THE CITY OF OLIVETTE - GOVERNMENT
Budgeting
The budget is the City’s most important written communication prepared during the year. The budget expresses in dollar amount the City’s work programs for the fiscal year. When adopted, it becomes a major source of direction for the department directors for the operation of the various functions and activities.
By statute, the budget is to be adopted by affirmative vote of a majority of the members of the Council no later than three days prior to the end of the fiscal year, February 28/29. Should the council fail to adopt the budget, amounts appropriated for current operations for the current fiscal year are deemed adopted for the ensuing fiscal year on the prorated month to month basis until the Council adopts a budget. The Council, by ordinance, makes supplemental appropriations if the manager certifies that funds are available for such expenditures.
As in the past, the finance office will continue to prepare the Monthly Financial Statements which are reviewed by the City Council and City Manager, so that the economical and fiscal picture of the city may be presented to the community for monitoring. Throughout the budget are a variety of comments, supporting data, tables and charts which are to be considered as supplemental to the budget message.
If during the fiscal year it becomes apparent insufficient funds have been budgeted in a certain area, the shortfall is reported to the City Manager. After reviewing the total budget, recommendations are made to the City Council and the budget is amended by City Ordinance.
Budget Process
Annually, since 1988, the City has been awarded the Government Finance Officers Association’s (“GFOA”) Distinguished Budget Presentation Award. To receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communications medium.
The City Manager prepares an annual budget for the ensuing fiscal year. The budget is based upon information provided by the various City departments and employees. After a proposed budget is prepared, it is submitted to the City Council for review. The City Council may revise, alter, increase or decrease the items contained in the proposed budget, provided that total authorized expenditures from any fund do not exceed the estimated revenues to be received plus any unencumbered balance or less any deficit estimated for the beginning of the budget year. The budget is legally enacted by ordinance following public hearing on the proposed budget.
Pursuant to the Missouri Statutes, the annual budget must set forth a complete financial plan for the ensuing fiscal year, and must include at least the following information:
(1) A budget message describing the important features of the budget and major changes from the preceding year;
(2) Estimated revenues to be received from all sources for the budget year, with a comparative statement of actual or estimated revenues for the two years next preceding, itemized by year, fund and source;
(3) Proposed expenditures for each department, office, commission, and other classifications for the budget year, together with a comparative statement of actual or estimated expenditures for the two years next preceding, itemized by year, fund, activity and object;
(4) The amount required for the payment of interest, amortization and redemption charges on debt; and
(5) A general budget summary.
Within a Fiscal Year the City Manager may transfer all or any part of any unencumbered appropriation balance among programs within a department. The City Council may by ordinance transfer part or all of an unencumbered appropriation balance from one department to another.
Each year as part of the budgeting process, the council appropriates Allocated Reserve Funds. These funds are expended by transfer to prior reserves in the year in which appropriated. They are carried as liabilities until sufficient funds have been accumulated to cover the expenditures for the Capital Improvement for which they are allocated.
The City prioritizes the improvements according to need and projects these improvements over a period of years.
The City is a suburban residential community with an economic base represented by a mixture of manufacturing, commercial enterprises, numerous small specialty shops, and support services. The City currently has approximately 339 business establishments, including approximately 12 manufacturing ad warehouses enterprises located in an industrial park. The City does not have a central business district. Commercial enterprises include numerous small specialty stores and several small strip shopping centers located mostly along Olive Boulevard, the major thoroughfare of the City.
GENERAL PROPERTY TAX
The property taxes, which is ninety nine cents ($.99) per $100 of assessed valuation, constitutes roughly 22.12% of the total revenue. Our assessed valuation has increased 2%, in addition, with the 1995 approval of the ½ cent sales tax for street maintenance and capital improvements, the infrastructure of Olivette can be addressed without placing a burden on our reserve stream.
Not later than August 31st of each year, the City Council sets the rate of tax for the City and files the tax rate with St. Louis County (the “County”) by September 1st. The County is responsible for reviewing the rate of tax to insure that it does not exceed constitutional rate limits.
Taxes are levied on all taxable real and personal property owned as of January 1st in each year. Certain properties, such as those used for charitable, education, and religious purposes, are excluded from ad valorem taxes on both real and personal property.
Real property within the City is assessed by the County Assessor. The County Assessor is responsible for preparing the tax rolls each year and for submitting tax rolls to the County Board of Equalization. The Board of Equalization has the authority to question and determine the proper value of property and then adjust and equalize individual properties appearing on the tax rolls. By statutes, tax bills are to be mailed in October; however, the volume of assessment complaints required to be reviewed by the County Board of Equalization can affect the date on which bills are actually mailed.
Payment of tax on real and personal property is due by December 31st after which date they become delinquent and accrue a penalty of one percent per month.
Billing and collection of property taxes is performed by the County for personal property and by the City for real property. The County Collector of Revenue deducts a commission equal to 1.5% of the taxes collected for his services. After such collections and deductions of commission, taxes are distributed to the City.
