SB 0967 - Fiscal Note

Fiscal Note - SB 0967 - Revises provisions relating to taxation in urban school districts, gaming loss limits and use of gaming funds

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3992-01

BILL NO. SB 967

SUBJECT: Taxation, Revenue, and Gambling

TYPE: Original

DATE: March 11, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue*	$0 to $236,225	$0 to $973,246	$0 to $1,002,444
Gaming Proceeds for Education Fund**	$0	$0	$0
Gaming Commission Fund	$0 to $3,133,333	$0 to $3,760,000	$0 to $3,760,000
School District Sales Tax Trust Fund**	$0	$0	$0
Total Estimated Net Effect on All State Funds	$0	$0	$0

*Does not include unknown transportation costs.

**Revenues and transfers net to $0.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 8 pages.

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$37,722,419 to $95,146,638	$45,266,903 to $182,463,852	$45,266,903 to $185,354,393

FISCAL ANALYSIS

ASSUMPTION

The State Tax Commission assumes this proposal would not fiscally impact their agency.

The State Treasurer's Office (STO) states that this proposal would create a new trust fund (bank account) and would increase the cost for banking service and investment fees for the state. It may also result in a lower earnings rate for the funds held in this trust when compared to state funds invested using a "pool" concept. STO assumes additional costs may be incurred as a result of these funds needing to be held "outside of state funds"; however, these costs could be absorbed through STO's current appropriations.

The Gaming Commission (GAM) states that based on testimony from Wall Street analysts that follow the gaming industry worldwide, the experience of Iowa and other states that have removed regulatory restrictions, and their own internal analysis, GAM believes a conservative way to predict the fiscal impact of removing the $500 loss limit is to assume that all Missouri boats' win per admission would rise to at least the level of the Illinois riverboats doing business in the St. Louis market. This rate of $31 per admission is well below the Illinois statewide average of $45 per admission and the Iowa statewide average of $38.

GAM believes these numbers are supported because Missouri and Illinois have a similar tax rate and regulatory structure, and feels that absent the $500 loss limit, Missouri operators would achieve a win per admission of at least $31. In addition, GAM projects that the removal of the boarding restrictions would result in an overall increase in admissions of at least 10%. Based on a 10% increase in admissions from FY97, GAM estimates admissions of 35,349,261 in FY98. Using a $31 win per admission, GAM estimates adjusted gross receipts of $1,095,827,091 in FY98, an increase of $443,831,052 over FY97 receipts. This would result in an increase of gaming taxes (20%) of $88,766,210.

The Office of Administration (OA), Budget and Planning assumes that removing the loss limit would increase the win per admission from $20.05 to anywhere between $26.07 (a 30% ASSUMPTION (continued)

increase) to $31.00, which is the win per admission of the Illinois riverboats in the St. Louis area. OA estimates admissions at 37,600,000 in FY99, FY00, and FY01, and an increase in adjusted gross receipts taxes of $45,266,903 to $82,352,452. This increase in adjusted gross receipts taxes are to be distributed entirely to the local dock city school districts. OA assumes admissions will not be affected by this proposal.

For fiscal note purposes, Oversight assumes admissions may increase up to 10%. Using OA's admissions estimates, admissions could increase by up to 3,760,000. An increase in admissions would result in an annual state and local impact of $0 to $3,760,000. Oversight further assumes adjusted gross receipts taxes will increase, and will range this increase using OA's estimates.

The Department of Revenue (DOR) assumes the Division of Taxation and Collection would handle the collections of the tax described in Section 1 of the proposal with existing resources because the city and county impose the tax rather than each individual school district. The distribution of the tax would be different than is currently used for any other local sales tax; however, it is assumed the Information Systems Division would develop a program that would assist in the distribution process. DOR further assumes the Department of Elementary and Secondary Education would provide pupil figures for each school district affected.

The Division of Motor Vehicles and Drivers Licensing assumes it is not required to check for collection of the local tax in Section 164.115 of the proposal when titling a vehicle. It is assumed the City Clerk of St. Louis City would collect any such tax; therefore, the Motor Vehicle Bureau would have no administrative cost impact. If, however, the intent is to have the Bureau witness payment of the taxes prior to titling a vehicle, there would be an administrative impact to the Bureau consisting of reject costs, policy changes, and titling manual revisions.

The Information Systems Division assumes they would be responsible for developing the distribution system for the sales tax authorized in Section 1 of this proposal. The Division would utilize existing personnel, but would request $456 in overtime costs in FY99. State Data Center costs would also be incurred, but the amount is not sufficient to request funding. Oversight assumes these costs would be absorbed using existing resources.

The Department of Elementary and Secondary Education (DES) states that this proposal outlines reimbursement of transportation costs for the St. Louis City School District, and divides transportation reimbursement into five categories, some paid by transportation categoricals and some by desegregation funds. DES assumes any increase in reimbursement of transportation costs for the St. Louis City School District could become a decrease for all other school districts,

unless there is an increase in the amount of funds available for transportation.

ASSUMPTION (continued)

DES further assumes the provisions relating to tax abatements, gambling loss limits, and sales tax may generate more revenue for the local school districts, but would not fiscally impact state funds or the foundation formula.

Oversight assumes changes in the reimbursement of transportation costs would result in unknown costs to General Revenue.

Officials from the City of St. Louis assume there are over $10 million in tax abatements per year. City officials assume the revenue would be placed as payments in lieu of taxes. They state it is unclear whether taxpayers would pay the 50% of school property taxes or the City would pay the 50% of taxes. The City assumes it would pay the 50%. At over $10 million per year in tax abatements, the City assumes it would pay the school board over $5 million per year. City officials assume the proposal could effectively stop all tax abatements in the City. Therefore, Oversight has ranged the fiscal impact from zero to $5 million in cost to the City and income to school districts.

