Arnold residents are now receiving sewer bills from American Water, which took over the system from the city in May. Residents may have noticed a new tax on their bill:
Did you not hear about this gross receipts tax? It was passed at the May 21 council meeting (agenda here). What, you don’t see anything on that agenda about a new tax? This is the bill that created the tax:
Nope, definitely nothing about a tax on the meeting agenda. Maybe they talked about it at the meeting? Nope. There was no discussion whatsoever at the meeting about any aspect of this ordinance before the vote (video here, May 21 video, 11:25 mark)
You have to look at the full text of the above ordinance, which lays out the agreement between Arnold and American Water. Here is the relevant section (click to enlarge):
Under Missouri’s Hancock amendment, voters have to approve the creation of a new tax or the increase of an existing tax. Could it be that this tax was approved long ago but not actually charged until now? Something like that happened in Pevely in 2013, where a 5% gross receipts tax had been approved previously, but only 1% was collected until the board raised it to the approved 5% level. No public vote was needed.
Well, let’s check the Arnold ordinances. Here is the one (22-17) that covers utility taxes. Here’s what it says:
(a) Every business organization supplying or furnishing electricity or electrical power or electrical service in the city shall pay to the city an annual license or occupation tax in the amount equal to:
(1) Six (6) per cent of the gross receipts of such business derived from all users who are residential customers;
(2) Six and nine-tenths (6.9) per cent of the gross receipts of such business derived from all users who are not residential customers.
Sections (b) and (c) cover business organizations supplying gas or gas service and telephone service. But that’s it. Nothing in there about sewers.
There is a legal difference between a tax and a fee, and the latter are not subject to the Hancock Amendment. But I think this clearly falls under the definition of a tax. There is a franchise fee provision in the ordinances, but it only applies to video service providers (aka cable companies).
Did the ballot provision that approved the sale of the sewer system include tax language? No it did not (see page 8 here).
So it would seem to me that, at the very least, the city council passed a tax hike secretly, with no public notice and no attempt to notify anyone besides something buried in a council packet. Did the council members themselves even know they were voting on a tax hike? Heck, the Leader didn’t even mention the tax in its article on the finalization of the sale. For posterity, here is a list of Arnold city council members that voted for this secret tax hike, which passed unanimously:
VOTED FOR A SECRET TAX INCREASE:
Beyond the secrecy, it appears that this may also be an illegal tax. It is not authorized in city ordinances, and the public did not get a chance to vote on it. This should really be no different than the tax you pay on your phone or gas bill. Those are collected from the customer by the business and submitted to the city, and those are set out in the city ordinances.
But the only way to challenge this tax is in court. Will anyone step up to take this on? Arnold is perhaps betting that nobody will.
Another Tax Coming?
At its August 20 meeting, the city council will consider placing a 1/2 cent sales tax hike on the November ballot for capital improvements. This tax would allow for the elimination of the stormwater fee, which some believe is also illegal. If I’m not mistaken, there will be absolutely nothing else on the November 2015 ballot, so Arnold will have to spend a lot to pay for the holding of the election.
Also, Arnold’s current sales tax rates (page 8) range from a base of 8.35% to 9.35% at Arnold Commons to 10.35% in the Ridgecrest TDD. Add 0.5% to these numbers if this tax is approved.