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City, county officials concerned about potential sales tax revenue loss after passage of state bills

June 16, 2014

in Local

EdwardsBy Randy Kirby
Managing editor

On May 27, the Governor’s office held a telephone conference call with various cities and counties around the state. Sedalia was one of those cities. City Administrator Gary Edwards participated as did Pettis County Presiding Commissioner John Meehan.

The purpose of the conference call was to let Missouri cities know that because of last-minute sales tax exemption bills approved during the last few minutes of the recently completed Missouri legislative session, Missouri cities and counties could be significantly impacted by sales tax losses. Sales tax revenue is the major revenue source for Sedalia and most Missouri cities.

The bills that were approved at the last minute by the legislature did not have time to be thoroughly vetted nor, in many, if not most cases, they did not have fiscal notes attached to them. In other words, their financial impact was unknown at the time of passage.

In other words, their impact is just now being analyzed. The Missouri Municipal League and the Governor’s office has done that. The Governor’s office estimates that Sedalia could lose as much as $1.4 million per year in sales tax dollars if all of the sales tax exemption bills are not vetoed. A $1.4 million annual sales tax loss would be devastating to Sedalia. This figure would be coupled with separate and recent sales tax declines from other sources totaling about $500 thousand. So, if the governor’s estimate is anywhere near accurate, and coupled with recent sales tax revenue declines, Sedalia could lose as much as 15% of its total sales tax annual revenue.

It is anticipated that the Governor will veto many, if not most, of the last minutes sales tax exemption bills. The question becomes what will the legislature do during its September veto override session. Will they override his vetoes or not?

“To be fair …. there is a partisan division in Jefferson City on this issue. The governor says the bills will damage cities and counties and the overall state budget. His GOP opponents disagree with his calculations and say that fewer taxes will attract business to Missouri similar to what is happening in Kansas and elsewhere.

“However, it is a fact that these bills (about eight of them) were approved at the last minute of the legislative session without a financial impact analysis. So, no one can claim they truly know all the facts related to impact. But, the Missouri Municipal League in Jefferson City has some major concerns about their impact on cities in Missouri and is asking cities to request that the Governor veto these sales tax exemption bills that were approved at the last few minutes of the recently completed state legislative session,” said Edwards on Wednesday.

Meehan told the Sedalia Weekly Observer that he feels he needs more substantial information on the economic impact the bills will have.

“When the Governor’s office says that it will have a negative impact of $351 million on local governments across the state, that’s a tremendous amount of money,” he said.

Proper interpretation of the 10 bills he has read is vital to understanding the impact they will ultimately have on Pettis County. “It’s not necessarily black and white – there’s some gray areas that are going to have to be looked at,” he said.

By his own estimates, the impact will be 2.5 times greater on the city than it will be on the county, due to the difference in tax rates, he explained. “Our tax rate is one percent, while the city’s is around 2.4 percent.”

But the part about the situation that bothers him the most is the fact that the local sales tax was voted in by local voters and then the politicians in Jeff City want to start exempting certain things.JOHNm

“What gives them the right then to come back and say ‘we’re going to change the rules now,’” Meehan stressed. “Personally, I don’t think that they should be doing that.”

“The dollar figures are simply estimates, but the bottom line is, as chief financial officer of the county, it’s my responsibility to bring negative and positive issues back to the attention of those people in Jeff City,” the presiding commissioner said. “And I have done that. And they still passed this one.”

Meehan acknowledges the state politics involved in the situation, but “I am the local guy who was elected to protect Pettis County folks, just like our sheriff is elected to protect people from criminals. Mine’s a financial responsibility and I do my job,” he said.

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