Use Tax Proposition - April 7, 2020 Election

During the April 7, 2020, election, Park Hills residents will be voting on the City's Use Tax Proposition. Before you go to the polls, please take a moment to read this blog and learn about the Use Tax; how it works, where the dollars will be spent, and why it is so very important to the City's financial health.

What is a Use Tax?

A Use Tax is a tax imposed on the storage, use or consumption of tangible personal property in this state.  Unlike a Sales Tax, which requires a retail sale in Missouri, the Use Tax is imposed directly upon the person or business that stores, uses, or consumes tangible personal property in Missouri.  The Use Tax does not apply if the purchase is from a Missouri retailer and already subject to Missouri sales tax.  It is not a double tax.  Missouri does not require  "out-of-state" companies that do not have a "direct connection" with the state to collect and remit Use Tax.  If an "out-of-state" seller does not collect Use Tax from the purchaser, then the purchaser is responsible for remitting the Use Tax to Missouri.

How would a Use Tax impact the citizens of Park Hills?

For the most part, the citizens of Park Hills will never pay any additional taxes if the Use Tax proposition is passed on April 7th.  If passed, the Use Tax will not add tax to an out of state purchase by a taxpayer.  If a taxpayer purchases $2,000 or more worth of out-of-state goods upon which no tax has been paid, the purchaser must self-report and pay the Use Tax with their individual income tax return.  This is already required by state law.  The State of Missouri relies on self-reporting for Use Tax compliance related to these purchases.  It is the individual's responsibility to keep track of his/her spending and to voluntarily report it.  Business owners generally file Use Tax Returns quarterly.

Why is the passage of the Use Tax important to Park Hills?

Five years ago, the City of Park Hills had $3,197,298 available to spend on anything council deemed necessary. The City also had $1,00,000 in a "Restricted Reserve Fund" that was invested in CD's drawing the highest interest rate possible.  The total cash the City had at that time was $4,197,298.  About that time the City began several large projects without providing a way to pay for them.  Year by year, the City began deficit spending and cash balances began to decrease.  By mid-January 2020, the City checking account totaled only about $57,000, after the week's bills and salaries were paid.  Two hundred thousand dollars was taken out of the reserve fund was deposited into the checking account.  For the past two and a half years the entire staff has been making cuts everywhere possible to cut deficit spending.  Deficit spending for Fiscal Year 2019/2020 is estimated to total $300,000.  To balance the budget for FY 20/21 the City will either need to cut $300,000 or have an increase in revenues in that amount.  If the City is forced to again make cuts, the only thing left to cut is City Services and City Employees.  While the City currently has $800,000 is reserves and a checking account now totaling about $700,000, a balanced budget is crucial to the City's financial survival. This is why the passage of the Use Tax is so important to the City of Park Hills.

How much will a Use Tax generate for Park Hills?

I am hoping the passing of the Use Tax will bring in between $40,000 and $50,000 per year; but since there are no concrete figures on how much money is spent outside Missouri, any number is just a guess.  When the City of Perryville put the Use Tax on their ballot, they estimated they would receive around $40,000.  They are now receiving $300,000 a year.

How will the money generated by the Use Tax be spent?

The City Council voted to have ALL money collected through the Use Tax to be used for Street Repair, Sidewalk Repair, and Improvements to Storm Drainage.  A few years ago the City budgeted annually $600,000 for street repairs.  By 2017 that amount was down to $200,0000 a year and this year it was again lowered to $100,000. 

Summary:

1. Few residents will be affected by the Use Tax. 
2. The Use Tax will not increase the cost of home internet. 
3. All money collected will be spent on Streets, Sidewalks, and Storm Drainage.
4. Additional revenue will help balance the budget. 
5. City services will be less likely to be reduced.
6. Employee benefit reductions and a reduction in the City workforce may be avoided or greatly reduced.  
7. The City will have needed funds for street paving, sidewalk repair, and storm drainage.

If you have questions or concerns that are still unanswered, please, call me. I will be happy to discuss it with you.

Most Sincerely,

Mark McFarland, City Administrator