• Online shopping, health care taxing Independence budget

  • As Independence officials take up the proposed budget for the fiscal year that begins July 1, they are looking at long-term challenges on both sides of the ledger – the money coming and the money going out.

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  • As Independence officials take up the proposed budget for the fiscal year that begins July 1, they are looking at long-term challenges on both sides of the ledger – the money coming and the money going out.
    Chief among them is the competition that local retailers face from online businesses, which do not collect sales taxes. Not only is that unfair to the local businesses that invest and pay taxes here, City Manager Robert Heacock said, but it’s slowly costing the community jobs and eroding the city’s tax base.
    “We’re not able to capture the incremental growth of the economy,” he said in an interview with The Examiner this week after presenting the budget to the City Council on Monday.
    The $291.72 million budget for 2013-14 is 13.7 percent less than the budget for the current year, largely because this year’s budget had millions for sewer work. The council is holding meetings on the budget in the few weeks and is expected to adopt it in mid-June.
    The city plans no layoffs or furloughs. The approximately 250 city employees not covered by union contracts would get raises of 2 percent, the first raise since August 2009. Altogether, the city has about 1,100 employees and, Heacock pointed out, budget-related unfilled vacancies that are equivalent to 83.3 full-time positions.
    The budget is balanced, as legally required, and tax rates would not be raised. The city would get back to having 5 percent of general revenues set aside as an “undesignated fund balance,” that is, a reserve for cash flow and for unexpected expenses. City policy is to have a 5 percent reserve, but this would be the first time in several years that the city would be able to get back to that, Heacock said.
    Funding challenges
    Heacock – like city officials in many places – has for years voiced concerns that Internet sales are hurting local businesses and the local governments, especially cities, that are highly dependent on sales taxes.
    Those local brick-and-mortar stores, he said, are the ones who invest here, hire here and, for example, pay property taxes for schools.
    “They do all those things. They’re part of our community,” he said.
    Online companies – out of the city or state, sometimes out of the country – enjoy a competitive advantage in not collecting sales taxes.
    “Our stores become window shopping,” he said.
    If a single major employer closed, there would be an uproar, he said, contending that this amounts to the same thing.
    “It is a subtle shipping of jobs out of the area,” he said.
    The U.S. Senate has approved legislation to enact taxes on Internet sales, but its chances in the House appear uncertain.
    Health-care costs
    Probably the biggest budget issue, Heacock said, is the rising cost of health care.
    Page 2 of 3 - The city offers generous employee benefits, he said, including health care, and he says those costs keep rising.
    In 2001-02, health care accounted for 9 percent of the city’s general fund budget. Now it’s 15 percent.
    “My question is, where does that stop? ... You have to draw the line at some point,” Heacock said.
    The city’s health plan is self-funded. The city pays 80 percent of costs, and employees pay 20 percent. The initial recommendation that came to Heacock was to increase spending by 15 percent for next year, but he said the city can afford 4 percent, so officials in the coming months will look at such options as higher co-pays and higher deductibles.
    The city also has to look at longer-term issues such as health coverage for retirees. At one time, he pointed out, a city employee could become vested in that program with just five years service to the city. Now it’s 20 years. Stressing that this would not affect current employees or current retirees, he said officials at some point have to address retiree health care and the buildup of vacation time and sick leave for new hires.
    The city recently restructured its bond payments for the Falls at Crackerneck Creek project.
    Development there has been slower that officials had hoped and planned, and bond payments for work to help develop the site have fallen to the city.
    The city was able to drop those annual payments from $4.8 million a year to $3.3 million, though the payments are now stretched out longer and could cost the city $1.5 million more over time.
    However, Stoney Creek Inn breaks ground in July, with a large conference center, to the east of Bass Pro Shops, and Heacock expressed confidence that it will help bring more businesses. That would mean more taxes to service those bonds.
    Heacock said Stoney Creek and the conference center will be attractive and highly visible from Interstate 70.
    “It is a great marketing tool for us that we don’t currently have,” he said.
    Catching up
    The budget includes some other new things as well.
    • The Police Department is looking to create a two-person highway safety unit focused on Interstate 70, Missouri 291 and U.S. 24.
    Also, Heacock said, this summer the city could begin discussing red-light cameras.
    “Police officers can’t be everywhere,” he said.
    • The city has won grant funding to add four firefighters. In addition, it’s filling three other openings. Those seven new firefighters should be on board by the end of the month.
    Grants such as this one help, he said.
    “We’re actively looking at those opportunities,” he said.
    • As money is available, officials are trying to get back some of what’s been lost in the lean years of the recession.
    Page 3 of 3 - “One of the things we’re trying to catch up on a little bit is equipment,” Heacock said, adding that the Public Works Department is being budgeted to replace four vehicles next year instead of the normal one a year.
    “For me, you need to put money into basic services,” Heacock said.

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