Cuts impacting Crestwood’s ability to provide services citizens want, Arnoldy says

Police chief: City officials need to eye revenue solutions so services can be maintained

Cuts impacting Crestwood's ability to provide services citizens want, Arnoldy says

By Mike Anthony

Crestwood officials have made so many budget cuts over the past 10 years that unless a revenue solution is found, it will be difficult to maintain the level of services residents require.

That was the message interim City Administrator Frank Arnoldy had for Mayor Gregg Roby and the Board of Aldermen during two work sessions that took place last week to discuss the city’s proposed 2016 budget. Former City Administrator Mark Sime’s resignation was effective Oct. 23, and Arnoldy, the city’s police chief, is serving as interim city administrator.

As proposed, the 2016 budget projects total revenues of $10,707,316 with anticipated expenditures of $11,724,354 — a deficit of $1,017,038.

Information comparing 2006 operating revenues to projected 2016 revenues was presented by Arnoldy. In 2006, sales-tax revenue was $4,373,201, while the city’s property tax revenue was $1,793,577. Total operating revenue was $9,746,162. Property-tax revenue in 2006 also included funds generated by Proposition S, a 20-cent tax-rate increase voters approved in 2006. For 2016, sales-tax revenue of $3,495,718 is projected, while property-tax revenue of $1,083,950 is projected. Total operating revenue of $7,714,793 is anticipated.

Total sales-tax and property-tax revenues for 2016 are projected to decline by 21 percent— $2,031,369 — compared to 2006. During the same 10-year period, total operating expenditures have increased from $8,020,353 in 2006 to $8,274,794 proposed for 2016.

“So during that period, we’ve increased that by about 5 percent,” Arnoldy said. “What needs to be factored in there with that increase of 5 percent, in those intervening 10 years we have made numerous cuts within the operating budget of the city in personnel and in other items. So it’s a 5-percent increase, plus the amount of things that have been decreased through cost-cutting measures during that time …”

In 2006, the city had a general fund surplus of $1,725,809, he noted. But the proposed 2016 budget projects a deficit of $560,001.

“… The problem is not necessarily cost driven,” Arnoldy said. “We have cut things back. We have done the best we can to still provide the services that our residents are requiring. It’s a matter of declining revenues …”

Over the past 10 years, he said. “We have done numerous cost cuttings and at this point the sales tax, which is really beyond our control, we can’t drive something to make that increase. So a lot of what this (budget summary) sheet is showing us is we’ve cut costs about as much as we can cut it and still maintain the service level. It’s a matter of across these 10 years, it’s a revenue thing and we need to be looking at revenue solutions to try to bring our funds and things back into where we need to be to provide the services that we’re being requested to provide.”

Finance Officer Rick Jett said, “I think Mr. Arnoldy has done a commendable job explaining what we believe the essence of the issue is. Again, it’s as simple as your revenues and costs at home, and our reserve balance is our savings account. At the end of the day in 2016, we are out of balance by about $600,000, and in order to fund those operations at that $8.4 million level, we will need to draw from our savings …”

Though the 2016 budget projects a healthy reserve, drawing from reserves is not “a sustainable strategy,” Jett said. “It is a doable strategy for any one of us at our home situations to temporarily take care of an issue, but it is not a long-term solution … So therefore, you really only have two choices. On a long-term basis, you have to drastically reduce the cost structure, or on the other side, you have to drastically increase the revenues.

“And I think that we certainly as staff and as a team here at Crestwood are ready to talk with you about some ideas regarding solutions to the revenue side of the equation … When you look across the revenue sources of all the funds, including the general fund, but especially the capital improvement fund and even the park and stormwater fund, what you find is that the vast majority of revenue impact is influenced by sales taxes. So any solution of revenues needs to take that fact into account.

“The other fact that Mr. Arnoldy brought up is the fact that at the end of the day, we cannot just dial that particular revenue source up. We are really at the mercy of how many retailers we have operating in the city, what the economy is like for sales — for retail sales — and what the environment for generating those retail sales is. But we do not have at our disposal a way of changing, for example, just increasing the sales-tax rate. In all of the instances in the three major funds, our sales-tax rates are already set at statutory maximums. On the other hand, at least in the general fund, there are some other revenue sources that we can discuss, some of which are available for improvement with permission.”

Citing 2014 tax rates — the most recent data available — Arnoldy noted that based on the city’s 2014 tax rate of 25.6 cents per $100 of assessed value, Crestwood residents paid roughly 3.5 percent of their total tax bill to the city.

“It’s slightly more than what the county library is getting. It’s less than the Zoo Museum District is getting, and for that, the people are getting all of their municipal services provided to them,” he said. “It’s just a point of reference … because oftentimes as there’s any discussion of something to do with taxes, it’s ‘Oh my God, the city of Crestwood is taxing us to death,’ and we’re only 3.5 percent of that total collection …”

Residents now pay about $8 a month to the city in taxes, Arnoldy said, as he presented scenarios showing how much revenue could be generated by tax-rate increases ranging from 10 cents to 50 cents.

“After a lot of discussion, it was decided to use the 40(-cent increase) just as a guide to see because it would take care of what our current needs are and allow us to take care of some other things that have been needing to be done …,” Arnoldy said.

The city’s current residential tax rate is 24.8 cents; commercial, 39.9 cents; and personal property, 27.8 cents. A 40-cent tax-rate increase would generate an additional $1,000,972 in tax revenue. The owner of a $200,000 home would pay an additional $152 a year in taxes to the city, or $12.67 per month.

“The 40-cent amount would get us in a solid position, as we let some other things develop in the city, and then we could make decisions in the future as to whether we collect it all or if it needs to be dialed back. But for now, we would need it all …,” Arnoldy said.

Mayor Gregg Roby noted that residents of surrounding communities pay much more to fire protection districts than what they pay to Crestwood for all municipal services. For example, the 2015 blended tax rate for the Mehlville Fire Protection District, which has had the lowest tax rate of all fire districts in St. Louis County for nearly 10 years, is 70 cents per $100.

At the end of the Oct. 29 work session, Roby said, “… I would just caution based on the numbers that we’re dealing with now, that this is a real problem for this city, and we can go through the budget as we did the last two nights and we can make cuts to various items in that budget. But at some time or another, they’re going to catch up to us and we’re going to have tremendous debt to deal with and how do you deal with it then if you haven’t been working on it all along?

“… We’ve got a great board that understands the finances, obviously, of the city and appreciates the position we’re in, and as the mayor I just encourage everyone to think very strongly about what we as a community can do to help improve our economic situation here and continue to provide the great services that we provide to our residents …”