1 CITY OF ST. LOUIS EARNINGS TAX DISCUSSIONS WAYS AND MEANS COMMITTEE MARCH, 2010

2 Typical of most large municipalities, City revenues are comprised of a mix of taxes, licenses and fees. Revenue Structure

3 Earnings Tax - $138.4M Earnings Tax - $138.4M Property Taxes - $51.1M Property Taxes - $51.1M Sales Taxes - $48.0M Sales Taxes - $48.0M Payroll Tax - $35.5M Payroll Tax - $35.5M Franchise (Utility) Taxes - $61.4M Franchise (Utility) Taxes - $61.4M Service Fees - $18.5M Service Fees - $18.5M Intergovernmental Aid - $18.4M Intergovernmental Aid - $18.4M Revenue Structure Sources of General Revenue (actual FY09)

4 Revenue Structure Goal of revenue structure is to maintain a diverse base that grows with economy at a rate sufficient to maintain City services Goal of revenue structure is to maintain a diverse base that grows with economy at a rate sufficient to maintain City services

5 Revenue Structure Desirable characteristics for individual revenues include: Desirable characteristics for individual revenues include: o Equity and fairness: (e.g. not imposed most heavily on those least able to pay, incurred by users of services, residents and non-residents, etc..) o Equity and fairness: (e.g. not imposed most heavily on those least able to pay, incurred by users of services, residents and non-residents, etc..) o Ability to grow with economy o Ability to grow with economy o Reasonableness in relation to impact o Reasonableness in relation to impact on economic activity on economic activity o Ease of enforcement and collection o Ease of enforcement and collection

6 Revenue Structure Over 70% of City general revenue is distributed among five top sources Over 70% of City general revenue is distributed among five top sources Each has strengths and weaknesses in meeting desirable characteristics Each has strengths and weaknesses in meeting desirable characteristics Collectively represents a diverse base that grows modestly with economy and distributes tax burden among those that benefit from City services Collectively represents a diverse base that grows modestly with economy and distributes tax burden among those that benefit from City services

7 Revenue Structure Home to major sports venues, Busch Stadium, Edward Jones Dome, Scottrade Center Home to major sports venues, Busch Stadium, Edward Jones Dome, Scottrade Center Arch and Riverfront Arch and Riverfront Forest Park Forest Park Zoo / Art Museum / History Museum / Science Center and Botanical Garden Zoo / Art Museum / History Museum / Science Center and Botanical Garden Grand Center and other performing art venues Grand Center and other performing art venues Convention Center Convention Center City Services Have a Regional Reach

8 City Earnings Tax Imposed in 1959 Imposed in 1959 Individual tax of 1% of earnings of residents and non- residents of the City for work done or for services performed in the City Individual tax of 1% of earnings of residents and non- residents of the City for work done or for services performed in the City Corporate tax of 1% of net business profits from City businesses or business conducted in the City Corporate tax of 1% of net business profits from City businesses or business conducted in the City

9 City Earnings Tax Individual earnings tax equal to approx. 85% of total earnings tax receipts Individual earnings tax equal to approx. 85% of total earnings tax receipts

10 City Earnings Tax Other Major Cities Imposing Earnings and/or Income Taxes: Other Major Cities Imposing Earnings and/or Income Taxes: Baltimore Baltimore Cincinnati Cincinnati Cleveland Cleveland Columbus Columbus Denver Denver Louisville Louisville Kansas City Kansas City New York New York Pittsburgh Pittsburgh Philadelphia Philadelphia

11 City Earnings Tax Growth rate over 3 year, 5 year and 10 year period less than property tax but more than sales taxes. Growth rate over 3 year, 5 year and 10 year period less than property tax but more than sales taxes. Growth Rates 3yr. 5yr. 10yr. Growth Rates 3yr. 5yr. 10yr. Earnings Tax 1.7% 2.7% 1.9% Earnings Tax 1.7% 2.7% 1.9% Property Tax 4.5% 3.4% 2.8% Property Tax 4.5% 3.4% 2.8% Sales Tax 0.5% 1.4% 0.2% Sales Tax 0.5% 1.4% 0.2%

12 City Earnings Tax As the largest source of general revenue ($138.4M in FY09) the earnings tax provides the most funds for City services. As the largest source of general revenue ($138.4M in FY09) the earnings tax provides the most funds for City services. Equivalent to: Equivalent to: o Just over the FY09 total general fund costs of the Police $137.3M

13 City Earnings Tax Or Equivalent to the costs of these services: Or Equivalent to the costs of these services: o Fire Department - $61.1M o Corrections - $35.7M o Corrections - $35.7M o Refuse Department - $13.5M o Forestry Div. trimming / weed & debris - $7.1M o Park Maintenance - $8.5M o Building Code Enforcement - $7.7M o Street and Alley Lighting - $5.0M

14 Property Tax As Replacement? Est. Earnings Tax Receipts (FY10rev) (A)$136,000,000 Est. Earnings Tax Receipts (FY10rev) (A)$136,000,000 Estimated Property Tax Revenues (B)$287,573,759 Estimated Property Tax Revenues (B)$287,573,759 (incl. City, schools, library, (incl. City, schools, library, zoo/museum, etc..) zoo/museum, etc..) City Property Tax Rate* per $100 AV (C)$ City Property Tax Rate* per $100 AV (C)$ *City portion (excl. debt) = $1.279 *City portion (excl. debt) = $1.279 Additional Rate to Compensate Additional Rate to Compensate for Earnings Tax A / (B/C) =$3.143 for Earnings Tax A / (B/C) =$3.143 Would exceed current statutory cap – Would exceed current statutory cap – City portion of $1.279 at 86% of $1.49 limit City portion of $1.279 at 86% of $1.49 limit

15 Property Tax As Replacement? Appraised Real Prop Value$100,000$200,000$800,000 Appraised Personal Property Value(s)$15,000$35,000$120,000 Current Tax Burden (2009)$1,595$3,300$19,671 New Total With Tax Increase$2,349$4,861$28,973 Additional Property Taxes$754$1,561$9,302 Tax % Increase47.3% Homeowner #1Homeowner #2 Business

16 Sales Tax As Replacement? The sales tax is similarly restricted as City’s current rate reflects most sales tax options The sales tax is similarly restricted as City’s current rate reflects most sales tax options Historically weak growth rate Historically weak growth rate

17 Sales Tax As Replacement? Current Sales Tax Rate In City State:4.225% Board Of Education0.666% City: General Fund (1 & 3/8 cent)1.375% Capital Fund (1/2 Cent)0.500% Transportation (Metro 1/2 & ¼ Cent)0.750% Regional Parks (1/10 cent)0.100% Local Parks (1/8 cent)0.125% Public Safety (1/2 Cent)0.500% 3.350% Total Current Rate8.241% Est. Earnings Tax Receipts$136,000,000 Est. Receipts - 1 Cent Sales Tax$33,000,000 Sales Tax Equiv. - Earnings Tax 4.121% 4.121% New Rate With Tax Increase12.362%

18 Other Considerations Credit risks related to uncertainties in revenue stream and continued need to reauthorize tax (higher borrowing costs?) Credit risks related to uncertainties in revenue stream and continued need to reauthorize tax (higher borrowing costs?) Impact on financed TIF developments Impact on financed TIF developments Current budget challenges Current budget challenges