When Boone County received its April distribution of sales tax money from the state two weeks after the county locked down under a stay-at-home order, nothing seemed out of the ordinary.
The report, covering revenue collected for the county in the first three months of the year, showed receipts of $3.5 million from the general revenue sales tax, down 0.9 percent from the previous year and in line with projections made when this budget was written.
But the next report, due in early May, will tell a different story, County Treasurer Tom Darrough said.
The reports generally only show sales through about the middle of the previous month because of the time between the sale and when the state receives the taxes.
"There is obviously that lag," Darrough said. "I suspect on May 7 we will see staggeringly depleted sales tax numbers."
Luckily, Missouri has received $2.4 billion in federal COVID-19 relief funds from the federal government and 25 percent, or about $521 million, will be distributed to cities and counties.
That will mean $21.2 million for Boone County, but at a meeting of the CARES Act Funding Working Group on Tuesday, it was clear that money can only be used for extraordinary expenses related to the pandemic, said state Rep. Kip Kendrick, D-Columbia, a member of the group.
And federal stimulus distributions to individuals have helped prop up sales. While income tax collections at the state level are down 62.4% for April, sales tax collections are up 13.2%, according to a report of state tax collections through Monday afternoon.
Counties and cities around the state are anxiously awaiting that May 7 report. The long-term economic impact on local governments has yet to reveal itself, but they are preparing for significant revenue shortfalls that could impact the services these governments provide.
While early estimates are just that, those estimations are grim.
Richard Sheets, the deputy director of the Missouri Municipal League, said that depending on the size of the community and how its economy is structured, Missouri cities could expect to see up to half of their expected revenue evaporate due to the pandemic.
"I think it’s going to be a reduction in a quarter of the revenue, reduced from last year," he said. "Maybe even close to a 50% reduction."
Cities he defined as "regional commercial areas" will experience the hardest blow from their evaporating revenue streams. Cities like Columbia, Springfield and other large communities rely on sales from those traveling into the community to eat at restaurants and buy at malls and specialty shops.
And cities that depend on tourism dollars could expect even greater losses, Sheets added.
"Places like Branson are going to get one of the biggest hits, it might be 50% or more because almost their whole economy is based in tourism and that's been shut down completely," he said.
Smaller communities can also expect revenue declines, he said, but the blow may not be quite as significant.
"Smaller and medium-sized cities ... are going to fare a little bit better," because they are less reliant on people traveling into their cities to vacation or shop, Sheets added.
While the losses might be lessened for these communities, the impact still means real-world choices at the ground level.
Mayor Steve Crosswhite of Sturgeon said his community expects to see up to a 10% reduction in revenue as a result of the pandemic.
"For us that could amount to $15-$20,000 that we could expect (to lose)," he said. "That slight reduction, although it doesn’t seem like a whole lot ... could have an impact and slow us down a bit."
Crosswhite said the town is working on a budget for 2020/2021 and expects that some cuts might need to be made to government services for roads repairs, sewer and water lines, and for the police department.
"Just like any community, police, water and sewer, and roads could be impacted," he said. "We have a desire to hire an additional police officer, and that may be delayed."
To alleviate the strain on budgets, the National Association of Counties has repeatedly urged Congress to send relief to state and local governments. It reported this month that Missouri is one of five states that are expected to see "significant decreases in revenue due to COVID-19."
Regardless of community size, it’s clear that no Missouri government will escape revenue declines. And because of the state’s heavy reliance on sales tax for revenue, municipalities may actually experience a more dramatic effect than those in neighboring states like Nebraska, which rely more on property taxes for revenue streams.
Boone County’s budget heavily relies on sales tax dollars to function. For 2020, 66.9% of the total budget was derived from sales tax revenue.
Dedicated sales taxes fund several programs, including 78% of the Roads and Bridges Fund, and there are taxes for law enforcement, the Community Children’s Services, and 911/Emergency Management.
To Sheets, the whole pandemic is highlighting an issue that has been hurting Missouri for a while. The ever-increasing move to online purchases has undoubtedly boomed as a result of the pandemic, as citizens follow stay-at-home orders and shun crowds to avoid contracting the novel coronavirus.
In a state like Missouri that has failed to pass an updated e-commerce use tax, that means a greater share of lost revenue, Sheets said.
The sentiment was highlighted in a statement published by the Missouri Municipal League expressing the need to pass e-commerce legislation.
"The failure of the Missouri legislature to pass an e-commerce use tax has the potential to bankrupt local governments across the state because of the COVID-19 pandemic," said Gary Jungermann, Callaway County presiding commissioner. "The large online retailers that don’t collect and remit use taxes on the vast majority of their sales now represent the lion’s share of economic activity in the state and are starving municipalities and counties of crucial revenue."
Columbia Mayor Brian Treece seconded this point in the statement by highlighting the increasing demand for government services while suffering revenue declines.
"Now more than ever, we need the Missouri General Assembly to close the online use tax loophole and level the playing field for our shopkeepers who are struggling right now," Treece said. "The current pandemic has altered consumer spending while dramatically increasing the demands of local government."
Sheets said it’s been an issue the Municipal League has been championing for a while, and the pandemic is underlining the urgency to update the legislation.
Only Florida and Missouri have yet to update their laws to capture revenue from all online sales, regardless of whether the store is physically present in the state.
"Technology has changed and we’re trying to get the legislature to come into the 21st century," he said. "And it can be a tough nut to crack."
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