County Sales Tax Distribution Again Under The Microscope
Jim Brasfield has taken on what may be a thankless task -- examining St. Louis County's famously complicated sales tax distribution system.
Brasfield is a professor at Webster University and previously served as the mayor of Crestwood. He recently finished a study in late December of the distribution system for the University of Missouri-St. Louis.
To step back for a minute, the distribution system splits county municipalities into “point of sale” and “pool” cities – which affects how much money a town receives.
- "Point-of-sale," or "A," cities get to keep most of their sales tax revenue. They tend to include municipalities with big retail centers, such Brentwood, Clayton, Crestwood, Des Peres, Fenton, Kirkwood, Richmond Heights and St. Ann, the site of the formerly prosperous Northwest Plaza.
- "Pool," or "B," cities pool all the 1 percent tax collected within their borders; their share is determined by population. "Pool" cities are generally more residential, such as Florissant, Glendale, Manchester, Maryland Heights and Wildwood. But the category does includes commercially rich municipalities, such as Chesterfield, Webster Groves and University City. (Click here to read a more detailed explanation of how the system works.)
The study came to the conclusion, at least in part, that: "A complex tax system is unlikely to have only one 'best' solution, because there are many options for change and each will have positive and negative impacts on some communities."
“Particular cities see a change in the system advantaging them,” Brasfield said in a telephone interview. “And they’ve argued for that change. And other cities see themselves disadvantaged by any kind of proposed change – and therefore they oppose it.”
Brasfield said the sales tax arrangement put in place in 1993 is fairly rigid – even though the retail economies of county cities have changed dramatically in the last 20 years. That setup lead to tension among cities, especially since county sales tax proceeds shrunk considerably since the Great Recession.
“Places like Crestwood and St. Ann don’t collect nearly as much sales tax as they used to because of closing of malls,” Brasfield said. “Some of the West County cities like Chesterfield collect a good deal more sales tax than they did some time ago. But when you look at the county as a whole, there hasn’t been an enormous shift or change in sales tax – except that the growth of sales tax has slowed.”
In fact, Brasfield’s report found that Chesterfield generated the most gross sales tax (about $12.5 million) among the county’s incorporated cities in 2013 – besting towns like Maryland Heights, Florissant and Bridgeton. (In fact, in 2013, Chesterfield got about $127.28 a person in sales tax revenue, while point-of-sale cities took in roughly $207.30 a person.) Only unincorporated St. Louis County ginned up more money.
Because Chesterfield is a pool city, it has to give up a big portion of its sales tax proceeds – which hasn’t sat well with the town’s officials. Not only has the city filed a lawsuit to get rid of the distribution system, but Chesterfield Mayor Bob Nation even broached the possibility of leaving St. Louis County for St. Charles County.
Brasfield said this type of tension is not new.
“In 1993, it was cities like University City and Webster Groves that contended they had large populations and deserved a larger share of the sales tax,” Brasfield said. “Now, it’s a place like Chesterfield that contends that it has significant retail developments and all of the costs associated with that retail development. And therefore they deserve a larger share of the tax that they collect within their jurisdiction.”
Short of any court action, changes would be difficult to achieve – primarily because the Missouri General Assembly would have to act. That’s not easy, especially since lawmakers representing St. Louis County have very different opinions.
Case-in-point: State Rep. Sue Allen, a Republican, represents Chesterfield, Town and Country, Winchester and Ballwin in the Missouri House. All of those cities have different sales tax designations – and different takes on changing the system.
When she was the chairwoman of a interim committee looking at the structure of the St. Louis region, Allen said many of her fellow committee members were not satisfied with the structure of the system.
“People in St. Louis County need to work this out ourselves," Allen said. "Because at the state level, they’re going to fix it and it’s not going to be to the liking [of the cities receiving the money].”
Indeed, Brasfield said, cities have to negotiate among themselves. Once they come to a consensus, he said, it will be easier for the legislature to act.
But he cautioned that significant changes are unlikely.
“There are incremental scenarios on the margins that could be made that could ameliorate some of the concerns of some of the parties,” Brasfield said. “But it is a zero sum game unless you increase the amount of sales tax. Every city has struggles to meet its budget, so any significant gain in sales tax on the part of one city is going to be a loss on the part of somebody else.”
County's a player
Since St. Louis County just experienced a changeover in leadership, it may be possible that there could be a fresh look at the sales tax system. But it should be noted that the county is not exactly an impartial observer.
That’s because any sales tax that’s generated in unincorporated St. Louis County is put into the pool – which then goes into the county’s coffers. Brasfield said this has long been a source of contention among municipalities, even though there’s no obvious solution.
St. Louis County Executive Steve Stenger – who previously represented a district consisting of unincorporated St. Louis County – said that he wants to take a closer look at the sales tax system before advocating for any specific changes. He also said the county would likely get involved in the Chesterfield lawsuit.
“The first thing I want to do is analyze, review and make a determination of what’s in the best interest of St. Louis County," Stenger said. "And that’s going to occur over time. And what I would anticipate is that St. Louis County will likely intervene in that lawsuit and will become a party – so we can become part of the discussion and part of that case. And I think we’ll learn a lot through that process as well.”
On the Trail, a weekly column, weaves together some of the intriguing threads from the world of Missouri politics.