Disincorporation an Option for Struggling Cities

A story out of California discusses how municipal disincorporation is being considered by California cities under financial duress. Thankfully, Missouri is generally in much better fiscal shape than California or our neighbor to the east, but disincorporation is still a rarely considered option for small Missouri towns. There are a number of small towns in St. Louis County that contract for the county to perform many town services. The cities tax the residents, and use those revenues to pay the county to provide specific services. That is certainly more efficient than every small city providing every service themselves, but the kicker is that the county would provide these services to town residents anyway, out of their general county taxes, if the town didn’t exist as a political jurisdiction in the first place. In many instances, tiny cities exist only as middle-men for many public services, which the residents would receive from the county anyway if the town didn’t exist as an intermediary — and they’d have lower tax bills.

You may be asking, “Wouldn’t the county have to increase taxes to fund services to more people if the city disincorpoarated?” In many Missouri counties, the answer is “maybe.” But in St. Louis County, it is “no.” This is because of the county’s sales tax pool. If smaller cities disincorporated, the sales tax money that previously went to the cities would be redivided. The county’s share is based on its unincorporated population, which would rise if cities disincorporated, so the county would get more money from existing tax payments, and probably not have to raise other taxes.

I don’t want any state or county laws changed in a way that would mandate disincorporation. I just want the residents of smaller towns in Missouri, and especially in St. Louis County, to know that it is an option worth considering as cities face budget difficulties.