Sweeping fiscal changes may come to St. Louis, St. Louis County and its local municipalities if backers of a plan to merge the city and county into a single metropolitan government succeed.
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A petition drive would be needed to place the measure on the Missouri ballot for statewide voter approval.
The group in 2017 launched a city-county governance task force to examine how a consolidation plan, which has been discussed for decades, could work to enhance the region’s economic viability. The city of St. Louis completely separated from the county, a division that took place in what’s known as the “Great Divorce” of 1876.
“We must be bold, determined, innovative and open to new ideas about best policies and programs to meet the formidable challenges of our region,” said retiring Washington University Chancellor Mark Wrighton, who will head efforts to implement the proposal.
The group will launch a $25 million campaign to gather the more than 160,000 signatures to put the measure on a statewide ballot and build public support on the argument that a streamlined government will save taxpayer dollars and better equip the region to compete economically going forward.
Critics say many questions remain over the fiscal, social, and policy impact.
PROPOSAL
Under the 160-page blueprint, the new metro city would be led by an elected mayor who would assume all duties of the county executive and the city mayor by 2023.
The group wants to get the amendment on the 2020 ballot. If passed, a two-year transition period would begin on January 1, 2021. The first election for the new metro city would take place in November 2022.
Voters would elect a 33-member Metro Council, whose members would represent districts drawn by a nonpartisan expert and initially approved by the St. Louis County Council and St. Louis Board of Aldermen. The metro city would manage policing services and municipal courts for the region's 1.3 million residents.
The plan preserves current municipalities but reclassifies them as municipal districts of the Metro City. “These municipal districts would have the authority, but not the obligation, to offer services in the areas of fire protection, parks and recreation, trash and recycling, general administrative functions, and any other services desired by citizens but not provided by the Metro City government,” reads the report.
The general sales tax revenue would be collected on a Metro City-wide basis to support services provided regionally by the Metro City.
Municipal district operations would be funded through local property taxes, utility taxes, and fees for service collected within the district.
The report acknowledges the concerns raised by citizens outside the city worried that they will wind up on the hook for additional debt. To address those concerns “all current debt and outstanding liabilities” will remain within the district in which they were incurred and that “includes but is not limited to general obligation and other indebtedness as well as pension liabilities” and to be repaid with “existing revenues collected within a given municipal district.”
St. Louis would remain as a municipal corporation which would allow it to service its financial obligations with revenue from residents within the former city of St. Louis boundaries. “We estimate that this debt could be addressed within seven years,” says the report.
The task force recommends the initial property tax for the metro city be lower than the current St. Louis County rate and that the earnings tax in the current city of St. Louis be phased-out, according to established state law, by 10% each year. The earnings tax accounted for 37% of city general fund revenue in 2017 and faces renewal in 2021.
The task force estimates that this new government structure would save $250 million a year.
“This plan outlines a bold vision to create an efficient, equitable, safer, thriving Metropolitan City that will be the 9th largest in the United States, well positioned to prosper in a global economy,” the report says.
Better Together was launched in 2013 as a project of the nonprofit Missouri Council for a Better Economy and has held public meetings and issued a series of reports examining local government operations and in 2017 the task force began working on some form of consolidation.
The city and county encompass 90 municipalities, 23 fire districts, at least 60 police departments, 20 municipal fire departments, and 81 municipal courts with annual spending of $2.3 billion to operate and “an estimated $750 million excess dollars spent annually due to inefficiencies or duplication,” the report asserted.
No changes are proposed for school districts.
The county's courts and cops came under the spotlight after a policeman in Ferguson, in St. Louis County, shot to death Michael Brown, an unarmed, 18-year-old black man. After the ensuing protests and unrest, local and federal probes found unfair practices in the court system, notably fines that local governments rely heavily on to support their budget.
“Through their courts, municipalities are imposing ‘hidden taxes’ on disproportionately African-American and disproportionately poor residents,” the report said.
REACTION
Both Democratic and Republican state lawmakers questioned why residents of the city and county won’t decide the proposal’s fate and worried that local residents could be drowned out by a statewide vote.
The task force said the existing governmental structure is dictated by constitutional provisions that can only be changed through a constitutional amendment, which requires a statewide vote.
The previous mayor and county executive had hinged their support for any consolidation on local support and there’s speculation that a counter initiative could be pushed for the 2020 ballot requiring local voter approval.
Local governments are pushing back with the Municipal League of Metro St. Louis voting last week to back an alternative process that would review options with a final plan requiring local approval. The group is launching a petition drive to establish a special Board of Freeholders as outlined in the state constitution to consider consolidation options.
Fears that have been raised include whether existing debts could be pushed on to other local governments and concern over a loss of local control.
Some also question the involvement of retired businessman and philanthropist Rex Sinquefield who has provided funding for Better Together. Sinquefield has long sought to rid the state of the earnings tax and helped fund the 2010 ballot initiative that requires voters reauthorize the tax every five years.
Others reserved judgment.
The elected post of city comptroller is among those that would be eliminated. The incumbent, Darlene Green, manages city debt issuance and is not shy about criticizing city policies she believes damage its bond ratings.
“We don’t want to offer an opinion until we’ve had a chance to review the proposal,” said Green spokesman Tyson Pruitt.
Several municipal market participants said they needed to dissect the report to gauge its impact on the market’s perception of the city, county, and impacted local governments.
The county's ratings range from the double-A category to AAA. It had $554 million of long term GO, revenue, TIF, and loan debt outstanding as of June 30 including $97 million of GOs, according to its financial results.
The county operates a single-employer pension plan for employees and pays the full actuarially required contribution. It was 62.5% funded with a net pension liability of $357 million based on its last available results.
The city is rated A-minus by Fitch Ratings, A-plus by S&P Global Ratings and Baa1 by Moody’s Investors Service. Moody’s cut the rating last spring, marking the fourth consecutive year that it downgraded the city. Lease debt for essential purposes is one notch lower at Baa2 and less-essential lease debt is now rated Baa3.
The downgrade stemmed from “the city's weakened reserve position which will remain challenged over the near term despite recent revenue enhancements and policy changes that seek to rebuild narrow reserves,” Moody’s said.
The city's long-term burden of debt and net pension liabilities represent 18% of personal income, according to Fitch. The city has $37 million of general obligation debt outstanding, and voters authorized an additional $50 million last year. The city has about $430 million of leasehold revenue debt outstanding.
The three-year average adjusted net pension liability under Moody's methodology for adjusting reported pension information was $1.3 billion in 2017, or 2.3 times operating revenues. St. Louis is the state's second-most-populous city with 316,000 residents.
