With the release of the proposed fiscal year 2010 budget, we've seen what happens when a government is too reliant on recession-sensitive sales tax revenues. Bill Watkins' proposed budget anticipates no growth in sales tax for the fiscal year beginning in October. That's one of the main reason's the city's total proposed spending will actually be lower for the fist time in more than 20 years.
A report released by MU's Community Policy Analysis Center in mid-July warned that Columbia's expenditures were outpacing its revenues. One of the study's authors, professor Tom Johnson, said that this was not uncommon in growing municipalities. But he said that eventually, Columbia will have to re-evaluate its funding structure.
“The way we have our sales tax is incapable of keeping up with growth in the community,” Johnson said. “Now, if you’re willing to accept declining services as we grow, that’s not a problem.”
Third Ward Councilman Karl Skala has harped about Columbia's "addiction" to sales tax and the need to find another way to fund city services. And with Columbia's regional draw as a shopping destination declining as nearby cities develop their own retail centers, a retail sales tax increases will be ever more dependent on population growth.
The budget this year will include an increase in development fees from $.25 per square foot to $.50 per square foot, but Fourth Ward Councilman Jerry Wade has indicated that the fees are still too low for growth to pay for itself.
Years of reliance on increasing sales taxes has put Columbia in a bind, and both city staff and residents will feel the tough decisions the council will make in September.
We've seen what one year of low consumer confidence has done to the city's finances, how should the city keep it from happening again?