The St. Louis Post-Dispatch recently ran an article on St. Louis County’s budget situation that was lacking, in my opinion. St. Louis County is trying to address a $40 million budget shortfall, and the article quotes county budget director Paul Kreidler and other county officials about the current predicament. This is the 2023 budget, and they are claiming that financial hits from 15 years ago and Missouri’s Hancock Amendment are some of the causes of the county’s shortfall. As the article puts it:
And it’s [the Hancock Amendment] one of the reasons St. Louis County’s budget situation looks so dire, county officials say.
The [Hancock] amendment forces local governments to adjust their property tax rates to avoid excess revenues. When the county saw a sudden increase in assessed property values around 2007 and 2008, it couldn’t collect the windfall. . . . Then sales tax revenues also plummeted because of the Great Recession—about 10% of revenue from residents buying cars and shopping vanished.
As to the part about not being able to collect the property tax windfall, I hardly know where to begin. First of all, the reassessment process is not and never was intended to lead to tax increases (although it often does). Requiring tax rates to roll back is a good thing and should be more strictly enforced than it is. But in fact, St. Louis County government (and many other local governments) are getting just such a windfall this year from increased personal property taxes (which are exempt from rollback rules). St. Louis County will get almost $4 million more in revenue this year simply due to used cars increasing in value.
I also disagree with the article’s statement that the county “couldn’t collect” the windfall in rising home values. Over the past decade, total assessments in St. Louis County have increased 29%, with the bulk of that being home values. During that period, property tax rates have only been reduced by 10%, leading to a 14% increase in total property tax collections over the past decade. As for the “sudden increase” the county experienced in 2007 and 2008, the county did not lower its tax rate in those years. So, it did enjoy the benefits of the increase! (See page 167 in this CAFR.) When the county did lower the tax rate in 2009, it only lowered the debt rate, not the general fund rate. When assessed valuations started to fall in 2009, the county could have raised its property tax rate without a vote of the people to offset those losses, but it chose not to do that. Maybe they should have, and maybe they shouldn’t have, but the Hancock Amendment didn’t prevent St. Louis County from taking such action.
That 14% increase over the past decade does not include the current car-tax bonanza, and next year’s reassessment is likely to be substantial given the large increase in home values seen in 2021 and 2022. Yes, home values have leveled off the past few months, but assessed valuations will be set as of January of 2023, so any real decline in 2023 will not be captured. Combine that with the high inflation rates that local governments will use to reduce their rate rollbacks, and next year is likely going to be very expensive for taxpayers.
St. Louis County’s elected officials can ask taxpayers for a property tax increase at any time. Just because politicians don’t want to ask that, or voters may choose not to approve it, does not mean that the Hancock Amendment is a problem for local government. It is anything but. Just look at what has happened in Kansas City, where the school district is the only local government exempt from Hancock rollback rules. Assessments have skyrocketed in recent years, and taxes have not decreased at all in the Kansas City school district. That’s the reality without the Hancock Amendment, and it’s one I’ll pass on.
Note: The original version of this blog post incorrectly stated that the decrease in sales-tax revenue during the Great Recession was less than the approximately 10% that the county claimed. However, county’s figure (as reported in the Post-Dispatch) was correct. I had overlooked a sales tax increase approved by the voters during that period that accounted for the difference. I thank Paul Kreidler from the St. Louis County Budget Office for pointing out my mistake.
