Good morning.

This is the budget and public employees committee.

Today is November 19th.

It is 1007.

Madam Clerk, please call the roll.

Alder Woman Son Yay.

Vice Chair Browning.

Present.

Alder Woman Velasquez.

Alderman Devotee.

Present.

Chair Aldrich.

Present.

Alder Woman Son Ye.

Auto Woman Velasquez.

We have three present.

With that, we have established a quorum.

I'll take a motion to minutes from Wednesday, November 5th, 2025.

So moved.

Second.

Madam Clerk, please call the row.

Alder Woman Son Ye.

Vice Chair Browning.

Aye.

Alder Woman Velasquez.

Alderman Devotee.

I.

Chair Aldrich.

Aye.

Alder Woman Sun Ye.

Alder Woman Velasquez.

We have three I votes.

With that, we will move to item number four, board's bill for review with the Board Bill, used by all the women, Jamie Cox and Tweet, co-sponsored by Bretton Orion, Shame Clark Hubbard, President Green, Madam Clerk, please add me as a co-sponsor.

Noted.

And all the women from the eighth, whenever you're ready, you may proceed.

Thank you, Mr.

Chair, members of the committee.

Today I am here to present Board Bill 100, uh, which is the subject of the earnings tax.

This board will would put toward the voters the question of whether to renew our city's earnings tax.

This is a process by state statute, which we have to do every five years.

Um and the next year updue will be 2026.

Uh, with me today for this discussion, I have uh budget director Paul Payne as well as representatives uh from the Comptroller's office and uh the city collector of revenues office for any questions.

Uh and I will now ask uh budget director Payne to come and present a brief presentation on the relevance of renewing this earnings tax.

Gotcha, gotcha.

Director, come up, say your first and last name.

We've missed you since budget season.

We may start early this year and see you sooner than later.

Good morning, Mr.

Chairman.

Uh, my name is Paul Payne on the budget director.

Good morning.

Good morning.

Uh yes, I'd like to start with the presentation this morning.

Uh as you can see, uh it's on screen, so I'll just uh go right into it.

Um just to recap what what uh we we just discussed.

Uh in November 2010, the voters were asked to reaffirm uh both uh Kansas City and St.

Louis reaffirm the earnings tax every five years.

We have done that uh the last uh in 2011.

Uh we approved it by 88 percent of the vote, 72 percent in 2016, and 79 percent in 2021.

And this would be the next fourth of these votes, which is due in April of 2026.

Director, can you talk a little bit maybe to the mic on the more discussion about the revenue structure in the city of St.

Louis?

As you're familiar with the budget and being the budget committee, you're aware that the earnings tax currently in the this year's budget.

We have a total uh of $607.4 million dollars in the in the budget.

Of which 38.28.2 percent uh it's the represented by the earnings tax.

And you can see, as in most municipalities, uh the revenue structure is distributed among uh various revenues comprised of taxes, licenses, and fees.

And the earnings tax is just simply the largest of those within the general revenue fund.

And from actual numbers in FY25, you can see tax of 28.5 million dollars uh in property taxes 78.3, sales tax is 62.2, payroll tax 44.7.

So you can see how those fall in terms of the major categories.

Of course, our goal of the revenue structure is to maintain a diverse base that grows with the economy and sufficient to maintain city services.

So you you want to have revenue that uh uh reflects the underlying economy and is not does not get a fixed rate structure which does not grow and maintain the cost of service.

So some of these desirable characteristics of a of a revenue structure, equity and fairness.

You you don't want to impose a tax that uh most heavily on those least able to pay.

Uh you also want to be able to do recur the uh recoup the costs of those services provided, so you want to be able to uh provide get fees that from the users of those services and residents and non residents, and that includes residents and non-residents alike, and that's particularly the city of St.

So you want to be able to uh provide get fees that from the users of those services and residents and non-residents, and that includes residents and non-residents alike, and that's particularly to the city of St.

Louis, which has a lot of commuter uh and those who come into the city beyond those city residents.

Um as I mentioned, you want to have a structure that grows with the with the economy, and you want to have uh structure that uh shows reasonableness in relation to impact on the economic activity.

You do not want to discourage uh business uh development within the city with your revenue structure.

And finally, ease of enforcement and collection, that's just state basically you need to have a source sources that can be collected without too much overhead and somewhat not overburdensome with collection effort.

