This section presents summary information on the FY1999 budget
of the City of St. Louis. The discussion that follows describes
the economic outlook for the City and region and presents a detailed
review of the general operating fund budget as well as budgets
for enterprise and special revenue funds. This section also includes
summary tables of sources and uses of funds for all fund groups
and describes the major sources of revenue for FY1999.
National Economic Outlook
The economic outlook for the U.S. economy remains positive with GDP projected to grow by 2.8% in calendar 1998. Despite the continued expansion, inflation has remained remarkably under control. The inflation rate as measured by
the growth in CPI was up only 2.3% in 1997 and is projected to
remain in the 2% range over the next year. The national unemployment
rate also remains low, standing at 4.7% at the end of the first
quarter of this year and is projected to remain around this level
over the next twelve months.
Missouri Economic Outlook
The state of Missouri has continued to see an increase in the number of jobs statewide. While manufacturing employment has shown a consistent decline, the State is gaining new jobs in such service areas as finance, insurance and real estate. The St. Louis area is participating in this job growth with 2,000 jobs to be added by MCI Corporation and up to 1,500 jobs by Southwestern Bell. The State of Missouri's budget for 1999 cites the growth in personal income in 1997 at 5.6%. This growth is projected to continue over the next two years although at a slightly more moderate pace.
St. Louis Economic Outlook
The City's Annual Operating Plan and budget play
a pivotal role in promoting the vitality of the local economy
by providing essential services and maintaining the infrastructure
on which local businesses and industry depend. These services
and infrastructure help promote growth in economic activities
that bring new dollars into the metropolitan region that in turn
produce jobs and income for residents and just as importantly,
revenues for the City. The St. Louis area economy can be characterized
as a mix of local export industries such as automobiles, medical
and defense technologies with growing service and tourism industries.
The St. Louis Metropolitan area has a total population of about
2.6 million people. Recent estimates put the City population
at 351,000, or just under 14% of the regional total. With a little
less than half of the region's office space, downtown St. Louis
has the single largest concentration of employment in the area.
Quality of life issues such as reasonably priced housing, short
commuting times, quality public transportation, private and parochial
schools, low crime and the availability of cultural activities
are among its major assets. Additionally, the region ranks as
the nation's seventh largest corporate headquarters market with
22 Fortune 1000 corporations located here.
Major public works projects either already underway or planned to begin in the FY1999 fiscal year include the new $180 million Federal Courthouse, a new City Justice Center now estimated at about $90 million and the $46.8 million mixed income housing development project at the current Darst-Webbe public housing complex. Major public works projects will continue in Forest Park utilizing proceeds from the 1997 bond issue and other public improvement projects are underway at the parks cultural institutions.
The list of current and pending private construction projects includes a new $9 million Schnucks grocery center on the City's northside, a $20 million Drury Hotel development at the old Fur Exchange building, a $5 million expansion at the Middendorf Meat Co., and the planned construction of a new $172 million downtown convention hotel.
Other developments will have both positive and negative effects
on the City's revenue base. The recent merger announcement of
Sherwood, Davis & Geck Medical Co. will lead to the loss
of an estimated 400 jobs in the City. Meanwhile the recently
completed acquisition of St. Louis University Hospital by Tenet
Healthcare Corporation adds the activities of that institution
to the City's tax base.
The St. Louis Development Corporation (SLDC), will continue its efforts on major projects such as the development of the Arena site and will promote small businesses growth with such programs as the SBA 7A Loan, Micro Loan, Revolving Loan Fund and tax abatement programs.
Through the provision of City services, maintenance of infrastructure and promotion of tourism and business development, the City will be assured of its continuing role as the region's economic center. This continued role will in turn provide the necessary revenue base for maintaining services to residents and visitors alike and keep the City in a sound fiscal position.
The general appropriation for the City of St. Louis for FY1999 totals $652.1 million. In addition to this appropriation, there are funds such as the Community Development Block grant and the Street Improvement funds among others that are appropriated separately. The following is a brief description of the major funds subject to appropriation followed by tables illustrating recent revenue and expenditure history as well as projected performance in FY1999.
General Fund
The General Fund is the general operating fund of the City and accounts for all financial transactions not required to be accounted for in another fund. General Fund expenditures account for about one-half of all City expenditures. As the general operating fund, general fund revenues pay for the majority of services delivered to and paid for by citizens. These include administrative costs as well as more visible services such as police and fire protection, emergency and other medical services and maintenance of parks and streets.
