With pension sales tax due to expire, City Council considers taking new tax to voters

Correction: Due to an editing error, an earlier version of this story was missing a word that made it unclear whether the tax rate would change if the proposed tax is approved. The overall sales tax rate would not increase if voters decide to replace the expiring 3/4-cent sales tax with the new one.

Tensions rose at a Springfield City Council retreat on Friday as members discussed potential ballot language that could replace the 3/4-cent Police-Fire Pension sales tax with a more flexible source of revenue for the city.

Since 2009, the 3/4-cent sales tax has directed taxpayer-approved funding to the city's Police and Fire Pension Fund. It was renewed twice, for additional five-year terms, in 2014 and 2019. The tax is set to expire on March 31, 2025.

As of June 30, 2022, the pension fund held 87.4% of the assets needed to pay accumulated benefits, a significant improvement from the 35.5% funding level in 2009 when the tax was first approved. In addition to the revenue from the sales tax, the city contributes about $5.4 million in general revenue annually to the retirement system. The pension plan funded by the sales tax was closed to new hires in 2006; new police officers and firefighters are enrolled in the state LAGERS retirement plan.

While the goal is to have the pension plan 100% funded, City Manager Jason Gage said another five-year renewal of the tax would produce far more revenue, about $45 million annually, than is necessary. With the expiration on the horizon, Gage said, council has the opportunity to revamp the 3/4-cent sales tax with a new proposal that could create revenue for other initiatives that need to be addressed.

Assuming voters approve, the new tax would replace the one from 2009 and there would be no increase in the overall sales tax rate.

While council mostly agreed with the idea of sending a new tax to voters in April, there was a clear difference of opinion about how the money should be spent and the ballot language presenting the issue to the public.

Ballot language in question

An informal draft of the ballot language Gage presented to the council includes a wide range of potential uses for the funds, from infrastructure and beautification of public spaces to crime reduction and investment in jobs and economic prosperity. The suggested term for the tax would be either permanent or 20 years, though Gage said that was for council to decide. Gage said some categories may be redundant to allow for flexibility in allocating the funds based on the needs that arise, as predicting issues of importance 20 years in advance is difficult.

The tax would continue to fund the pension fund until that financial liability is addressed.

"For me that's the number one thing we have to do is make sure that's fully funded without question," Gage said. "We're at a point in time where we don't have to have that full amount. We can really do some great things in our community, if the public agrees and wants to do that and still make sure we hit that 100%."

As drafted, it would be up to council to budget and allocate the sales tax revenues to specific projects and programs within the categories selected. Gage presented a baseline suggestion of such allocations, but said it would be council's decision to formally outline their intentions. He suggested such an outline should be created for the first three to five years to communicate to voters in concrete terms how their money would be spent.

Councilman Craig Hosmer wanted to see the tax money dedicated to public safety. While this would not be additional money to be budgeted, it would be a revenue source dedicated for that purpose. Hosmer argued the public supports law enforcement and the tax would be easy to pass with this purpose.

"If we don't get law enforcement right, it doesn't matter how pretty we make the city ... because right now we've got a problem," he said.

Law enforcement currently receives about $60 million from the city's General Fund. By replacing some of that allocation with dedicated revenue from the proposed tax, Hosmer said, the remaining money could be used for any other projects or programs that the city has the need for.

Councilman Matthew Simpson expressed concern that, since the General Fund does not have any limitations on how it is spent, the money would not be guaranteed for anything, diminishing transparency and trust with the public.

"We owe it to them to let them know where it will go," he said.

Councilman Derek Lee was not a fan of the ballot language in general. While initially he took a stance opposing the tax altogether, he said the question should be more focused on a narrow purpose, similar to Hosmer's idea.

"It just sounds like we want more money for everything, we want to spend more money on everything," he said. "I think this is the wrong approach ... I don't like this language at all."

Councilwoman Heather Hardinger said that limiting the funds to public safety would not do justice to the public as there are other topics beyond the scope of public safety that deserve to be addressed.

Responding to public requests, priorities

The ballot language that was presented largely came from requests and priorities that the community has said are important, city officials said.

Cora Scott, the city's director of public information & civic engagement, presented community survey results that showed strong public support for maintenance and improvement of city streets and infrastructure, flow of traffic and enforcement of city codes and ordinances.

The survey also asked for thoughts on improvements to the city's attractiveness and beautification of public infrastructure both of which were ranked highly by those surveyed.

During discussion about the ballot language, Councilwoman Monica Horton emphasized the needs of the community for neighborhood improvements. She pointed out that crime numbers have been trending downwards, suggesting to Hosmer that a new tax could allow them to do both — support law enforcement and address neighborhood needs.

"It's clear to me that infrastructure, roads and neighborhood improvement is certainly something that voters will be certainly willing to vote on," she said.

More: Springfield's police-fire pension is doing well; the future after tax expires is murky

Council could not reach consensus on the ballot question, preventing city staff from drafting formal council agenda items just yet. To continue the discussion and work toward a consensus, the ballot question will be revisited at a future committee meeting yet to be determined.

The question has to be submitted to the county clerk by Jan. 23, 2024, in order to be on the April ballot.

This article originally appeared on Springfield News-Leader: Springfield City Council to disagrees on 3/4-cent sales tax proposal