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Columbia cashes in with sales tax

Tax revenue hasn’t grown this much since 1998’s record.
Friday, August 27, 2004 | 12:00 a.m. CDT; updated 9:07 p.m. CDT, Thursday, July 10, 2008

Seventy miles isn’t enough to keep Sedalia resident Jim Larson from the movies and coffee he desires.

Larson, who was shopping at Columbia Mall on Wednesday afternoon with his wife, Donna, and their two children, said he makes the drive to Columbia twice a month because Columbia has a better selection of DVDs and coffee.

“There’s really not a lot of that stuff in the area unless you go to Columbia or Kansas City,” Larson said.

As local businesses benefit from shoppers such as the Larsons, city government is benefiting as well from the increased sales tax revenue those shoppers bring in.

Columbia’s sales tax growth is more than doubling expectations this year. City officials had anticipated a 2.25 percent increase in sales tax revenue in the budget for fiscal year 2004, which ends Sept. 30. But after nine months of strong business for local retailers, sales tax revenue now is expected to grow by 5.25 percent, said Lori Fleming, the city’s finance director.

This is the highest rate of growth in Columbia since 1998, when sales tax revenue grew by 5.52 percent.

Sales tax makes up nearly 28 percent of general fund revenue, which pays for basic services such as police and fire protection, parks and recreation, public works, health and environment and other basic government services.

Out-of-town shoppers like the Larsons are one of the main reasons for Columbia’s unexpected sales tax growth this year.

Ed Robb, retired MU economist and Republican candidate for state representative in the 24th District, said sales growth lagged in Columbia during the past few years partly because surrounding cities added the kinds of stores that previously were only in Columbia. That meant regional shoppers could buy locally rather than shopping in Columbia. He said new retail developments here are starting to draw back shoppers.

“We should see a pretty good jump when the Bass Pro Shop opens and with the Biscayne Mall development,” Robb said. “I would expect the economy would do well through the end of this year and into next year.”

Gary Markenson, executive director of the Missouri Municipal League, said regional shopping hubs across the state are seeing a similar sales-tax rebound.

Joe Haslag, associate economics professor at MU, said higher sales tax revenue in Columbia follows a statewide trend.

“The state of Missouri has seen an increase in sales tax also,” Haslag said. “That seems to be in line with the idea that the people in Columbia have similar spending habits to the people in the rest of Missouri.”

The unexpected sales tax revenue this year means the city has more money for local projects. Fleming said the revenue is paying for 12 of the 25 new employees the city hopes to hire in fiscal year 2005. Despite the gains in 2004, city officials are planning conservatively for 2005. The city’s budget calls for a 4.5 percent increase in sales tax next year compared to this year’s 5.25 percent increase.

“There are so many uncertainties on the national level that we didn’t feel certain we could sustain that rate,” Fleming said.


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