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In preparation for a fiscal year 2023 budget, Shrewsbury aldermen are exploring ways to generate more revenue and reduce expenses to recover the financial condition of the city.
And that condition, according to city officials, is in great need of improving. Its general fund operated at a negative cash balance at the beginning of 2022, the city’s credit rating was lowered by S&P Global Ratings and the city was placed on the CreditWatch.
City Finance Director Diana Madrid presented the board with several options to shore up the city’s cash flow during a work session Tuesday, including potentially increasing the city’s utility sales tax rate. Shrewsbury’s current electric utility tax rate is 7.25%, which is mid-range among 13 comparable municipalities, including Olivette, Glendale, Maplewood, University City, Clayton, Kirkwood, Webster Groves, Ladue, Crestwood, Richmond Heights, Des Peres, Frontenac and Brentwood.
Sales taxes from utilities, which comprise about 13% of Shrewsbury’s average total general fund revenue, are the city’s second largest revenue source.
Madrid told board members that an increase in revenue is needed, and dipping into the utility tax bucket would net the highest return for the lowest impact to citizens.
“It’s a need, and increasing the utility sales tax is the highest impact for the city with the lowest increase to residents or commercial customers,” Madrid said.
If the board decides to move forward with the increased tax, voters could see it on ballot as early as November.
Madrid also presented board members with a revenue-generating option of levying an economic development tax, which would require the establishment of an economic development commission to outline specific uses for the funds generated.
Board members also were presented with potential expense savings, primarily involving health care benefits, which comprise about 10% of the city’s overall costs. Currently, the city covers 100% of health insurance to 50 employees and their dependents at an annual cost to the city of nearly $630,000.
Also during the work session, board members unanimously approved an ordinance establishing a finance commission and installing its inaugural members. In addition to the city’s finance director, the mayor and the city administrator/city clerk, Alderperson Bette Welch and three residents —Michael Salmo, Ed Purvis and Amie Koenen — were appointed to the commission.
Members will serve in an advisory capacity to the board of aldermen, with responsibilities for making budget and salary recommendations, participating in an independent annual audit and reviewing and recommending policies related to finance and accounting.
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