Post-pandemic sales tax increases play key role in Springfield’s budget outlook

Published: May. 2, 2023 at 7:46 PM CDT
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SPRINGFIELD, Mo. (KY3) - Springfield’s City Council has completed three of the seven meetings that will lead to the 2023-24 budget adoption on June 5 as the city’s fiscal year runs from July-June. The city will most likely have an operating budget of around $495 million, a jump of about $50 million from last year.

With its three new members (Callie Carroll, Derek Lee, and Brandon Jenson) in attendance, the council heard about the city’s revenues at a Tuesday luncheon from Finance Director David Holtmann.

“Our total revenue so far this year is about a 10 percent increase over what we had budgeted for the year,” he said.

The main driver for the revenue increase is the sales tax, which has gone up significantly since the COVID-19 lockdown that shut down businesses.

Sales and use tax revenue account for the largest percentage of the city’s general fund at 62.8 percent. Holtmann presented the council with a graph comparing total revenues in fiscal year 2022 with seven other Missouri cities. Joplin was the only community more dependent on sales and use tax at 68 percent. Kansas City was 23 percent, Jefferson City was 44 percent, St. Charles was 24 percent, Independence was 39 percent, Columbia was 43 percent, and St. Louis was 26 percent.

“Sales tax can be volatile,” explained Springfield City Manager Jason Gage. “It can grow fast, which is good, and we’re seeing that right now. But it can also go down pretty fast and cause a problem during the middle of a budget year.”

“That happened in 2008 when there was a significant downturn,” said Springfield City Council member Craig Hosmer. “The city of Springfield had to cut jobs and services. Sales tax is so dependent on other factors like the national economy while a property tax is consistent, and you can depend on those revenues to run police, fire, and the rest of the services that the city provides.”

“We’re still in post-COVID growth, but we know it won’t last because it’s still growing at about a 9-10 percent clip,” Gage added. “And historically, a good year for us would be three-percent or over. So we know it’s not normal, and we know it will change at some point.”

So the question is, how can Springfield avoid such a dependence on sales taxes?

“There’s a lot of things we can look at,” Hosmer answered. “We passed a hotel-motel tax recently but just basically kept the same amount that we already had. We could have enhanced that. I also think we should look at maybe eliminating some sales tax and going to some property tax. We could also look at taxes we get related to City Utility services. But we at least need to look at having a more diversified portfolio of where we get our revenue and not just be completely dependent on the sales tax.”

There is a new possible source of revenue that many other communities have already jumped on.

A sales tax on pot.

“If council should choose in the future to put that question on the ballot, the earliest time would be August,” Gage said. “Right now, it would be difficult to estimate how much marijuana tax revenue would be, but my guess is in the $3-$6 million range. So would that be helpful? Sure. But we want to get some public feedback first, which we’ll be doing soon with some surveys.”

“I think we really should have done it in April when over a hundred other municipalities in the state of Missouri did that, and the majority of them passed,” Hosmer said. “And I think we should utilize (the marijuana sales tax money) for law enforcement because they’re going to have an added burden along with first responders. I also think we should use it on mental health and drug addiction because I think marijuana is still an entry drug that’s going to lead to other problems that the city faces. So I think we have to be prepared for that.”

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