Special Revenue Funds
Special Revenue Funds are used to account for proceeds of specific
revenue sources that are legally restricted to expenditures for
specific purposes. Funds contained in this category include,
government grants, the convention and tourism fund, gaming fund,
assessment fund, lateral sewer fund, capital funds, tax increment
financing funds, transportation fund and other miscellaneous special
funds. The debt service fund that is used to account for resources
and expenses related to the City's general obligation (property
tax supported) debt is also included as a special fund. Two other
funds are included in this group for illustrative convenience.
The City's mail room service operates as an internal service
fund in that it provides mail service to departments on a reimbursement
basis. The employee benefits fund is an agency fund in that it
administers expenditures for the City's various health plans funded
by appropriations from other City funds as well as contributions
from City employees.
Enterprise Funds
Enterprise funds are used to account for operations that are financed
and operated in a manner similar to private business enterprises
- where the intent of the governing body is that the cost (expenses,
including depreciation) of providing goods or services to the
general public on a continuing basis be financed or recovered
primarily through user charges. The major enterprise funds in
the City are the Water Division and Airport operations. The Parking
Meter Division is also operated as an enterprise fund.
Detailed descriptions of funds within each of these fund groups
can be found in the glossary in the Appendix of this document.
The total appropriation of $652.1 million represents an increase of about 2.5% over revised FY98 revenue estimates. In the special funds category, the City's outstanding general obligation debt is to be retired in FY99, and therefore the property tax levy for the debt service fund will decline next year. The capital fund appropriation includes $6.2 million in revenue from the final two payments from the State of Missouri for the sale of Columbia Bottoms to the state. The Gaming Fund appropriation of $5.4 million has been conservatively budgeted to make up for an approximate $450,000 shortfall in FY98 due to an earlier barge accident on the Mississippi River. The Communications fund will utilize approximately $500,000 in its existing fund balance to supplement Year 2000 compliance efforts. Approximately $1.0 million in surplus hotel sales tax revenues currently in the Convention and Sports facility trust fund have been appropriated to the General Fund to meet a one-time increase in debt service on the convention center facility
The tables on the following pages contain summary budget information for all funds. A more detailed discussion of the general fund budget and descriptions of trends in major sources of revenue follow.
The FY1999 general fund-operating budget at $360.7 million represents an increase of approximately 4% over that of the current year. While Public Safety and Neighborhood Stabilization remain as the chief focus of the budget, the FY1999 proposal also attempts to address technology challenges, operational efficiencies as well as continued improvements in service delivery. To maintain and enhance the City's fiscal integrity, the FY1999 proposed budget is based on a set of conservative assumptions regarding revenue growth and on a commitment to fund continuing operations from operating revenues only.
The operating budget of the Police Department is the City's largest at $110.9 million and represents over 30% of the total general fund. Over the last four years, the City has made use of federally funded crime prevention initiatives to increase the number of commissioned officers by 173, up to the present total of 1,723. Though federal funds are no longer available for most of the new officers, the City has made a commitment to retain these individuals with local funds. The FY1999 proposed budget also contains sufficient funding to allow for a two tiered salary increase structure for commissioned officers, as well as anticipated higher costs for health insurance.
Neighborhood Stabilization efforts will be stepped up in FY1999 with the implementation of an expanded "District Debris Removal Program". The program initiated in FY1998, attempts to prevent further neighborhood deterioration by providing clean-up crews to maintain vacant properties. To build on its initial success, additional work crews are funded in the operations budget and a large investment in equipment is included in the Capital Improvements Fund to further support this effort. To provide assistance and guidance to the various individual city departments and agencies that make use of grant funds, the FY1999 budget proposes adding a new Grants Section. This new section will be a part of the Budget Division under the Board of Estimate and Apportionment and will seek opportunities to supplement local tax dollars with outside funds. The Grants Section will be responsible for drafting proposals and coordination and follow-up with other city departments to ensure that the City is in a position to take advantage of available non-local funds in a timely manner.
To address the increasing backlog in departmental service requests for computer and network related problems, the staff of Information Systems Section of the Budget Division will increase by seven. In addition, the proposed budget contains funds and authorization to contract for computer and network related services when necessary. To supplement this effort, an additional $1.3 million is included as a capital budget item for computer hardware replacements and system upgrades.
In the Department of Health and Hospitals, increased
emphasis will be placed on the treatment of Communicable Diseases
and on enhancing the Departments ability to track carriers of
infectious diseases through cooperative efforts with other jurisdictions.
In previous years, the State of Missouri has provided funds through
its General Relief Program to the City for the care of indigent
and uninsured individuals. This arrangement is currently being
phased out and the State will contract directly with other providers
for this service. Consequently, the FY1999 budget does not anticipate
receiving or appropriating General Relief funds.
