Crestwood officials now eyeing 35-cent tax hike for Aug. 5 ballot

Aldermen question if 35-cent tax-rate increase enough to solve financial woes


A week after Mayor Roy Robinson proposed a five-year, 25-cent tax-rate increase to head off declining revenue and increasing expenses, Crestwood aldermen extended that proposal to six years at a rate of 35 cents.

The Board of Aldermen was set to vote Tuesday night — after the Call went to press — on whether to place that tax increase on the Aug. 5 ballot. Aldermen have until 5 p.m. May 27 to place the proposed 35-cent tax-rate increase on the August ballot.

If approved, the measure would tax residents an additional 35 cents per $100 of assessed valuation and generate an estimated $1,130,528 per year, or $6,783,168 over six years. For an owner of a $200,000 home, the tax increase would cost $133 per year, or roughly $11 per month.

Residents already pay a combined 37.4 cents per $100 of assessed value between the city’s 20.5-cent municipal tax rate and 16.9-cent tax rate from Proposition S, which initially was approved as a 20-cent tax-rate increase in 2006 by voters to retire and refinance more than $3.5 million in debt and line-of-credit expenses.

Due to reassessment in 2007, aldermen subsequently rolled back the Proposition S rate to 16.9 cents from 20 cents. If the 35-cent tax-rate increase is approved, residents would pay a total tax rate of 72.4 cents until 2012, when Prop S expires.

While Robinson recently estimated that the city currently has $3.5 million to $4 million in cash on hand, he said he was troubled by a first draft of the city’s 2007 audit as well as a report of the city’s finances for the first quarter of 2008.

A finance presentation at an April 30 town-hall meeting showed that the city had budgeted $12,676,109 for services in the 2008 budget, but officials now believe “the city may not have enough revenue to cover those expenditures.”

During a May 8 work session to discuss the proposed tax-rate increase, city officials said that if the city can’t make up the revenue this year to meet expenses, the reserve cash on hand of $3.5 million to $4 million would be utilized.

In the first draft of the city’s 2007 audit, the city is estimated to have experienced a $600,000 drop in sales-tax revenue from 2006 to 2007 largely due to store closings at the former Westfield Shoppingtown Crestwood mall, now called Crestwood Court.

That drop can be attributed to the October closing of Dillard’s, one of the former anchors of the mall, as well as vacancy rates approaching 50 percent.

And through the first quarter of 2008, due to several one-time expenditures as well as a drop in revenue, Robinson said the city had “$2 million less in cash on hand” than it did at the start of the year.

Among those one-time expenses was a $525,000 prepayment in March on the city’s remaining $2.08 million in debt for an annual-appropriation note with Royal Banks of Missouri.

The prepayment reduced by one year residents’ taxes toward Proposition S as funds to retire the note are generated from that 2006 tax-rate increase.

The city also paid $377,600 in February for a new police communications system after aldermen decided not to finance the payment of that system, which also led to in-creased one-time expenses.

Robinson said these expenses in the first quarter are much of the reason why the city used just more than $2 million in cash on hand to cover those payments.

“People out there are saying what happened to $2 million?” Robinson said. “Well, what happened to it is the board spent it.

“They spent it on paying back for Prop S. They spent it on communications … So all of that came out of one thing. It’s not a loss. It’s we don’t have that cash any longer. But it was spent appropriately by what the board directed them to do.”

Compounding those one-time expenses, the city’s first-quarter report for 2008 also showed that sales-tax revenue is in further decline.

Among the city’s three major funds, $1,159,410 was collected in sales-tax revenue from January through March of this year compared to $1,326,572 in sales-tax revenue generated during the same period in 2007.

That amounts to a loss in sales-tax revenue of 12.6 percent in the city’s three major funds when comparing the first quarter of 2008 to the first quarter of 2007.

With all of these factors in mind and a visible trend of in-creasing expenses and decreasing revenue, aldermen reached consensus at the work session to vote on an ordinance this week to place a six-year, 35-cent tax-rate increase on the Aug. 5 ballot.

The reasoning behind the six-year sunset is that city officials expect to see new sales-tax revenue by that time from the pending redevelopment of the Crestwood mall. After initially purchasing the mall property for $106 million in 1998, the Westfield Group sold it for $17.5 million in March to Centrum Properties of Chicago and New York-based Angelo, Gordon & Co.

With the sale price of the mall sinking $88.5 million in 10 years as well as other downward trends, Ward 3 Alderman Gregg Roby questioned whether a 35-cent tax-rate increase will be enough to solve the city’s financial issues.

“My concern is I think about property taxes, not just the sales tax,” Roby said. “I think the property tax is going to show a decline next year as well because we just went from a $106 million mall down to a $17.5 million mall. And your numbers are going to drop dramatically there.”

“But I do believe 35 cents will offset all that,” Robinson said. “I think we’ll be OK at 35. Are you thinking more than that?”

“Well, let me just say that the calculations just on the sales tax are minus $917,080 by the end of 2008 if the trend continues,” Roby said. “The 35-cent increase was $1,130,528 (per year). That gives you not much more than a hundred-some-thousand dollars left over. And with the property taxes decreasing, with your fuel costs going up, I don’t know … Just the fuel alone could be another …”

“Hundred-thousand (dollars),” Robinson interjected.

“Easy,” Roby said.

“The only problem I have … is if you go out there with times as they are and ask for more than 35 (cents), that’s double what we’re paying now,” Robinson said.

“And I understand that,” Roby said. “… I just don’t want to turn around in a year and go back to the people and say: ‘Gee, we screwed up. We didn’t figure properly.’ …

“I’ll agree to a 35-cent. We’re just going to have to go with it,” he added.

“We’re just going to have to make it work,” Robinson said.