CHICAGO – St. Louis, its sewer district, and Kansas City scored fiscal victories in elections Tuesday in Missouri, while Ferguson voters rendered a split decision on proposed tax increases.
The Metropolitan St. Louis Sewer District won voter approval from St. Louis area voters for Proposition Y to authorize $900 million of borrowing to fund its capital program through 2020.
The plan sets rates for 2017 to 2020 and provides funding for $1.5 billion in projects over those four years. They are part of a larger, $4.7 billion long-term infrastructure program of capital projects, many required under a 2012 consent decree with the U.S. Environmental Protection Agency.
The plan relies on borrowing, service charges, grants, and state revolving fund support. The district doesn't intend to tap the new capacity until fiscal 2018 because borrowing authority remains from $945 million authorized by voters in 2012.
The district intends in fiscal 2016 to sell about $150 million of bonds and then $174 million in fiscal 2017 with additional issues planned through 2020.
St. Louis voters also approved $25 million in borrowing for equipment purchases and endorsed the continuation of the city's earnings tax. Kansas City voters also signed off on continuing the earnings tax.
The 1% tax is imposed on wages earned in their respective cities. In St. Louis, 72% of voters endorsed the tax while 77% of Kansas City voters approved it.
"City voters rejected a very dangerous gamble with our public safety and credit rating," said St. Louis Mayor Francis Slay. "The coalition that won tonight, as grass-roots as you can get, is now poised to do great things."
The tax generates about $160 million annually and accounts for about one-third of budget revenues. In Kansas City, the tax generates about $240 million annually and represents 40% of its operating budget.
The tax comes up for a vote every five years in the two cities due to a 2010 state ballot measure. If voters had rejected the tax, it would have been phased out over 10 years.
Civic leaders in both cities promoted the tax as one that is broad-based and goes easy on residents because a sizable amount of revenue comes from non-residents who work there.
The earnings tax faces a threat at the legislative level. Some lawmakers are opposed and could resurrect legislation next year in a new session to try to rescind it or phase it out.
St. Louis voters also signed off on Proposition F providing $25 million of bonding authority to fund fire department equipment and various infrastructure improvements. The bond will utilize the current tax levy and not require a tax hike, according to comptroller Darlene Green's website.
In junk-rated Ferguson, voters nixed a proposal to raise property taxes by 40 cents per $100 of assessed value to raise an estimated $1.5 million annually.
The city's voters did approve a one-fourth cent economic development sales tax that is projected to generate about $1.2 million annually.
The city asked for the tax hikes to fund rising costs in the wake of the controversial police shooting to death of Michael Brown in 2014.
Moody's Investors Service, which recently placed Ferguson's $16.5 million of debt on review, said in previous reports it would be watching the results closely.
The city has $6.7 million of Ba2-rated 2011 general obligation bonds, $8.4 million of Ba3-rated 2013 certificates of participation, and $1.5 million of B1-rated 2012 COPs. Moody's dropped the city – which has warned that its solvency is at risk -- to junk last September.
Moody's put the city on a fresh review after the U.S. Justice Department filed a federal lawsuit in February accusing Ferguson of policing and municipal court practices that violate constitutional and federal civil rights. The lawsuit followed the Ferguson city council's decision to water down a negotiated consent decree. The city recently reversed course and agreed to sign the consent agreement.
The city estimates the agreement's implementation cost in the first year could run as high as $1.5 million with costs falling under $1 million in subsequent years.
The city is struggling with a $2.9 million shortfall in its $14.5 million budget and had warned that it needed both taxes to pass to tackle both its deficit and the consent agreement's costs, saying deep service cuts would be needed otherwise.
DOJ launched a patterns and practice probe of the department following the August 2014 killing of Brown, a young, unarmed black man, by white police officer Darren Wilson. The event triggered protests in Ferguson and around the country.
The city northwest of St. Louis once had a healthy balance sheet and an Aa3 rating, but it has struggled to recover from reduced fine collections and other litigation.
