Sales tax revenues slow in Columbia

Thursday, May 8, 2008 | 5:27 p.m. CDT; updated 4:05 p.m. CDT, Tuesday, July 22, 2008

Columbia merchants’ taxable sales fell $4 million to $1.9 billion in 2007. Although that is a small drop, its impact ripples across the budgets of Columbia and Boone County.

The flattening of taxable sales continues into 2008. The governments of both Columbia and Boone County have revised their projections for sales tax income down this budget year.

“Right now, there’s some softness because the amount of building materials being purchased is less than previous years,” said Don Laird, president of the Chamber of Commerce.

Employment in the construction industry in Boone County dropped to 4,105 in 2007 from 4,335 in 2006, according to the Regional Economic Development Inc. Columbia and Boone County issued 2,866 fewer single-family construction permits in 2007 than they did in 2006, and the valuation of new single-family construction dropped $50 million.

According to the 2008 Boone County adopted budget, not only is the home improvement and construction sector producing less sales tax revenue, but dining and entertainment is, as well. Revenues from sales tax make up 29 percent of all general government revenues for the county, which is a large factor in determining the budget for the upcoming fiscal year. In addition, sales tax makes up approximately two-thirds of all tax revenues.

Predictions for income from sales tax are made every fiscal year, which begins at the start of the year for the county and runs from October to September for the city.

Boone County projected sales tax income to rise 4 percent in the 2007 fiscal year, but the projection was revised to 0.5 percent in the middle of the year. County Auditor June Pitchford said if sales continue to decline, there will be less than 0.5 percent growth in sales tax revenues for the county.

“Actual growth rates for last year came in less than 1 percent,” Pitchford said.

As a result, the county will defer replacing or purchasing equipment until revenues increase, will have only minimal wage or salary increases, and will have no new programs or expansions among other changes. This plan, according to the budget report, will help prevent staffing or service cuts. Sales tax makes up nearly three-quarters of funding for roads and bridges in the county. For law enforcement services, all but 2 percent of their funding comes from sales tax. 

Columbia projected a 3 percent growth for 2007 fiscal year. Like the county’s, that estimate was revised to a more modest 2.5 percent growth rate.

Columbia’s sales tax, which is 7.55 percent, has been steady for more than a year. The tax includes the 4.225 percent state sales tax along with smaller taxes such as the county road, parks and law-enforcement taxes, according to a 2007 report by the City of Columbia. In addition, some commercial districts have a higher sales tax than the rest of the city to help pay for infrastructure.

These areas, called Transportation Development Districts, charge 8.05 percent sales tax, which will not return to the normal 7.55 percent until the developer has accrued enough money to pay for road improvements. To receive the increase in sales tax, each developer has to submit a petition to Boone County.

“They have to tell them why they want the extra 0.5 percent, what they’re going to do with it, and how much it’s going to cost,” said Heather Guess, the accounting assistant for the City of Columbia.

There are eight of these districts: Broadway-Fairview, CenterState, Columbia Mall, Conley Road, Grindstone Plaza, Lake of the Woods, Northwoods and Shoppes at Stadium.  The Lake of the Woods surcharge has been collected since 2004, and the Columbia Mall surcharge was added in 2007.

An increase in sales tax, such as in the transportation development districts, needs to be voted on by the community before it goes into effect. In 2001, sales tax in Columbia rose from nearly 7 percent to 7.225 percent. In 2002, the tax went to 7.35 percent. That percentage held steady for several years before it increased to the current 7.55 percent.

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barbara Hoppe May 8, 2008 | 11:23 p.m.

Although sales tax in general needs to be voted on by the community, sales tax imposed through a TDD does not. It is created by the court and there is no community vote on it. That is one of it's fundamental problems with it.

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