The City of Hermann Board of Aldermen met last week during a regularly scheduled meeting to discuss what has been deemed informally as “Proposition New Streets.” It’s a second-run effort to finance Hermann’s street rebuilding and repair through an increased sales tax, which would be on the Aug. 6 ballot of a City Special Election to start street repairs in the next calendar year. The failed first attempt was through a proposed increase in the property tax levy. It failed by 27 votes, considering the total number of votes placed at the ballot box. For the proposition to pass, it needed a required super majority—57 percent of the votes cast.
During various informal discussions with the Advertiser-Courier, it was generally assumed by Mayor Robert Koerber, some of the Aldermen and those that opposed the original proposition, that the streets “need to be fixed,” and that there was probably another way to finance the project.
The idea of an increase in Hermann’s sales tax gained steam after an informal listening session with the Aldermen at City Hall, last month. After several scenarios were discussed following that meeting, a 7/8 of one percent sales tax surfaced to the top. Board President Bruce Cox said State law only allows a 7/8 of one percent or a half of one percent tax—nothing in between, within the targeted range of funds needed to repair the streets.
“The half of one percent sales tax increase didn’t generate enough money for what we wanted to do,” said Cox, hence the focus on a 7/8ths tax increase.
It is estimated by Joey McLiney, president of McLiney and Company, based in Mission, KS, that a 7/8 of one percent sales tax will generate $450,000 per year. Mr. McLiney has served as a municipal advisor to the City, previously helping with the waste water bonds issued in 2010 and the re-issue of bonds in 2016. According to City Clerk Patricia Heaney, McLiney and Company is only paid by the City of Hermann if debt is issued through financing for the City’s projects.
“We thought one percent, [which the State allows], would be too much,” said McLiney.
He added, there are several ways to work smarter within the realm of a sales tax to save money on street rebuilding and repair.
Working with Mayor Koerber, McLiney said if it makes sense to repair more streets quicker than the sales tax generates, to save money in the long run, “Certificates of Participation” can be used to generate the money necessary for the accelerated project . A certificate of participation (COP) is a type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. And there might even be more savings.
“If it’s $450,000 to do several streets, ask the road repair crew, “If we triple our project size, and go a million and half and pay it off in three or four years, will there be a discount?” he explained. “Will it be less expensive to get them all done within a week as opposed to three years?”
The Mayor said the most popular aspect of using a sales tax is that everybody pays a little bit.
“A 7/8 cent sales tax applied to a $100 purchase is only an 88 cent increase in the price of the hundred dollars of merchandise,” he said. “A sales tax is paid by everyone that buys merchandise in Hermann. This includes tourists who may pay as much as 30 percent of the tax. Tourists and visitors use our streets as well as our citizens and with a sales tax proposal, they will be helping pay for the streets they use.”
The Mayor also listed other benefits.
• No bonding is required
• There will be no bond indebtedness showing up in the City’s financials
• There will be no principal payment every year
• There are no interest payments to make
• The Board can sunset this tax at any time
The Board is looking at a sunset date of no more than 18 years. And finally, the tax will be strictly limited to rebuilding and replacement of the streets. Mayor Koerber says he hopes the Board of Aldermen will have the details firmed up this week, for a vote on Wednesday. May 28 is the deadline to get the proposition question on the ballot for Aug. 6.