This article first appeared in the St. Louis Beacon, Aug. 28, 2013 - The grand opening of two new outlet malls in Chesterfield appears to have also launched a rekindled debate into St. Louis County’s complicated sales tax formula that pits “pool cities’’ against their “point of sale’’ counterparts.
The current setup, says Chesterfield Mayor Bob Nation, amounts to “redistribution of wealth in a bad sense.”
His neighbor to the south, Wildwood Mayor Tim Woerther, strongly disagrees. The way sales tax revenue is split now “works very well for the vast majority of cities,” Woerther said.
The two were among a parade of mayors, county officials and a few residents who spoke at Wednesday’s hearing of the state General Assembly’s Joint Interim Committee on St. Louis Metropolitan Statistical Area Governance and Taxation.
The panel is planning to conduct a study on local governments and tax policies in the St. Louis metro area. The committee’s members include state Rep. Mike Leara, R-south St. Louis County, who has annually introduced a bill to change the distribution formula for the county’s sales tax.
Under the current arrangement, in place for 20 years, county municipalities are divided into two categories:
- “point of sale cities,’’ which generally have more retail businesses within their borders, and turn over to the county and other entities a portion of the sales tax revenue they collect;
- “pool cities,’’ which share all of their sales tax revenue and receive a cut from the point-of-sale bloc.
In addition, a portion of the countywide 1-cent sales tax also goes to the county government, which maintains that some of its services are used countywide – such as the County Council, the Department of Revenue and the courts.
Chesterfield and Fenton (within Leara’s district) are among a handful of county cities pressing for a change so that cities with lots of retail businesses can keep more or all of the sales taxes generated within their borders.
Chesterfield currently is a pool city but doesn’t want to remain so. It’s affected by a 1984 provision – approved by the General Assembly – that bars any new municipalities from being point-of-sale. Chesterfield was incorporated in the 1990s.
Chesterfield is backing a proposal to phase out the share of the pooled sales tax that now goes to St. Louis County government.
The state is involved in the dispute because St. Louis County needs legislative approval for certain tax changes. That includes the collection and distribution of sales taxes.
The County Municipal League and most of the county’s 91 municipalities have backed a compromise to make a slight change to the current distribution formula but would generally keep it intact.
Chesterfield isn’t happy with that idea. Take, for example, the new outlet malls that just opened. Chesterfield city officials estimate that the two malls will generate millions of dollars a year in additional sales tax income – but Chesterfield would get to retain less than 7 percent of it.
Under the current breakdown, said city administrator Michael Herring, Chesterfield contributes $12.2 million annually to the sales-tax pool but gets only $5.9 million of it back.
But Wildwood’s Woerther was among several mayors who said that Chesterfield is collecting sales tax money from their residents as well – and also benefits from the same countywide services.
'Pool' and 'point of sale' cities disagree on what's fair
A spokesman for St. Louis County said that eliminating the revenue-sharing provision in the sales-tax distribution formula would mean that just over a quarter of the county’s residents – who reside in the "grandfathered'' group of point-of-sale cities – would collect almost half of the county’s sales-tax income.
Webster Groves Mayor Gerry Welch noted that inner suburbs like hers don’t have the open land that is much cheaper for developers to use to build “big box stores’’ and other large developments. Webster Groves, she added, also is hurt economically because about 40 percent of its land is owned by nonprofits who don’t pay sales taxes.
But those nonprofits, such as Webster University, benefit the region greatly on other levels, she said. Her point was that county municipalities shouldn‘t be penalized because they may have fewer sales-tax generators within their borders, while their residents shop elsewhere.
The conservative Show-Me Institute made a similar point. The institute’s David Stokes told the committee that all sales tax income generated within St. Louis County should be distributed solely on the basis of population. The institute contends that the jockeying among municipalities for commercial businesses has led to abuses in the use of eminent domain and in the granting of tax breaks, such as TIFs (tax-increment financing), to developers. Getting rid of the point-of-sale advantage would eliminate such problems, the institute contends.
However, Chesterfield says that the issue is fairness. Changing the current system, said Nation, is the city’s top priority.
Either way, any changes will need to be approved by the General Assembly. Comments from the members on the joint committee holding Wednesday’s hearing signaled that there’s a different of opinion on what needs to be done, and what to do next.
Committee chair Sue Allen, R-Town and Country, said the panel will undertake a new independent study that will likely draw from the earlier ones, as well as Wednesday's testimony, to come up with some sort of recommendation.