Sales-tax sharing costing Crestwood roughly $400,000 annually, board told

Three bills seek to change sales-tax sharing in county

By Kari Williams

The city of Crestwood is losing more than $400,000 annually in revenue because of how sales-tax proceeds are distributed in St. Louis County, according to Fenton Mayor Dennis Hancock.

Hancock, who presented a sales-tax sharing proposal last week to the Board of Aldermen, said from 2006 to 2010, Crestwood lost an average of $432,000 per year due to how sales taxes are distributed in the county.

“To me (that) is grossly unfair,” Hancock told aldermen Feb. 14. “The city of Fenton, in that same period of time, has lost an average of $3.5 million a year. Why are we punished? Because we’re a small city that works hard and generates a lot of sales-tax revenue, just like Crestwood does.”

Three bills currently are pending in the Legislature that propose changes to sales-tax sharing in St. Louis County, Hancock said. House Bill 1038, introduced by Rep. Mike Leara, R-Concord, would phase out sales-tax sharing in St. Louis County over a 10-year period.

A second bill, HB 1463, would, according to Hancock, “go the complete opposite end of the spectrum,” creating a situation where all the sales-tax funds in the county would be pooled and shared based on population.

“That would be even less of an incentive for cities like Fenton to do anything to redevelop the 295-acre site that used to be the home of Chrysler,” Hancock said.

The third proposal, HB 1335, puts a 15-percent cap on the amount of money a city would contribute to the pool and excludes St. Louis County from receiving any revenue from a countywide, 1-percent sales tax.

“That’s based on other local-option sales taxes that are in place today that also share 15 percent,” Hancock said. “I think that’s reasonable. if we’re going to have sharing, then let’s be reasonable about that sharing.”

HB 1335, sponsored by Leara and Rep. Eileen McGeoghegan, D- St. Ann., also allows for cities to choose if they want to be an A city or a B city.

A 1977 state law designated county municipalities that were levying a local sales tax as point-of-sale, or “A,” cities, while other cities and unincorporated areas of the county became pool, or “B,” areas.

Areas annexed into a city after 1984 also became pool areas.

“A” cities until 1994 retained all of the revenue they generated from the countywide, 1-percent sales tax. Revenue generated from that tax in “B” areas is redistributed to those entities on a per capita basis.

However, under state legislation approved in 1993, “A” cities now are required to share part of their 1-percent sales tax revenue with “B” areas in the pool, based on a progressive sliding scale.

Areas annexed by point-of-sale cities after 1995 remain in the sales-tax pool.

Therefore, some cities, such as Crestwood and Fenton, have both point-of-sale and pool parts and are designated “A/B” cities.

Regarding HB 1335, Hancock said, “That bill is a bill that was developed by the A cities working together and that bill, to me, is a good bill. It’s a good compromise from where we are today.”

Hancock suggested Crestwood employ a lobbyist, which Fenton did in the last legislative session.

“What I have discovered is that not only is it important to have someone there working for you, working for the things that you want to get done,” Hancock said. “It’s just as important to have somebody there watching your back to make sure some things don’t get done to you.”

Ward 3 Alderman Jerry Miguel said he did not realize cities like Fenton share more than 15-percent sales-tax revenue.

“I thought the cap was 15 percent, because I know that’s pretty much what we’ve been sharing,” Miguel said.

The 1-percent sales tax currently does not have a cap, Hancock said, which causes cities such as Fenton and Chesterfield to share about 50 percent of their revenue.

“The other thing I would point out is that while St. Louis County today takes $10 million a year out of the pool more than they pay in, their concern, of course, is what are they going to do to make up that $10 million?” Hancock said.

Ward 1 Alderman Darryl Wallach said while Wildwood benefits with $2.5 million or more, Crestwood has to tax its citizens for services the city wants to provide.

“It is not fair; it’s not equitable for them not to charge their citizens for services, but they reap the benefits of seeking $2.5 million … It’s just not fair for that city to reap the benefits, while we as a city struggle for our services that we want,” Wallach said.

Hancock agreed and said the current system “simply isn’t fair.”

“It’s not equitable. It’s not. It artificially keeps some cities afloat,” Hancock said. “It hurts others, and as I said, there’s no incentive for a city in St. Louis county to do what it takes to generate revenue if you’re going to just ship most of it out.”