Based on actual sales tax distributions for FY97 and adjusting for inflation (3% per year), Oversight estimates the proposed sales tax of up to 1/2% by St. Louis City and St. Louis County would result in income of up to $23,622,487 in FY99, $97,324,646 in FY00, and $100,244,385 in FY01. These taxes, less one percent for collection which is to be deposited into General Revenue, are credited to the School District Sales Tax Trust Fund, and then distributed to St. Louis area school districts. This tax would require voter approval, and Oversight assumes the earliest it could go into effect would be April 1, 1999.

This proposal also allows the board of education in any metropolitan school district to levy a tax, including a sales tax, use tax, earnings tax, gaming tax, or tourism tax, for school purposes. If a school district chooses to levy a tax, it must then be approved by a vote of the people. Because the proposal only permits, and does not require, school districts to levy an additional tax, Oversight assumes this provision would have no fiscal impact.

St. Louis County and St. Louis Public Schools did not respond to our fiscal impact request.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE
Income - Sales tax	$0 to	$0 to	$0 to
	$236,225	$973,246	$1,002,444
Costs - Reimbursement for
transportation for St. Louis
school districts	(Unknown)	(Unknown)	(Unknown)
ESTIMATED NET EFFECT	$0 to	$0 to	$0 to
ON GENERAL REVENUE*	$236,225	$973,246	$1,002,444
*Does not include unknown transportation costs.
GAMING PROCEEDS FOR EDUCATION
Income - Gaming tax	$37,722,419	$45,266,903	$45,266,903
	to	to	to
	$68,627,043	$82,352,452	$82,352,452
Transfer to St. Louis	($37,722,419	($45,266,903	($45,266,903
area school districts	to	to	to
	$68,627,043)	$82,352,452)	$82,352,452)
ESTIMATED NET EFFECT ON
GAMING PROCEEDS FOR
EDUCATION FUND	$0	$0	$0
GAMING COMMISSION FUND
Income - Admission fees	$0 to	$0 to	$0 to
	$3,133,333	$3,760,000	$3,760,000
ESTIMATED NET EFFECT ON	$0 to	$0 to	$0 to
GAMING COMMISSION FUND	$3,133,333	$3,760,000	$3,760,000
FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
SCHOOL DISTRICT SALES
TAX TRUST FUND
Income - Sales tax	$0 to	$0 to	$0 to
	$23,386,262	$96,351,400	$99,241,941
Transfer to St. Louis	$0 to	$0 to	$0 to
area school districts	($23,386,262)	($96,351,400)	($99,241,941)
ESTIMATED NET EFFECT ON
SCHOOL DISTRICT SALES
TAX TRUST FUND	$0	$0	$0
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
POLITICAL SUBDIVISIONS
Income - St. Louis area school districts
Payments in Lieu of Taxes from City of	$0 to	$0 to	$0 to
St. Louis	$5,000,000	$5,000,000	$5,000,000
Gaming tax from Gaming	$37,722,419	$45,266,903	$45,266,903
Proceeds for Education Fund	to	to	to
	$68,627,043	$82,352,452	$82,352,452
Sales tax from School District	$0 to	$0 to	$0 to
Sales Tax Trust Fund	$23,386,262	$96,351,400	$99,241,941
Transportation aid	Unknown	Unknown	Unknown
Costs - St. Louis area school districts
Transportation	(Unknown)	(Unknown)	(Unknown)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Income - Local Government
Admission Fees	$0 to	$0 to	$0 to
	$3,133,333	$3,760,000	$3,760,000
Cost-City of St. Louis
Payments in Lieu of Taxes	$0 to	$0 to	$0 to
to School District	($5,000,000)	($5,000,000)	($5,000,000)
ESTIMATED NET EFFECT ON	$37,722,419	$45,266,903	$45,266,903
POLITICAL SUBDIVISIONS	to	to	to
	$95,146,638	$182,463,852	$185,354,393
FISCAL IMPACT - Small Business

Small businesses could be fiscally impacted if they would be required to make payments in lieu of taxes to school districts. In addition, small businesses could be required to pay a sales tax, or some other form of tax, upon voter approval.

DESCRIPTION

This proposal prohibits St. Louis City from issuing or allowing tax abatements unless the city determines the amount of revenue generated to the city as a result of the project and pays 50% of that amount to the school districts. The act adds a provision specifically governing transportation aid to metropolitan school districts, which divides the transportation operations of such districts into five portions, guaranteeing reimbursement of 100% of allowable costs for transportation pursuant to a program to reduce student mobility, and 75% of allowable costs for the magnet/regular integrated, special education, and other court-ordered transportation portions.

The proposal also gives the Board of St. Louis Public Schools the authority to impose the same types of taxes as may be imposed by the City of St. Louis, subject to the approval of a majority of voters; eliminates the $500 loss limit on gambling boats; provides that any net increase in profit caused by the removal of the loss limit be paid directly to the school district in which the gambling boat is located; and authorizes St. Louis County and the City of St. Louis to impose a one-half cent sales tax to be disbursed to school districts in the city or county on the basis of the number of resident pupils in the district. The tax must be authorized by the governing body of the city or county and approved by the voters. The provisions of Section 1 of the proposal expire DESCRIPTION (continued)

on July 1, 2008.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Gaming Commission

Office of Administration

Budget and Planning

Department of Revenue

Department of Elementary and Secondary Education

State Treasurer's Office

State Tax Commission

City of St. Louis

NOT RESPONDING: St. Louis County and St. Louis Public Schools

Jeanne Jarrett, CPA

Director

March 11, 1998