As we come into the holiday season, I wish each and every one of you a happy, healthy, and prosperous new year! We are finishing out the year on a strong note with development and economic activity, even in the face of high inflation and economic/market volatility and uncertainty.
Thoughts and Perspectives
No doubt that our council members and I are elected to serve our residents and businesses, as related to the City’s responsibility to provide high caliber services, in an efficient and cost-effective manner. To that end, I am proud to say that our council members address their responsibilities in a very conservative manner. That said, we also have a responsibility to provide fair compensation to City staff and employees to attract and retain valuable employees.
City council has been going through the annual budget evaluation process in preparation for the upcoming year. Preliminary projections indicate that 2023 will have approximately $2.5 million in revenue over expenses on total revenues of a little over $40 million. Along with this is a projection of $5.5 million over the policy of 40% fund reserve of general funds. In addition to these fund reserves is an additional $6.9 million earmarked for future debt payments. These numbers are before allotting any amount toward what is called a merit pool for variable pay raises based on performance evaluations. In accordance with Chesterfield Employee Salary plan, the Consumer Price Index (CPI) to be used as a guide as to what amount should go into the merit pool has indicated an annual inflation increase of 9.5%. This past year, military retirees received a 5.9% increase, as well as the same for social security recipients, while it has just been announced that social security recipients will receive an 8.7% increase for 2023. Last year the council voted to put 4.6% in the pool while the CPI for last year was 5.8%. Thus far, the council has yet to develop a consensus as to what percentage to allocate to the merit pool. From my perspective, if the revenues are available (and they currently are), we should follow our adopted pay plan and allocate at least what the CPI indicates for our employees overall to at least keep up with inflation.
Our Long-Term Forecast
Whereas our current financial posture (as bolstered by American Rescue Plan Act (ARPA) and Cares Act funds) is healthy, the five-year forecast predicts that we will have expenditures over revenues by 2026. So, to plan responsibly, we need to look at additional/alternative sources of revenues. The suggestion of simply cutting expenses does not work when we have a growing community that has expectations of at least maintaining the same level of services. Our revenues are negatively impacted by a continued decrease in land line utility tax as well as cable franchise fee reductions and on-line purchases from out of state.
Last April a “Use Tax” was on the ballot and narrowly failed, therefore it may make sense to again put that on the next April ballot. There did seem to be a fair amount of support because the measure passed in a majority of the voting precincts in Chesterfield. The amount of additional revenue, if passed, could only be estimated and would only be applicable to out of state online purchases at the same rate as existing taxes. This could be important as more and more shopping is taking place online.
Perhaps in addition to, or in lieu of a use tax, would be the consideration of a small property tax (Chesterfield currently has NO property tax). This would satisfy the suggestion/recommendation of diversifying our sources of revenue instead of being reliant predominantly on sales taxes. The amount of revenue that would be generated would be predictable, as it would be based on assessed valuation throughout the City of Chesterfield. Furthermore, with such a large tax base, the amount of mil levy (rate) necessary would be relatively miniscule compared to the total levy for all the taxing districts. For a home valued at $500,000 in the Parkway or Rockwood School District, a 15 cents per $100 of assessed value would cost a homeowner approximately $142.50 additional per year. Currently, these hypothetical homeowners are paying real estate taxes of $6,611.50 and $7,048.50 respectively in Parkway and Rockwood. So, in comparing these figures you can see that the additional amount in either school district would be a small portion of the total.
I know this is pretty dry material, and though I am philosophically predisposed to be against what some may call new taxes or tax increases, I think it is important to have some knowledge of your City’s finances and our choices in generating sufficient revenues to pay for the services we are able to provide. We need to be able to examine and analyze the facts, and then come to reasonable conclusions.
Thank you for your patience if you have persevered through this message! I encourage your questions or comments. If reaching out, please email firstname.lastname@example.org or call 636.537.4706 for more information.
Mayor Bob Nation