The FY1999 budget continues the City's commitment to make general fund contributions for public improvements. A total of $7.6 million will be transferred to the Capital Fund to offset the cost of debt service and major road and bridge repairs. An additional $1.9 million is proposed to maintain the fixed assets at the Cervantes Convention Center. For the first time the general fund will subsidize the operations of the St. Louis Development Corporation (SLDC) in the amount of $0.5 million.
Fixed increases accommodated in the FY1999 budget
include a 3% cost-of-living pay increase for all employees other
than commissioned police officers and firefighters. The cost-of-living
pay increase included in the budget for commissioned police officers
and firefighters is either 2% or 4%, depending on the employee's
length of service. Other fixed increases include a 6.9% increase
in the cost of providing health benefits, a 3% increase in Workers
Compensation costs, and a 6% rise in the cost of property insurance.
A scheduled debt service increase for the Convention Center project
is expected to increase debt service costs by approximately $0.6
million.
Partially offsetting the increases noted earlier are some reductions from the amounts appropriated in the current year. Included in this category is completion of the Eads Bridge resurfacing, resulting in an annual reduction of $250,000, and the refinancing of the Kiel Center debt with an annual reduction of $110,000. Actuarial gains in the Fire Retirement System will allow the City to reduce its contribution by $2.3 million in FY1999
Major changes in the FY99 General Fund Budget include:
The general operating budget for FY1999 is supported by revenues
of $360.7 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 FY1999,
this group will comprise 42% of all general fund revenues and
is forecast to grow at a rate of 2.5% over the FY1997 fiscal amount.
Of this group, the earnings tax is the most important and is
expected to generate over $113 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 are 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 than was originally
anticipated. 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 2.4% more than the forecasted amount
for the current year. While there are no rate increases anticipated
in the estimate, continued growth in telephone gross receipts,
an expected return to more seasonal weather, 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 2.8%, to $36.7 million. Growth in property tax revenues is provided mainly by continuing increases in the personal property portion. Real Estate tax revenue is forecasted to grow only modestly in FY1999. Revenues from sources associated with the hospitality and
entertainment industry are also expected to increase from the
FY1998 budget amount. As a group, these sources which include
the amusement, restaurant, parking, and hotel taxes are forecast
to provide approximately $16.5 million. Revenues channeled through
the state are expected to decrease slightly to $21.7 million.
Decreases in reimbursements for health care and in the financial
institution tax are being offset by increases in the prisoner
housing reimbursement and motor vehicle sales tax categories.
The chart below shows the allocation of the supporting the general
fund budget for FY1999.
Earnings and Payroll Tax
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 stable outlook for employment throughout
the area are the basis for our expectation of continued growth
from these sources. The FY1999 revenue estimate projects growth
rates of 2.5% for earnings tax and 2.6% for payroll tax, both
of which are consistent with long term trends. Earnings and payroll
taxes are projected to provide $113.4 and $29.4 million, respectively.
Together, these account for nearly 40% of the City's general
fund revenues.
Tourism and Amusements Tax
Convention and tourism based revenues such as restaurant and hotel
taxes are projected to increase to $10.25 million, up from the
current year's level of $9.0 million. Actual growth in hotel
tax receipts is expected to be about 4%. Previously collected
revenues, which had been accumulating in a special fund, are being
transferred in FY1999, accounting for about $1.0 million of the
increase to the general fund. 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 FY1999,
amusement taxes are projected to be $4.2 million, up from $3.9
million in FY1998, an increase of 7.6%. This is exclusive of
taxes on professional football games that are allocated to a special
fund to retire debt on a football practice facility.
Sales Tax
Local sales tax revenues will account for approximately $47.6
million, based on the local tax rate of 1.375%. Sales tax revenue
growth has slowed somewhat and will not achieve the original expected
increase of 2.5%. Accordingly, the FY1999 estimate calls for
growth of about 2% over revised estimates for FY1998.
Property Tax
Property tax revenues, which will account for nearly 10% of the
general fund in FY1999, 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. FY1999 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.
Franchise Tax
Revenues from franchise taxes are forecast to increase by over
2% to $51.7 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 FY1999
is due to continued growth in telephone gross receipts tax resulting
from the expiration of a revenue sharing agreement between Southwestern
Bell and the Public Service Commission. 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.
Licenses and Permits
License and permit revenue is expected to increase from the current
year's level, by approximately 1% with increases in gross receipts
based licenses such as the ones levied on parking garages and
sporting events. Some of the increase will be offset by an expected
decrease in revenue from the cigarette license tax and building
and occupancy permits. Others, such as liquor, graduated business,
and automobile licenses are forecast to remain at the current
year's level.
Intergovernmental Revenues
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 FY1999. 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
$400,000 per year.