly 35-percent gain.

“It’s redistribution at its worst …,” Leara said. “There’s an algorithm to how this is distributed. I’ve sat down with lawyers, and there’s no rhyme or reason to it. We can’t figure out how it’s equitably distributed. They make some adjustments here and there for some communities, and it’s just an unfair thing all the way around in my opinion.”

Leara for the past three years has tried to change the sales-tax distribution system back to the way it was before 1994, with no sharing of revenue by point-of-sale cities.

Leara’s attempt this year got the most traction as his House Bill 534 was passed 10-6 out of the House’s Local Government Committee and referred March 29 to the Rules Committee, where it stalled.

Under HB 534, a “B” city could adopt an ordinance to become a point-of-sale city, and an “A” or “B” city that has changed groups could transfer back to its original designation. Currently, an “A” city cannot revert back once it becomes a “B” city.

Bill supporters — such as Fenton and Chesterfield — contend many of the once fiscally sound cities pooling sales-tax revenue for their neighbors now are in need of those dollars to address their own financial problems. In addition, the current system acts as a disincentive for cities to develop economically on their own, bill supporters contend.

Leara cited the city of Glendale as an example.

“Glendale’s a nice place … but they choose not to have business and retail sales in their area,” he said. “That’s just the way they want to live, but I don’t think Fenton should support that.”

At his final Board of Aldermen meeting last week, Crestwood Mayor Roy Robinson said he recently sent a letter to Leara and other local legislators expressing the city’s support of changing the distribution system.

“It’s asinine that we have to give away our hard-earned funds that the city needs more than ever,” Robinson said.

Ward 3 Alderman Jerry Miguel urged the city to become even more “actively involved” in the reform effort. He said Crestwood contributed more than $400,000 to the county sales-tax pool last year — and more than $1 million a decade ago when the city’s sales-tax base was greater.

“Four-hundred-thousand dollars would go a long way to balancing our budget,” Miguel said. “In fact, it would more than balance our budget this year. Never mind what the impact has been to this city in the past.”

Opponents of HB 534 believe cities such as Green Park and Maryland Heights would leave the sales-tax pool if given the option. As a result, the amount of revenue distributed to other “B” cities would fall significantly, putting those communities — and the whole region — in financial peril, opponents contend.

The County Council was scheduled Tuesday — after the Call went to press — to consider adopting a resolution opposing HB 534 or any legislation that would alter the sales-tax distribution system until a county municipal league task force — comprised of officials from both “A” and “B” cities — finishes studying the matter in hopes of finding a compromise.

Sunset Hills Mayor Bill Nolan said his city, which could gain more than $475,000 if HB 534 were successful, is not taking an official position on the issue “until we see where the task force is going.”

Council Chairman Steve Stenger, D-south county, said Leara’s bill could cause a “significant loss” of revenue to unincorporated areas of the county.

The amount could be as high as $14 million a year, according to municipal league figures.

Stenger noted that his sixth council district largely is unincorporated. Of the roughly 146,000 people he represents, about 5,000 live in five municipalities: Bella Villa, Green Park, Lakeshire, St. George and Wilbur Park.

“That’s it. That’s all we have,” Stenger said. “So that means we could suffer a significant loss of tax revenue that would otherwise directly benefit unincorporated St. Louis County …

“We the people of the 6th District cannot afford to support such a bill because it takes money directly out of our pockets. It takes money out of our roads. It takes money out of our parks. It takes money out of all public infrastructure, and it’s going to cost us a great deal of money.”

He added, “Something that we have to be mindful of is that Oakville is not a municipality; it’s a boundary. Affton is not a municipality; it’s a boundary. Mehlville, same thing. All these areas that comprise South St. Louis County, those are not municipalities. We benefit greatly from the pooling of resources, of tax dollars. We are hurt greatly when we don’t pool. We need to support pooling. That’s the only way we’re going to get that one-cent.”

Leara said he understood the concerns about his bill from pool cities and may tweak the proposal during the next legislative session to include a five- to 10-year phase-in of the new distribution system.

“I understand the burden it would place on some municipalities that rely on this, but I think that they just need to readjust their budget and consider some sort of revenue or sales-tax generation in their own community versus pulling it from other communities that do,” Leara said.

“For example, we don’t share with Illinois. We don’t share with the city of St. Louis. What makes it better for St. Ann to pull from Fenton? That’s wrong in my opinion.”