Approximately 75% of city general revenue is distributed among the top five sources, so it is diverse in that in that sense.

Uh each has strengths and weaknesses in meeting desirable these desirable characteristics that we just discussed.

And collectively represents uh a diverse base that grows modestly with the economy and distributes the tax burden among those that benefit from city services.

And when I mention city services, uh it should point out that the city services have a regional reach.

Uh as I mentioned, we have major sports and entertainment venues in the city, the arch and the riverfront, all the stadiums, forest park, zoo, museum, all such brand center, convention center, etc.

So the current city earnings tax was proposed and uh first imposed in 1959.

It's an individual tax of one percent of earnings of residents and non-residents of the city for work done or performed in the city.

It also comprises a corporate tax of one percent of net business profits from businesses or business conducted in the city.

The individual portion of the earnings tax uh it totals just under 80 percent of the total earnings tax receipts, so the business portion, the corporate represents about 22 percent in the last fiscal year.

Other major cities uh imposing earnings and or income taxes.

You can see a list there from Baltimore, Cincinnati, Cleveland, Columbus, Louisville, Kansas City, New York, Pittsburgh, Philadelphia.

I should point out uh it's often confused.

The city is an ear has an earnings tax, it's not an income tax.

There's a difference there.

Uh uh what we tax are actual earnings, so when it not income.

Income would also comprise the say social security checks or interest earnings or retirees uh uh 401ks or whatever.

Uh uh what so what we're talking about is actual earnings uh earned within the city.

So some of the growth rate uh of the three uh actually I I used one out further, I did five year, ten year, and fifteen year on the earnings property tax and sales tax as sort of a rate of comparison.

Uh of the three, the earnings tax has been the most consistent uh growth.

We've seen some growth in the earn uh excess uh growth in the property tax over the last three years, which is exceeded the earnings tax, but over the longer term, it's been more consistent uh in with the earnings tax.

The sales tax has uh historically been weak, although with inflation going up late in the last few years, it has also uh picked up in its growth rate.

As the largest source of uh general revenue, uh 208.5 million in last fiscal year, the earnings tax provides the most funds for city services.

And just as an illustration, total FY26 general fund cost, the police department at 178.5 million dollars, the earnings tax exceeds that entire amount.

Or if you look at these other uh services provided, it gives you an idea.

The earnings tax exceeds uh the costs of all these other services, that would be fire department, corrections, forestry, park maintenance, street maintenance, street and alley lighting, neighborhood stabilization services, and our equipment services.

All of those services uh in total uh uh are less than what the city earnings tax brings in in the general fund.

So you want to discuss there's often to say, well, why can't we use the property tax as a replacement?

Well, what would that mean?

Well, if it in order to get the same amount of money as the property tax, this is an illustration.

Basically, the earnings tax is estimated to bring in 232.3 million dollars this current fiscal year.

Property tax, and this is talking about all jurisdictions, is estimated to bring in 438 million, 438.7, uh, and with a current rate of eight dollars and eleven cents and change.

Uh the additional rate to compensate for the earnings tax based on that would be another four over $4.29 in the actual tax levy.

Well, of course, that creates a problem because that's excessive that exceeds the actual authorized levy by state statute.

But just to illustrate what that would mean, uh, that's a 52.9 percent increase over what you would uh what basic homeowners and businesses would be paying in their property tax.

I'll take the middle example, a home worth about 250,000 and with cars at 35,000, you'd be current tax burden is just under $5,000 a year, 4,800.

Well, your tax bill would go up to 75 7,340.

That's an increase of 25 2500 or 52%.

And each illustration there, you can see it's proportionate.

But that would be a significant increase in the property tax.

What about the sales tax?

Well, the sales tax is similarly restricted as certain uh the city's current rate reflects most sales tax options.

In other words, if we we've taken advantage of most of the uh those rates that are allowed allowed under state statute.

But also, as I mentioned, has a historically weaker growth rate and it's a regressive nature uh it has is basically it's a regressive tax when you talk about who who has what the ability to pay.

And how much would you need in a sales tax to replace uh the amount of money generated by the earnings tax?

Well, this illustration shows that with the current if it shows the total sales tax rate, and which is 9.67.679%, of which and now that's the total rate.

Now, 4.255 is the uh 225 is the uh sales tax for the state.

