Local officials are girding for more bad news concerning the COVID-19 pandemic in early May.
That’s when the Missouri Department of Revenue is scheduled to distribute sales tax revenues for local governments.
Sales taxes help fund county and municipal governments, county law enforcement and roads, 911 Dispatch, fire districts and ambulance districts.
County Executive Dennis Gannon said he’s not sure what to expect from the May numbers, which will reflect sales through mid-March – after restrictions on businesses and stay-at-home orders were put into place.
“No one is really sure if enough revenue is being generated to come close to what we usually get,” he said. “I’ve talked to the governor, state legislators, other leaders of counties and cities, and the common thing is no one knows anything about these questions.”
Gannon has reason to be concerned, though.
Jefferson County’s general revenue budget, which funds most of its day-to-day operations, is driven mostly by money generated by a 1/2-cent sales tax.
In the county’s budget for 2020, sales taxes were expected to provide 34.3 percent of the total $94.8 million budget and 42.5 percent of the general revenue budget.
Separate 1/2-cent sales taxes also provide much of the funding for law enforcement and for road and bridge improvements. In the most recent distribution – released in early April but reflecting sales through mid-February – sales tax receipts were up 2.71 percent over the same time in 2019. That followed more robust increases in January (up 6.28 percent over the year before) and February (8.73 percent).
Gannon said there’s a chance the May numbers won’t reflect a worse-case scenario.
“Our bigger stores, like Walmart, Lowe’s and Home Depot, have remained open and people have told me they think they’re doing good business, but I’m a businessman and I know a lot of people look at revenue but never look at expenses,” he said.
“A big part of sales tax is automobile sales. I don’t know that a whole lot of cars have been sold, if any, during this time,” he said.
Todd Tracy, executive director of the county’s Economic Development Corporation, said it’s hard to predict the impact.
“There are some sectors that may be up, like grocery sales and some of the big box stores, and that will help us. I know some restaurants are not doing poorly, and by that, their revenues are flat. We won’t have a good handle on this until the numbers come out in May.”
Sheriff’s Office prepares
Sheriff Dave Marshak, whose department relies on that dedicated 1/2-cent sales tax, said he and his staff could see this coming and already have begun preparing for weak sales tax revenue.
“We immediately addressed the anticipated financial implications of COVID-19 six weeks ago. We must be forward-thinking when we look at the realities.”
Marshak said the Sheriff’s Office instituted a freeze on new hires at that time and canceled training, among other cost-cutting moves.
He said because school resource officers and jail transport officers are not being used, with schools not in session and most trials not being held, his department can in the short run absorb a temporary hiring freeze.
“With some of the positions we have frozen, we are in a better financial position to weather a storm than others,” he said. “I think we will get a better picture of the true impact this summer.”
Gannon said he and others in county administration also are considering how to adjust to an anticipated loss in revenue. When they drew up this year’s budget, they were planning for sales tax revenue to be flat.
“We budgeted very conservatively,” Gannon said. “But no one saw anything like this coming. How could you?
“We’ve been putting together a checklist of things that have to happen and need to happen versus other things that aren’t in that category,” he said. “We’re talking about things that maybe we can put off until the last quarter of the year, and others that we may have to put off until next year.”
Gannon said all the answers won’t necessarily be in the May sales tax numbers, but in the months to follow.
“If you’ve just been unemployed, you might have a little discretionary income for the first month, but two or three months down the line, you’re probably going to have a lot less. How are people’s habits going to change in the next few months? We don’t know.”
Arnold has fingers crossed
Arnold City Administrator Bryan Richison said anecdotal evidence inspires some cause for optimism, at least in the short term.
“I have seen some people talking about a worst-case scenario, which is more guesses and not data-driven, of a 20 to 30 percent decrease,” Richison said. “Then, there are other people who say that while a lot of businesses are closed, the ones that are open are kind of going gangbusters.”
Richison said sales at the big box stories in Arnold don’t appear to be negatively affected by the virus.
“I don’t think there has been any drop in Walmart’s business, and they may be up,” he said. “They are by far the biggest sales tax generator in town.”
Richison said he recently got out to buy a lawnmower and saw a large crowd at Lowe’s.
“It was mindboggling, honestly,” he said.
“I think there will be a drop in restaurants, but a lot of them are trying to mitigate that with delivery, drive-thru, carryout and curbside delivery, so that drop may not be as bad. It wouldn’t be shocking if there is not much of a decrease at all (in sales tax revenue).”
Richison said he does not foresee the city needing to adjust its budget for the current year, which runs through Aug. 31.
“I think it will have a bigger impact in July and August when we are trying to wrap up the next fiscal year (September 2020 through August 2021),” Richison said. “I think it will be a conservative budget coming up for the next fiscal year.
“My bigger concern is what might happen long term. I think there will be businesses that don’t survive this.”
Officials want state to pass internet tax
Gannon, Tracy and Marshak said the current situation points out the need for local jurisdictions to be able to levy sales taxes on internet sales.
The county and most of the cities placed ballot issues before voters in August 2018 asking them to authorize “use taxes” that would require internet merchants to collect sales taxes, but, except in Kimmswick, the measures were all defeated.
Since then, county and municipal officials have called on the Missouri General Assembly to enact legislation that would allow taxation of internet sales.
“It’s clear that we’re going to get hammered if we don’t get something soon,” Gannon said. “People are creatures of habit, and a lot of people have gone to online shopping during the last few weeks – whether it’s for safety, or convenience – and those habits are going to be hard to break.”
State Rep. Dan Shaul (R-Imperial) said he believes help may be coming soon.
“I believe the pandemic has put a spotlight on sales tax revenue that’s not being collected by state and local entities. Sales taxes will be down; there’s no hiding that, and probably by a tremendous amount. It will be a big issue, front and center.”
Shaul said he believes the General Assembly will take up the matter this summer.
“I believe something will be done on this, if not during the next three weeks (of the current session), then during a summer session,” he said. “The leadership is currently setting its priorities. The first one will be the budget. I would think internet sales taxes might come after that.
“We need it. We’ve needed it since the Supreme Court came down with their decision (that allows collection of taxes on internet sales, regardless of where the seller is located). We’re only one of two states – Florida is the other – that don’t collect them. I think people now will begin to understand why we need to do it, so their local communities can provide them the services they need.”
The Missouri Association of Counties and the Missouri Municipal League have pushed to update the state law as a priority for the current legislative session. Failure to do so “has the potential to bankrupt local governments across the state because of the COVID-19 shutdown,” spokesmen for the two organizations said in a news release.
