Sunset Hills city budget challenged as sales go online

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By Erin Achenbach
Staff Reporter
eachenbach@callnewspapers.com

Sunset Hills saw a $4.5 million increase in taxable sales from 2017 to 2018, but the city is still facing challenges from a loss of brick-and-mortar stores and an increase in internet sales.

City Administrator Eric Sterman said in his budget presentation to the aldermen Nov. 12 that Sunset Hills is continuing to face economic challenges from stagnant sales tax receipts despite growth in both the local and national economies.

The board will hold a final vote on the 2020 budget at its meeting at 6 p.m. Tuesday, Dec. 10, at City Hall, 3939 S. Lindbergh Blvd. It will also vote on the 2020-2024 capital improvements plan list.

The city projects a $173,000 overall deficit in 2020 due to planned capital expenses, but projects an $82,000 surplus in operating funds.

Under the plans, employees would get an average 3-percent merit raise.

The proposed budget allows the city to continue to “offer quality services and amenities to our residents,” but the city is challenged with flat or regressing revenues, according to the memo from Sterman to the board. That leaves the economic outlook uncertain, which is a similar position the city was in when approving the 2019 budget last year.

The majority of the city’s revenue is generated from taxes, primarily sales taxes from stores in the city. Those account for 48 percent of overall revenue in 2020, and nearly 100 percent of revenue for capital improvement, parks and stormwater.

Taxable sales did increase over $4.5 million from $235 million in 2017 to nearly $240 million in 2018.

But Sterman cautioned that since the beginning of 2018, Sunset Hills lost two significant sales tax generators, Johnny Mac’s Sporting Goods and Toys “R” Us, which may cause taxable sales in the city to head downward.

Expected revenue for 2020 is $10.83 million, up from $10.79 million in 2019. The $10.83 million does not include grants.

The second largest revenue generator in the city is utility tax, which accounts for 16 percent of the money the city takes in. Those have stayed flat and are expected to stay there, Sterman told the board in a budget memorandum.

Other revenue sources for the city include property taxes, business licenses, grants, court fines and park fees.

The city’s assessed value increased in 2019, since it was a reassessment year and property values went up.

Assessed valuation for Sunset Hills in 2019 was $441 million, a significant increase from $396 million the previous year.

However, because of the increase in assessed value and the Hancock Amendment, Sunset Hills had to roll back its tax rate to 4.7 cents per $100 of assessed valuation for residential and commercial property, down from 5.1 cents for residential and 5.4 cents for commercial the previous year. Overall, the city will take in the same amount in taxes.

As for expenditures, the city will be spending 54.1 percent on salaries and benefits, with an additional 16.5 percent on capital projects and 9.8 percent on debt service. Remaining expenditures include building maintenance, supplies, professional services and other similar items.

Most expenditures are paid for out of the general fund, which accounts for 67.1 percent of all expenditures in the 2020 budget and will be used to pay for salary and benefits for the city’s departments.

The capital improvement fund, with budgeted expenses of $1.4 million, will pay for things such as new flooring at City Hall ($20,000), four new police cars ($141,500), a new police station surveillance system ($20,000) and three new vehicles for the Public Works Department ($213,000).

At the Nov. 12 board meeting, Ward 1 Alderman Dee Baebler asked if the sales tax revenue loss due to an increase in online shopping could be curbed by implementing an internet sales tax.

“The answer is complicated… There is no real federal or state consistency, if you will, to capture internet sales tax. Missouri has sort of danced around the issue, at least the state Legislature. They’ve not really come out and passed a consistent mandatory internet sales tax,” said Sterman.

“What they have done… There is some capture of that sales tax, on a voluntary basis. They require cities to pass a use tax, which is a tax on business transactions across state lines that cities have to adopt via a vote of the public. The city of Wentzville, for example, had a use tax because they had an automotive plant that brought in a lot of parts… from other states, so those were taxed. For whatever reason the state has tried to apply that to internet sales tax… At a minimum the city would have to pass the use tax.”

Ward 3 Alderman Nathan Lipe said he was dismayed that a sidewalk along Leebur Drive was not budgeted in capital improvement plans for 2020.

Lipe had requested last year that money budgeted for new lighting at the athletic complex in 2019 instead be used to build a sidewalk at Leebur Drive, but he was told the issue would be revisited at a later time.

“This will be the third year passing on this… that we’re endangering children,” said Lipe. “Largest population of children in the city.”

“Do you have numbers to verify that claim?” asked Sterman.

“No, but you can’t disprove it either,” said Lipe.