The uh school board also has two-thirds of a cent six six seven, which leaves the other 4.79 rate as the city.

Well, the city would have to uh increase its rate by uh over 4% to generate the same amount of revenue to make up for the loss of the earnings tax.

And so you can see that in the illustration of the chart.

Uh the total sales tax would rate, which is already high comparatively with other cities, would exceed 13.7 percent.

Other considerations, well, the obviously given that it's such a large portion of our budget, there would be credit risks if we ever lost the earnings tax questions related to uncertainties in our revenue stream, and uh basically call into question the city's fiscal stability and credit worthiness.

Uh uh and on the TIFF, uh I mentioned the TIFF finance developments because you've already also have many agreements or financing arrangements that have been entered into that are reliant on that source of funds.

And of course, every year as the budget committee, as you're familiar with, we have existing budget challenges.

Uh already in other words, we're already facing challenges with finding sufficient funds to maintain our structural budget as well as our capital improvement needs.

And so those are a lot of things to consider and just highlight uh the importance of maintaining the uh earnings tax going forward.

And that's the conclusion of my presentation be available for any questions.

All right.

Quickly, did maybe uh sponsor did you did the comproller or the collector revenue want to weigh in?

I'm just looks like no from the comp controller.

Good.

We're in support all of it.

Gotcha.

All right, we'll go in order of seniority ultimate vice or vice chair Browning.

Uh thank you, Director.

Uh this is a good overview, and I think it's hard to understate the importance of this tax to our city.

Um it boggles my mind that we think it's a good idea, or I don't think we thought it was a good idea, but I think the state thought it was a uh good idea to make us uh have to pass this every five years because it is such an important tax to our city services, including things that Jefferson City purports to support, like our police.

Uh I'm curious about uh some of the considerations on this last slide that you presented.

Um I think one of the questions that's going to come up with a lot of residents is I don't like taxes, I don't like paying taxes, but what uh in more plain terms, what is at risk if we do not renew this tax?

Well, I I would think first and foremost, all those services that I mentioned, uh everything from fire to forestry to parks to streets, with the with the earnings tax uh providing 38 percent of the general fund budget.

Were we to lose that without a dedicated uh source to replace it, uh all of those would be at risk.

And I I mean this would this would be uh uh excessive loss.

I mean we've gone through recessions before where we've had to deal with budget cuts.

This this would this is more than that.

This is uh uh would be a permanent loss of our major source of funding for the general fund.

And that's that's a major uh and I I can't under understate the impact that would have on the budget.

Can you go a little bit more into uh the slide said impact on finance TIFF developments?

Yeah, I I and the reason why I bring that up is because if you are developer where you've issued bonds to finance a project, you've got a dedicated sources of revenues and it's based on those sources.

If all of a sudden the sources of revenues that were identified, the the revenue picture, you in I believe you've seen probably seen them before.

Hey, we expect to get this much in the restaurant tax and hotel tax or whatever, whatever it happens to be being financed, part of that part of that revenue stream is going to be earnings tax, right?

And if suddenly that was to change and be eliminated or be phased out in terms of your projections for your financing, then that's gonna have a negative impact on each one of those that has that is a revenue source for paying back those bonds.

Thank you.

That that um I think it just shows that we've we've always planned to have this tax.

It's built into so many different things in our city uh and the financing mechanisms and how we pay for these services, how we pay for these developments that bring more tax money to our city uh all becomes jeopardized if we do not have this tax.

Um I I don't think I I I would be surprised if any of us uh on the board of Alderman didn't support this.

Uh I think it's very, very important for our city.

I would be I'd like to be at it as a co-sponsor as well.

Uh and uh I thank you for uh coming in front of us today to provide some clarity on just how important this is for our city.

Alderman Devotee.

Yes, Chair.

Uh Director Payne, as usual, thank you for your uh clear, efficient, succinct presentation uh describing what could be a fairly complicated subject.

Alderman, are you able to do it?

It's always good to hear from you.

I I appreciate it.

Um I have no questions.

Uh Madam Clerk, I would ask that you add me as a co-sponsor to this bill.

Thank you.

Note it.

Uh no questions uh for myself.

Well, I'd actually do have a lot of people.

I'll just say no questions, and we got one.

