GENERAL FUND REVENUES

The general operating budget for FY1998 is supported by revenues of $347.3 million. General fund revenues are provided by a variety of sources, including employment-based taxes, property taxes, gross receipts taxes on utilities and retail sales, intergovernmental revenues received from the State of Missouri, and various business license fees and departmental receipts.

Employment-based taxes, a category which includes the earnings tax, payroll expense tax, and the graduated business license fee, provide the largest share of general fund revenues. In FY1998, this group will comprise 42% of all general fund revenues and is forecast to grow at a rate of 2.5% over the FY1997 budget amount. Of this group, the earnings tax is the most important and is expected to generate nearly $110 million. The estimate is based on the expectation of a growth rate of approximately 3% on the individual earnings tax portion, which is consistent with the historical pattern. Revenue from the graduated business license fee is forecast to remain at the $7.5 million level of recent years, an indication that the number of businesses and employees in the City has remained relatively constant.

Retail sales taxes are forecast to generate nearly $48 million, which is about 2% higher than revised estimates for the current year. The sales tax estimate is based on the latest quarterly collections information which indicates that taxable retail sales in the City have increased at a slower rate, in contrast to the State as a whole where the growth rate is in excess of 5%. Franchise taxes, a category which includes the utilities' gross receipts tax along with the gross receipts tax on the revenues from the City owned Airport and Water Division, is expected to generate over $51 million, or 3.4% more than the forecasted amount for the current year. While there are no rate increases anticipated in the estimate, the expiration of a profit sharing agreement between Southwestern Bell Telephone Company and the Public Service Commission along with an increase in the revenues generated by the Airport will provide the bulk of the forecasted increase.

Property tax revenues are forecast to increase by 4%, to $34.9 million. Real estate tax revenue will be at the FY1995 level, after recovering following the change in classification of some properties from commercial to residential real estate. Revenues from sources associated with the hospitality and entertainment industry are also expected to increase from the FY1997 budget amount. As a group, these sources which include the amusement, restaurant, parking, and hotel taxes are forecast to grow at a 9% rate. Revenues channeled through the state are expected to remain at the current year level of $20.3 million. Decreases in reimbursements for health care and in the financial institutions tax are being offset by increases in the gasoline and motor vehicle sales tax categories. The chart below shows the allocation of the supporting the general fund budget for FY1998.

Employment-based tax revenue, i.e., earnings and payroll taxes, continue to grow and provide the largest share of the City's general revenue. The concentration of metropolitan area jobs in the downtown St. Louis area and the improved outlook for employment throughout the area are the basis for our expectation of continued growth from these sources. The FY1998 revenue estimate projects growth rates of 2.5% for earnings tax and 2% for payroll tax, both of which are consistent with long term trends. Earnings and payroll taxes are projected to provide $109.5 and $27.5 million, respectively. Together, these account for nearly 40% of the City's general fund revenues.

Convention and tourism based revenues such as restaurant and hotel taxes are projected to increase to $9.5 million, up from the current years level of $8.6 million. Amusement tax revenues, which are a function of the prices paid for tickets purchased for sports events are expected to increase due to ticket price hikes and growing popularity evidenced by attendance figures. In FY1998, amusement taxes are projected to be $3.1 million, up from $2.7 million in FY1997, an increase of 15%. This is exclusive of taxes on professional football games that are allocated to a special fund to retire debt on a football practice facility.

Local sales tax revenues will account for approximately $47.7 million, based on the local tax rate of 1.375%. Sales tax revenue growth has slowed somewhat and will not achieve the expected increase of 2.5%. Accordingly, the FY1998 estimate calls for growth of about 2% over revised estimates for FY 1997.

The United States Supreme Court has held that the local use tax is unconstitutional in cities and counties that impose a local tax rate that is less than 1.5%. The case was remanded to the Missouri Supreme Court to consider what the proper remedy should be to correct the discrimination in those areas where the local tax rate is less than 1.5%. The State Supreme Court then proceeded to abolish the tax. A proposal to reinstate the local use tax was defeated by City voters during the FY1997 fiscal year.

Property tax revenues, which will account for nearly 10% of the general fund in FY1998, continue to provide a smaller piece of the general revenue pie. The forecast for next year recognizes the growth in the personal property area and the statutory prohibition against the realization of a revenue windfall resulting from reassessment of real property. Revenue from real property is allowed to increase, limited to an accepted inflation index, plus, any increases resulting from new construction. FY1998 revenues reflect the growth on a reduced tax base resulting from impact of transferring large apartment buildings from commercial to the residential real estate class. The effect of this change was absorbed in the FY1996 and FY1997 revenues.

