Tax revenues from mall area crucial for city
During an Independence City Council meeting late in 2020, City Manager Zach Walker expressed how it behooved the city for police to work with the management of Independence Center on various security measures to curb disturbances and violent incidents.
Less sense of security in the mall, and to an extent the surrounding retail area on 39th Street, would mean fewer shoppers, more stores struggling and less sales tax revenue for the city.
Amid the pandemic, the last part became an even larger concern shortly after the calendar turned 2021, when Macy’s announced it would be closing its Independence Center location. Those doors have now been shuttered, and the most activity on that end of the mall has been the city’s testing and then vaccine clinic that it’s been hosting next door.
That closure came less than two years after Sears closed, leaving a vacant anchor spot on the opposite end of the mall. Near the mall, JC Penney and Barnes & Noble have closed, leaving another possible budget hit.
Sales tax revenue accounts for the largest portion – about $30 million – of the city’s general fund of more than $70 million, which pays for most of city services besides utilities.
Between Sears and JC Penney, Walker estimates, the city lost about $500,000 in sales tax revenue in fiscal year 2020-21 compared with the previous year. Losing Macy’s will mean another half-million hit to the budget for fiscal year 2021-22
“Macy’s was the big gorilla,” Walker said. “When you lose three (big box retailers), I think that speaks to the importance of brick-and-mortar stores.
“That’s the thing, we’re hoping to guard against, is an avalanche of businesses closing there.”
The Macy’s loss, Walker said, “broadsided” the city’s budget preparations, and would’ve caused even more notable damage if not for two things: First, the use tax – the local sales tax applied to online purchases – netted far more far sooner than city officials anticipated when voters approved it in 2019. Second, American Rescue Plan federal stimulus dollars will help the city plug some gaps, cover some one-time projects and avoid drastic cuts for next year.
The use tax has been dedicated to fund the animal shelter and additional police officers, with “waterfall” funds going to the general fund at-large after specified allotments for the animal shelter and police.
Walker said city staff reasonably projected about $1.5 million from the first year of the use tax, with about 8 to 10 years until revenues reached the waterfall mark of about $3.75 million. Instead, the pandemic and subsequent spending habits threw the projection out the window, and Walker said the city projects to net more than $4 million from the use tax for FY 20-21.
“It could ebb and flow from that, but who knows?” Walker said of what the use tax could net in the future. “With the pandemic, we might see a generational impact (in spending habits). One way or another, it’s better to have the predictability for the numbers you put together.”
Besides the city, the Blue Springs School District also has a vested interest in the mall and surroundings, as the district boundaries stretch into southeast Independence.
The district hasn’t been hurt of late from property tax revenue there, said Kirk Sampson, assistant superintendent of business services, and hopefully that doesn’t change drastically.
County property tax records show that the school district’s share of revenue from mall properties grew about $115,000 from 2018 to 2019 when the every-other-year reassessment took place. Individual property numbers for 2021 are not yet available, but Sampson said that across the entire school district assessed property valuations went up 7 percent, so if any losses happened with the mall properties or nearby, other areas more than made up for that.
There are also no more tax abatements in place for retail and commercial properties along 39th Street, and other tax abatements in nearby areas around M-291 and Interstate 70 are scheduled to expire over the next several years.
Still, Sampson said, it’s a situation the school district clearly should continue to monitor, as currently he sees a mixed bag along 39th Street, which is “a little scary” looking down the road.
“It’s such a good area,” he said, referring to the location and proximity to highways. “If they don’t have customers in those large retail areas, it’s going to hurt.”
Right now isn’t bad overall, Sampson said, but “the scary thing is how does that all affect us later?”