Crestwood Board of Aldermen votes 4-3 to collect Prop S tax through 2011

Motion to retire tax this year fails with only Duchild in favor.

By EVAN YOUNG

Proposition S, the tax-rate increase approved in 2006 by Crestwood voters as a way to eliminate debt, will end in 2011 after nearly replenishing the city’s general fund.

The Board of Aldermen last week voted 4-3 to collect Prop S through 2011. Ward 1 Alderman Darryl Wallach, Ward 3 Aldermen Paul Duchild and Jerry Miguel and Ward 4 Alderman John Foote were in favor of Miguel’s motion. Ward 1 Alderman Mimi Duncan, Ward 2 Alderman Chris Pickel and Ward 4 Alderman Deborah Beezley were opposed. Ward 2 Alderman Jeff Schlink was absent from the March 9 meeting.

Prop S was a 20-cent tax-rate increase voters approved in April 2006. City officials launched the measure to eliminate $2 million in debt and eliminate a $1.5 million line of credit, both from Southwest Bank. After Prop S was approved, the board reduced the residential and personal-property tax rate from 20 cents to 16.9 cents per $100 while keeping the commercial rate at 20 cents.

In October 2006, the city refinanced its debt through Royal Banks of Missouri, obtaining a $2.87 million, tax-exempt “annual-appropriation note” that it would pay back in seven years with Prop S revenue.

But that time frame changed due to unscheduled prepayments the city made on the note to maintain its tax-exempt status. Because of those additional payments, the $2.87 million note was retired ahead of schedule, and officials said last week more than $200,000 of taxpayer money was spared from interest payments.

With a final principal and interest payment of $311,259.73 made to Royal Banks during the last week of February, the $2.87 million note is retired as of March 1, according to officials.

The Prop S tax had generated $2,052,587 in revenue as of Feb. 28, but the city had paid more than $3.1 million — a gap of $1,109,802 offset by general-fund reserves.

Last week, before the vote to retire Prop S in 2011, aldermen discussed whether to collect the tax until 2012, as allowed by its voter-approved ballot language; end it in 2011 to repay the general fund; or adhere to a March 2006 board-approved resolution to retire Prop S once the debt was retired and the city’s line of credit was eliminated.

Miguel said the March 2006 resolution was supposed to be reaffirmed annually, which hasn’t happened, and asked the board to do so. He said that the two purposes of Prop S have been met, and that the tax should retire this year.

“The resolution does not contain any statement about providing additional cash to the city for other services,” he said.

However, Pickel said he didn’t think it was “appropriate” to reaffirm the resolution “given today’s circumstances.”

“I can appreciate the sentiment there …,” he said. “Yes, I think you can argue that that’s been fulfilled. However, here we are four years later and we still have a significant amount that needs to be repaid to the general fund. So to reaffirm the (resolution) as written I don’t think is appropriate given today’s circumstances.”

Beezley said, “To me it’s very simple. We borrowed money from one account to pay off another account. And my father always said: ‘If you still owe money, you still owe money.’ So I think it’s a very simple decision.”

However, Duchild said he disagreed with notion the city “borrowed” the roughly $1.1 million from its general fund to help pay off the Royal Banks note because the Prop S ballot language didn’t preclude using the general fund to do so.

“We didn’t technically borrow any money from one account,” Duchild said. “The ballot talks about the money going to pay off the loan and the line of credit. It doesn’t say anything about the general fund can or cannot help pay off that loan either. So all the talk about the borrowed money to me I really don’t buy it.

“The point is, the city has the money, a lot more money than the city ever thought it would have back in 2006. The Proposition S … intent was to pay off the loan, pay off the line of credit and start to build cash reserves.”

City officials expect Prop S to generate $542,000 annually in 2010 and 2011. Miguel estimated that Prop S revenue from those two years combined would almost repay the general fund.

A five-year projection of city revenues and expenditures included with the 2010 budget assumes Prop S would be collected until its 2012 sunset. Even with the full extension of the tax, general fund expenditures still would exceed revenues by 2013.

Foote urged aldermen to “look at what our needs are” before making a decision.

“The purpose of this city and its existence is to provide services and take care of the infrastructure,” Foote said. “It’s not a contest on how much money we have or how little we have. It’s how we use that money and if the records that we keep are honest records and are available and transparent to the residents.

“We accumulated a lot of funds because we cut and we stopped repairing things. And just because we clamped down on spending money and accumulated money doesn’t necessarily mean we did our due diligence and took care of the city as we should have. So I think if this board wants to do its job, let’s look at what our needs are … I’d like to know where we’re going before we start throwing up our hands and saying we’re in great shape.”

Duchild said the sole purpose of Prop S was to retire debt — not fund city services.

“It’s a specific purpose tax. That’s how it was sold and the resolution pretty much states that,” he said. “People voted to get the city back onto strong footing, and that’s what happened. And I think we’ve even done a lot better than that … We’re not talking about a tax that covers infrastructure. We’re not talking about a tax that covers police, fire, all that.”

But Duncan disagreed.

“I don’t think Prop S has paid off what it was intended to pay off,” she said. “I think we used money from the general fund. The money from the general fund needs to be paid back with Prop S money, and that’s how I think it should go.”

Foote told Duchild, “The city funds paid out $1.109 million more than — more than — they had actually required if this had stayed on an amortization schedule. We cut about $200,000 off in interest. I’m not against saving the taxpayers money because I’m a taxpayer. But your figures are right in front of you. How do you propose to handle that?”

Duchild reiterated that the ballot language didn’t prohibit city funds from paying off the loan.

“My point is the borrowing from the general fund wasn’t really borrowing from the general fund. We used general fund money to pay off the loan,” he said. “I don’t consider it borrowing. If you consider it borrowing, that’s fine. I respect that thought process, but that’s the way I see it.”

Foote replied, “I don’t want this thing to go one second longer but I think we owe the citizens of this city a careful look at our finances and justification for every dime we spend. I’m not in difference with you on that. I’m totally for that … I’m not going to take any more than what’s absolutely due us. Period.”

Miguel motioned for the tax to retire in 2010, but Wallach noted that the board, by doing so, would have to cut the expected 2010 Prop S revenue from the 2010 budget. Miguel’s motion failed 6-1, with only Duchild in favor of it.