Revenues from franchise taxes are forecast to increase by over 3% to $51.3 million. Because these revenues are based on the gross receipts of utility companies, they are to a great extent dependent on changes in weather patterns, and to a lesser extent on regulatory agency actions. The increase in receipts forecast for FY1998 is due to a rate adjustment imposed on the sale of water by the City owned Water Division, the expiration of revenue sharing arrangement with Southwestern Bell which limited the utility company's return on investment, and to the expansion in the number of gates at Lambert Airport, which should generate additional revenue.

License and permit revenue is expected to increase from the current year's level, by approximately 4% with increases in gross receipts based licenses such as parking garages, hotels, restaurants, and amusement taxes. Some of the increase will be offset by an expected decrease in revenue from the cigarette license tax. Others such as liquor, graduated business, and automobile licenses as well as building and occupancy permits are expected to remain at current levels.

In addition to the local use tax mentioned previously, revenues received from the state include the motor vehicle sales tax and a gasoline tax, both of which are imposed statewide and distributed to local jurisdictions based on a statutory or constitutional formula. Because of increased automobile sales statewide, the distribution to the city of motor vehicle sales tax has been growing. This growth is projected to continue in FY1998. The distribution of gasoline tax revenues now includes a county portion for the City of St. Louis. The value of the county distribution is approximately $350,000 per year.

EARNINGS TAX

Definition A one percent tax levied against employee gross compensation and business net profits. The tax applies to all residents of the City of St. Louis regardless of where they work. It also applies to the earnings of non-residents who work within the city limits.

The city earnings tax is the most significant single source of general fund revenues, comprising nearly one-third of the total revenues. Receipts from individual taxpayers comprise about 85 percent of total earnings tax revenues, with businesses paying the remaining 15 percent. The Collector of Revenue is authorized by State law to retain a percentage of collections to pay for office operations. Funds not used for operations, including interest, are returned to the city. Collections for the current fiscal year reflect the fact that the city no longer collects earnings tax on deferred revenues, such as 401k plans. Revenues are expected to grow at a rate of 2.5% in fiscal 1998.

During the 1996 fiscal year, the Missouri Appeals Court reversed a lower court ruling which prohibited the City of St. Louis from collecting earnings tax on deferred earnings. During the 1997 fiscal year, the City adopted an ordinance deferring the tax on earnings which are not subject to the federal income tax.

PAYROLL EXPENSE TAX

Definition A tax of one-half of one percent of total compensation paid by a business to its employees for work performed in the City of St. Louis. Not-for-profit charitable or civic organizations are exempt from the payroll expense tax.

The payroll expense tax was implemented in 1988 as part of an overall tax reform package, the aim of which was to redesign the city revenue base to be more attuned to changes in the economy. Payroll expense tax receipts follow trends in earnings tax collections, but grows at a slower rate, due to a somewhat different base and exemptions noted above. Revenue from this source is expected to increase by 2% in FY 1998.

SALES TAX

Definition A one and three-eighths percent tax levied on retail sales in the City of St. Louis. Sales tax is not levied on certain items, including motor fuels, prescription drugs, food purchased with food stamps, all sales by or to not for profit organizations and residential utility charges.

The chart above shows the collections history of the city's 1.375% local sales tax. Authorization for the 0.375% portion of the tax expired in 1990. This portion of the was approved by voters in 1993 and is fully reflected in the FY95 revenues. Revenue from sales tax in FY98 is expected to grow at about 2% over revised FY97 estimates.

REAL AND PERSONAL PROPERTY TAXES

Definition A tax levied on the assessed value of all real and personal property. The current tax rate is $7.152 per $100 assessed value

Real and personal property tax revenues are distributed to the following taxing jurisdictions.

State	$0.03
Schools	$4.25
Junior College	$0.24
Library	$0.56
Zoo, Museum, Garden District	$0.232
Sewer District	$0.09
Sheltered Workshop	$0.15
Community Mental Health	$0.09
City - General Purposes	$1.4
City - Public Debt	$0.11
TOTAL	$7.152

Taxes are levied on all real and personal property owned as of January 1 in each year. Tax bills are normally mailed in November and payment is due by December 31, after which taxes become delinquent. Assessment ratios are 19% for residential property, 32% for commercial property, and 12% for agricultural real estate. Personal property is assessed at 33.3% of the appraised market value.

GASOLINE TAX

Definition A per unit tax levied on the sale of motor fuel purchased statewide. The gasoline tax is levied by the state and remitted monthly to local jurisdictions based on the proportionate share of the total population.

The gasoline tax rate is $0.17 per gallon. In 1992, the tax rate increased by $0.02 per gallon. Additional $0.02 per gallon increases followed in 1994 and 1996. Each of these changes added about million dollars to the City's share of gasoline tax revenues. In addition, the City receives a share based on its status as both a city and a county. The new "county" share is worth approximately $350,000 in the current fiscal year. A portion of the additional revenues is being dedicated to repayment of a loan from the State of Missouri for the city's share of the repair costs of the Eads Bridge roadway deck, and to other capital improvements.