Use Tax
Cities in Missouri, including Olivette, began collecting a use tax in 1993 that has been the subject of a Missouri Supreme Court decision. The use tax is a tax on businesses for sales with respect to the storage, usage or consumption of tangible personal property in Missouri that was purchased outside the state. As a result of the case, the use tax as then provided under state statutes was disallowed and the Missouri General Assembly passed legislation to permit the collection of the tax under terms intended to comply with the Supreme Court’s ruling. Included in the legislation, (now 144.757-144.761 or the Missouri Revised Statutes) cities may collect a use tax subject to voter approval of such tax. At an election held on August 6, 1996, Olivette voters approved a ¾% use tax.
The governing bodies of cities in St. Louis County that impose the use tax may elect to receive the use tax based on point-of-sales, with a portion of the tax being contributed to a pool, or may contribute the tax to the pool and obtain a portion of the funds in the pool. The City elected to participate in the pool for purposes of the use tax. The City can not reasonably estimate, at this time, the amount of funds it will receive from this tax.
Capital Improvement Sales Tax
In November 1995 voters approved a ½% sales tax for capital improvements that the City intends to use primarily for capital improvements relating to streets and for the cost of maintaining such improvements. The City expects to receive approximately $450,000 to $500,000 from this tax annually. By statute, this tax must be used solely for funding capital improvements and for the cost of maintaining and operating such improvements.
By statute the City must deposit this tax in a fund separate from all other revenues of the City. Accordingly, the City has established and deposits the tax in the Capital Improvements Sales Tax Fund. As of March 31st, the Capital Improvements Sales Tax fund has a balance of $38,960.
The Hancock Amendment
On November 4, 1980, Missouri voters approved an amendment to the Missouri Constitution to limit taxation and government spending.
The Amendment, popularly know as the Hancock Amendment, requires political subdivisions of the State of Missouri to obtain voter approval to impose or to increase any “tax, license or fee.” The Missouri Supreme Court, in Keller V. Marion County Ambulance District has interpreted this phrase to include only general taxes and licenses or fees that, in substance, are taxes.
The amendment also limits the rate of increase and the total amount of taxes on property which may be imposed in any year without voter approval. If the assessed valuation of property, excluding the value of new construction and improvements, increases by a larger percentage than the increase in the general price lever from the previous year, the maximum authorized current levy applied thereto in each political subdivision must be reduced to yield the same gross revenue from existing property, adjusted for changes in the general price lever, as could have been collected at the existing authorized levy on the prior assessed value.
The Hancock Amendment does not apply to taxes imposed for the payment of principal and interest on general obligation bonds or other indebtedness authorized by a City-wide referendum. This provision does not apply to the Bonds.
Assessed Valuation
Assessment of real property, pursuant to the Missouri Constitution, requires such property to be classified in subclasses consisting of agricultural, residential or commercial; permits different assessment ratios for each subclass; and requires uniformity in taxation of real property within each subclass. Pursuant to the constitution, agricultural property is assessed at 12% of its productiviry value, residential property is assessed at 19% of true value, and commercial property is assessed at 32% of true value. Personal property is assessed at 33% or true value. In 1986, the State Legislature passed a bill requiring reassessment of all real properties every two years, beginning in 1987.
During 1995, legislation was adopted reclassifying apartments from commercial to residential. As previously mentioned, commercial property is assessed at 32% and residential property is assessed at 19%. Since the change resulted in a reduction of taxes from apartments, the legislation also allowed cities to raise their tax rates, without voter approval, to offset the revenue reduction.
PUBLIC UTILITY TAX
The public utility tax roughly provide 25.96% of the total.
SALES TAX
The City of Olivette receives a 1.25% tax on all retail sales within the city limits. This consists of 1% general and .25% additional tax. The .25% is due to the St. Louis County redistribution plan. Capital Improvement sales tax line item receives .50% sales tax to be used for street maintenance of city owned and NID (Neighborhood Improvement District) streets and capital improvements.
City’s Finances
The accounts of the City are organized on the basis of funds and account groups in conformity with generally accepted accounting principles. All funds of the City, except the Pension Trust Fund, are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they become measurable and available and expenditures are recognized when the related fund liability is incurred. General fixed assets are recorded as expenditures at the time of purchase.
The Pension Trust Fund reflects the accrual basis of accounting. Under this method of accounting, expenses are recorded when incurred and revenues are recognized when earned.
The City operated on a fiscal year which commences on March 1st and ends on the last day of February in the following calendar year (the “Fiscal Year”).
The City Council annually engages an independent certified public accountant for the purpose of performing an audit of the books of account, financial records, and transactions of the City.
Investment Policies
All cash not restricted by law to specific accounts is pooled and invested by the City Manager. Under Missouri Revised Statutes, the funds of the City may be invested in (i) United Stated Treasure Bills, Notes and Bonds, (ii) obligations of United States agencies, (iii) collateralized certificates of deposit, or (iv) bank repurchase agreements. Presently all of the City’s investments are in certificates of deposit. The City’s deposits in excess of $100,000 are secured by a surety bond from MBIA Insurance Corporation.