Revenue Projections

Overview

Revenue projections are prepared early in the budget process. The first step in the process is to revise the estimates for the current fiscal year to develop an accurate base for the projections for the upcoming year. The revenue estimates are finalized during the completion of the budget. This section provides a description of the major revenue sources, and the assumptions used to develop estimates for the budget.

Sales Tax

The total sales tax in Springfield is 8.10%. Within the 8.10% tax rate, the City receives 2.125%, the State receives 4.225%, and the County receives 1.75%. The City’s rate of 2.125% includes 1% for general operations, .75% for public safety pension, .25% for capital improvements, and .125% for transportation. Springfield also shares in countywide sales taxes for law enforcement and parks. Sales tax revenue is a significant source of revenue for Springfield, generating 34.6% of total revenue and 57.2% of General Fund on-going revenue. The City is a regional economic center and has a large student population, resulting in a high-level of sales tax revenue per capita.

Sales tax revenue is estimated based on a combination of several factors, including the most recent six months of actual revenue, local economic trends, and projected retail activity. The FY2024 budget for the 1% sales tax in the General Fund is $61.6 million. This compares to FY2022 actual of $58.8 million and FY2023 budget of $56 million. Estimated sales tax revenue for FY2024 is based on national and local economic forecasts and discussed at length within the budget letter.

Charges for Services

The next largest revenue sources is charges for service which originate primarily from the enterprise funds and internal service funds. This revenue source represents charges to users of City services. In the enterprise funds, the charges are for sanitary sewer services, solid waste disposal, airport, and golf course usage. The charges reflected in the internal service funds are for insurance, fuel and vehicle maintenance and the City’s Printshop. The fees are set at a level to recover the cost of providing the service and to establish and maintain a reasonable reserve.

As part of the budget development process, Environmental Services worked with a third-party financial consultant to develop an update a long-term financial model that looks at future operating expenses, capital improvements, related debt service and revenue needs to comply with EPA and MoDNR wastewater mandates. Based on the recommendations of the consultant, Council approved a series of sewer rate increases that begins on July 1, 2023 and each the next two years. Overall, this represents a 3% system-wide rate increase over three years.

The General Fund receives fees for services such as building permits, economic development fees, zoning applications and engineering reviews. An annual fee study is conducted as part of the budget development process. Generally, the City tries to recover 100% of the cost of providing the service when setting the fee. Revenue estimates for charges for service are based on prior year units of service collected from various City departments and fee per unit.

Property Tax

Property tax is levied on real estate and personal property, such as automobiles, boats, and equipment. Property tax revenue supports parks, public health, the Art Museum, and debt service of major capital projects. With the renewal of the Level Property Tax measure in November 2017, property tax now supports additional public safety needs, the life-cycle equipment replacement plan and economic vitality needs. The Greene County Assessor assesses property values, and the Greene County Collector collects the tax. Major reassessment is done in odd numbered years. Local and state property tax levies in Missouri are regulated by a constitutional amendment known as the Hancock Amendment. This amendment limits the growth in property tax revenue to the increase in the consumer price index (CPI). Therefore, if property values increase more than the CPI, the levy is reduced to generate an increase in income equal to the CPI. Growth is allowed on a phased-in basis for annexations and new construction.

Property values in Springfield increase, on average, 2% per year. Property tax revenue has historically provided a stable source of revenue to the City of Springfield. This helps, in part, to balance out the volatility of sales tax revenue. The budget for property tax revenue is based on trends in the local real estate market. The actual tax levies are set in August, when the final assessed value information is received from Greene County. If the revenue estimates are significantly different, the budget is adjusted by City Council to reflect the difference in revenue.

Payments in Lieu of Taxes (PILOTS)

Payments in lieu of taxes (PILOTS) are received from the City’s municipal-owned utility, City Utilities of Springfield. The City receives 4% of all gas revenue, 4% of water revenue and 3% of electric revenue. This is an important source of revenue for the City. The receipts can fluctuate significantly based on weather and the price of natural gas and electricity. During FY2023 PILOT revenue is tracking well above FY2022 revenues. In FY2024, these PILOTS are projected to generate $18.5 million. This is an 7.6% increase from the prior fiscal year budget. The changing price of natural gas and weather make it challenging to estimate this source of revenue.

User Fees

User fees are assessed to citizens using city services and/or facilities, such as parks and health services. The Park Board establishes the fees for parks activities. The fee is set at a level to recover as much of the cost as possible, while still making the activity financially accessible to members of the community.

The Park Board establishes fees early in the budget development process. Revenue is based on programs and anticipated usage.

Grants

The City administers several million dollars in grants each year, including Workforce Development; Women, Infants and Children (WIC); Community Development Block Grants and the HOME program. Generally, the grants appropriated in the budget are the grants that are renewed annually.

The fiscal year for grants received by the City varies based on the agency providing grant funds. Grant revenue for the year is estimated based on information received from each grant administrator. If the actual grant award varies from the budget, the budget is amended by City Council.

Intergovernmental – State of Missouri

The State of Missouri provides funding for transportation, health and road improvements and the Workforce Development Office. Numerous grant funds also are channeled through the State. In addition to sharing in funding for roads, Springfield and the State of Missouri have some cooperative road projects that were pre-funded by the City. The State is repaying the City for these projects. The revenue estimates are based on contracts with the State of Missouri.

Intergovernmental – Greene County

Springfield has several cooperative programs with Greene County. Collaboration between two local governments allows citizens to receive a higher level of service at a reduced cost and avoids duplication of services. Emergency Communications services are funded by a countywide sales tax. The City operates and manages a call-taking and dispatch center. The City is reimbursed by Greene County from the sales tax.

The Springfield-Greene County Health Department is primarily funded by a property tax paid by city residents. The County contributes funding for some public health programs. Springfield and Greene County also jointly fund emergency management and the Emergency Management Operations Center. Both entities fund this service from general fund revenues.

A major funding source for the Springfield-Greene County Park Board is a .25% countywide sales tax. The City receives the entire portion of the countywide tax to provide all Park Board services, programs and maintenance. Another funding source is a property tax paid by city residents.

The City of Springfield also shares a .375% Law Enforcement Sales Tax with Greene County and other incorporated municipalities in the county. The City’s share of this tax in FY2024 is projected to be $10.8 million.

The funding provided by Greene County is outlined in an intergovernmental agreement pertaining to each service. These formulas are applied to the City’s estimated cost for the upcoming year.