GRADUATED BUSINESS LICENSE TAX

Definition A flat rate tax on businesses based on the number of persons a business employs within the city limits. The tax rate ranges from $150 for employers with two or fewer employees to $25,000 for employers with more than five hundred employees.

The graduated business license tax and provides a consistent source of revenue of about $7.5 to $8.0 million annually. The FY1993 fluctuation depicted in the chart above resulted from a change in the filing and payment dates, and is not expected to reoccur. Taxes are based on the following schedule:

FRANCHISE TAX

Definition A tax on the gross receipts of utility companies operating within the city, including sales of electricity, natural gas, telephone services, water and steam, and on the gross receipts of the Airport.

The tax rate for companies supplying natural gas and electricity is 10% of the gross receipts from their commercial customers and 4% of the gross receipts from residential customers. Companies supplying telephone service, steam and water are taxed at 10% of their gross receipts from all customers. The taxes are passed on to the ultimate consumers.

The tax on natural gas and electricity account for about two-thirds of all franchise tax revenue. Rate changes for supplying natural gas, electricity, and telephone service are subject to approval by the Missouri Public Service Commission.

AIRPORT AUTHORITY (Lambert-St. Louis International Airport)

Definition Airport revenue comes from Signatory Airline Fees, Concession Revenues, Interest Income and other revenues.

Lambert - St. Louis International Airport receives just over half of its operating revenues from signatory airlines in the form of landing fees and terminal rents. Signatory airlines are those airlines serving the Airport who have signed use agreements and include: American, Continental, Delta, Northwest, USAir, Southwest, TWA, Trans States and United. The Airport also receives revenues from concessions that operate on Airport property. Concession fees include revenues from the following activities: food & beverage sales, giftshops, coin devices, ground transportation, public parking, car rentals, space rental, in-flight catering and other concession revenues. Other revenues include non-signatory airline fees, cargo, hangar, tenant improvement surcharges, employee lot, gain on sale of investments and other miscellaneous revenues.

Lambert - St. Louis International Airport is currently expanding its East Terminal. Once this is completed in FY 98, there will be an addition of twelve (12) new gates. The increase in projected revenue for FY 98 is mostly attributable to this expansion.

WATER DIVISION

Definition The Water Division receives revenues from Net Sales of Water, Gross Receipts Tax and other miscellaneous income.

Revenues from net sales of Water include sales to flat-rate and metered customers and sales to other governmental jurisdictions. While the number of metered and unmetered customers has decreased slightly the sales to other governmental jurisdictions has more than compensated for the decrease. The Gross Receipts Tax is a 10% utility tax levied on all purchasers of water from the Water Division and payable to the City's General Fund. The other miscellaneous income is mostly revenue from services the Water Division performs, such as repairing damaged fire hydrants or tapping water lines for new buildings.

1/2 CENT CAPITAL SALES TAX

Definition A one half percent tax levied on retail sales in the City of St. Louis is dedicated to Capital expenditures. The sales tax is not levied on certain items, including motor fuels, prescription drugs, food purchased with food stamps, all sales by or to not for profit organizations and residential utility charges.

City voters approved the 1/2 cent sales tax for capital improvements in August, 1993. FY95 represented the first full year of collections of this new source of revenue. Projected revenue for FY98 is expected to grow at about 2% over revised FY97 estimates. The City ordinance authorizing the 1/2 cent sales tax included a formula for allocating the proceeds among various capital spending areas. This allocation is illustrated in the pie chart below:

RIVERFRONT GAMING

Definition Riverfront Gaming revenues come primarily from three sources: 1) the local share of the state gaming tax, 2) the local share of the state admissions tax, and 3) thelease agreement with the City Port Authority

Riverboat gaming on the St. Louis riverfront began in May, 1994 with the opening of President Casino's Admiral riverboat. The variety of games was somewhat limited until "games of chance" (e.g. slot machines) were permitted by law beginning in December, 1995. The State of Missouri imposes a 20% tax on the adjusted gross receipts (AGR) of riverboat gambling facilities as well as a $2 head tax on the number of admissions. By state statute, the City receives a 10% share of the state tax or 2% of AGR. The City is also entitled to one-half the state admission fee or $1 per admission. The City receives an additional 2% of AGR through a lease the between the riverboat operator and the City's Port Authority.

Two major factors affecting the City's receipts from riverboat gaming are the level of competition from other gaming facilities in the area and river stage levels that may periodically limit access to the riverboat. Revised gaming estimates for FY97, reflect the additional competition from new gaming facilities in the St. Louis area as well as a period of high water level that impacted parking access to the riverboat earlier this year. FY98 gaming revenue is projected to remain at the level of the revised FY97 estimates.