Crestwood aldermen debate opting out of August sales-tax holiday

By BURKE WASSON

As the state plans its annual sales-tax holiday during the first weekend in August, Crestwood officials are debating whether having less sales-tax revenue for three days will cause too much harm to the city budget.

The Board of Aldermen is scheduled to decide June 13 if the city should opt out of this year’s sales-tax holiday. The deadline to notify the state is June 20 — 45 days before the Aug. 4 sales-tax holiday begins.

The state sales-tax holiday does not include all sales, as customers would be limited to not having to pay sales tax on clothing and shoes priced less than $100 per item, school supplies priced less than $50 per purchase, computer software priced less than $50 per purchase, computer software priced less than $200 per item and computers and computer equipment priced less than $2,000 per item.

The sales-tax holiday does not include res-taurants.

Crestwood has participated in past tax breaks for customers, but City Administrator Frank Myers said that because this year’s sales-tax revenue is already below projections, he is against the city’s in-volvement.

“I will tell you that from conversations I’ve had with a number of city managers and administrators of St. Louis County, the vast majority are opting out because of the fiscal impact it’s having on their budgets,” Myers said. “I think as they began to look at the consequences of it, communities are now rethinking their position of opting out on that sales-tax holiday.”

A number of neighboring cities had dropped out of this year’s sales-tax holiday as of May 9, according to Assistant to the City Administrator Justina Tate. These include Black Jack, Fenton, Kirkwood, Maplewood, Overland, Rock Hill, St. Ann and Webster Groves.

With Crestwood’s 2006 sales-tax revenue down at slightly less than 5 percent of projections, Myers said he does not believe the sales-tax break, set from Aug. 4 to Aug. 6, would be beneficial for Crestwood.

At the same time, he said city officials would be talking with Crestwood businesses between now and the June 13 Board of Aldermen meeting to gauge their interest in the sales-tax holiday.

“I think the balance that the board has to consider is the revenue derived by the city compared to the positive impact this sales- tax holiday has on all of our businesses,” Myers said. “That’s why we’re going out and talking to the business community to get some more direct feedback before the board makes their final vote.”

Economic Development Specialist Ellen Dailey said at the board’s May 23 meeting that no Crestwood businesses had approached her about this year’s sales-tax holiday.

Ward 1 Alderman Richard Breeding voted May 23 against a second reading of a bill to opt out of this year’s sales-tax holiday, which delayed the discussion and decision until June 13.

Breeding said that with other neighboring communities not participating in this year’s sales-tax break, aldermen should consider the possible advantage that Crestwood businesses would have over nearby cities who have opted out.

“I’ve got an outside-the-box idea that we stay in and we promote that we’re in and promote that we’re a vital community and we want you to shop,” Breeding said. “Like ‘business first, come back to Crest-wood.’ Or it could just be ‘we’re in,’ which means we’re in this program. And I’ve said this before. I thought during sales-tax holidays before, we take a business-first program. We should have city leaders at the mall, city leaders at Kohl’s greeting people. I mean, why not think outside the box and clean this up that we’re in and we want you to come back to Crestwood? Here’s a three-day weekend to try us out.”

While he said he appreciates Breeding’s idea, Myers said he still does not believe the sales-tax holiday would help Crestwood businesses because people would simply delay any major purchases on eligible items until the first weekend in August.

“Let’s say as a resident of Crestwood and somebody that’s planned a $1,000 purchase that I’m going to be paying sales tax on,” Myers said. “And I look at this and I say: ‘You know, I’m going to wait and spend that $1,000 during this window of time so that I don’t have to pay that sales tax.’ And let’s say everybody takes that approach. Our sales-tax revenue, as I reported earlier based upon a question, is down 5 percent. If our residents fully take advantage of that, what we’re going to do is we’re going to lose more sales-tax revenue. And I just think that given where we are financially … and it is a great idea to promote business, but unfortunately, we make our money by this business yield, including sales-tax revenue. So I would recommend we opt out.”

Ward 1 Alderman Richard Bland said he also believes that the city should not participate in the sales-tax holiday because of the limited merchandise from which customers can benefit.

He also said he agrees with Myers that the loss of any sales-tax revenue would be hurtful to the city budget and asked the city administrator if he can estimate exactly how much money would be lost from the sales-tax holiday.

“While I think business is important, the sales tax that we won’t capture is going to be sales tax that will not go to our general revenue,” Bland said. “Do we have any numbers of any kind that would show us the kind of a negative impact on our parks and stormwater (fund) and our general fund? Do we have that?”

“The data concerning this program … the sales-tax data is very confidential, so we can’t extrapolate that,” Myers said.

“But it would have a negative impact?” Bland said.

“It’s going to have a negative impact,” Myers said. “And it may be very, very modest, but it’ll have some.”

Despite Myers’ recommendation to opt out, Board President Jerry Miguel of Ward 3 said that because the city had already budgeted a 4-percent decline in this year’s sales-tax revenue, the sales-tax holiday would not be as damaging — even though current projections show that the revenue is actually 5 percent lower than expected.

“We have already budgeted participating in the sales-tax holiday because we budgeted based on a 4-percent decline from last year’s revenue,” Miguel said. “So, we are already budgeted for whatever impact this particular holiday has. What I liked about it is that the more of our neighbors that opt out, the better it is for us, I would hope. And I would hope that we pick up some business from some of the surrounding communities in the process. Doesn’t sound like that may be happening, however.”