Um on the last slide you talked about how bad if we lose the earnings tax it would be, have in your 10 years budget director, have you or the budget division looked at the potential if we lose an earnings tax of what other revenue sources that you know we could potentially create, because my fear is that you know one day voters will probably be like, no, and we know how important it is to the city of St.

Louis.

So are we doing um preparation to look at other revenues, knowing that it is like one third of our budget?

I I I think that's a uh we've been fortunate in that the message that has gotten out is that how important this is.

Now I we have taken a look at the revenue structure overall.

Uh if you remember, I I um back I think it was fiscal 2003 when I uh or 2004 when I uh 24 when I made the uh presentation to the revenue advisory council.

And one of the things I'd like to point out when we talk about the earnings tax is that most of the time we're focused on general revenue and general but if you're looking at tax structure and you're looking at the city, it's not just the city that imposes taxes.

There are also other jurisdictions, the zoo museum district uh and the school board and all.

If you look at our totals tax structure, what is the single largest source of taxes in the city of St.

Louis?

It's not the earnings tax, it's the property tax.

Uh that's uh and then most of that the city only receives 20 percent of that.

I don't think uh people realize that, but most of that goes to the school board and these other jurisdictions.

Similarly, on the sales tax, which is often uh mentioned as a possibility, uh sales taxes if you take in all the rates, uh not just general fund, but all the special funds we have, plus the school board has a rate, plus the regional parks has a rate, that also exceeds both the earnings tax and payroll tax combined.

So when you look at tax structure, you have to look at what is imposed in the city entirely.

And I I think you'll see that the earnings and payroll taxes are actually third on that list.

And it's difficult to when you already have property tax, which is nearly double the earnings and payroll tax.

I'm talking as the city as a whole, all the jurisdictions.

And same thing with the sales tax.

It's though if you put those off the table, though that makes it very difficult to identify uh sources without in uh without uh that would grow and provide the same reliability in a revenue stream that the earnings tax provides.

Gotcha.

Thank you, Director.

Uh seeing no other questions from the committee, Alderwoman Cox Antwit, you are recognized to close on board bill 100.

Thank you, Mr.

Chairman, and thank you to the committee for hearing this presentation today.

Uh, I just want to close by reiterating what we heard from Director Payne about the importance and significance of this earnings tax for the fiscal stability of our city.

Um, it's not just important in order for us to maintain the services that we outline, but it's also important for the longevity of our city.

Um and to anyone from the public, as we heard that may have questions about why we want to prioritize the earnings tax.

I think a 1% earnings tax is better than a 50% increase in your property taxes.

A 1% earnings tax is better than a 1% sales tax rate that is unreliable for the fiscal health of our city.

So I think this presentation is very important for the public to hear and make clear uh why we need to renew this earnings tax and why it's important for the longevity and health of our city.

I want to thank my colleagues for all signing on as co-sponsors of this legislation.

I really appreciate that.

And I hope that um if we are able to pass this out of committee today, we can make sure that uh voters around the city hear going forward once this is on the ballot before them, how important it is for this legislation board.

So with that, I close and ask for your favorable consideration of Board Bill 100.

Madam Clerk, I'd like to make a motion that we embank Board Bill 100.

Second.

Previous role.

Hearing no objections, board bill 100 has been banked by the whole budget and public employees committee.

And with that, I would take a motion to uh pass board bill 100 or due pass recommendation.

I would move that we pass Board Bill 100 with a due pass recommendation.

Second previous role.

Seeing no objections to previous row, we have passed Board Bill 100 with a due pass recommendation.

Congratulations, all woman.

Thank you all.

All right, we'll move to uh item number five resolutions for review.

We have none.

Committee discussion, we have none.

Madam uh did we have anybody sign up in person for Board Bill 100?

We have none.

Do we have any written testimony for Board Bill 100?

We have none.

All right.

With that, next is announcements.

Just want to let everyone know that next on December 3rd, we will have a budget committee hearing at 6 p.m.

to talk Rams uh interest from the uh Rams board bill that we pass.

We will not have one next week because that would be the Wednesday before Thanksgiving.

Um so that is my announcement.

Any other announcement from any committee members?

Seeing none, I'd like to make or madam clerk, please excuse the old woman from the six and the older woman from the seventh for necessary absence, and I'll take a motion to adjourn.

So moved.

Second.

All in favor.

Aye.

Aye.

Any opposed?

Motion carries.

We are adjourned.

Thank you.