Friday, October 8, 2010

Proposition A Would Damage St. Louis's Credit Rating

A KMOX news report brings up a point today that I've been meaning to make for a while: voting yes on Proposition A, the earnings tax ballot initiative, would damage the credit rating of St. Louis and Kansas City. The initiative, funded almost entirely by billionaire Rex Sinquefield's private fortune (he's spent over $10 million on the race so far) was cleverly crafted. Instead of using ballot language that would allow state voters to directly eliminate the earnings tax in St. Louis and Kansas City, the bill was set up so that it would force a vote on the earnings tax in those cities every five years. That way, Sinquefield and his friends could frame the bill as "Letting Voters Decide." However, this title is misleading, because the bill actually prevents voters from deciding in every city other than St. Louis and Kansas City; those cities would be banned from ever implementing an earnings tax.

Unfortunately, Mayor Slay and some other St. Louis city officials have not been pushing back on the November vote, claiming that the best bet is to wait until a city wide vote in April (and also potentially under the influence of huge donations from Sinquefield to their campaigns). But, as Darlene Green explained to KMOX, the idea that waiting until April is better strategy has a fundamental flaw. St. Louis City's credit rating would likely be damaged even by a yes vote in November, because it would introduce instability in the city's revenue. Here's how Green puts it:
“Prop-A would actually cause our revenues to be unstable,” Green said, “because every five years voters would have to vote it in our out.”
And later:
Unlike Mayor Slay, who describes Proposition-A as a possible future threat, Green says the financial uncertainty that would be caused by Proposition-A passing in November could have an immediate impact on the city’s credit rating.

Standard and Poors recently re-affirmed the city’s A-plus rating, but that rating could be in doubt overnight if Prop-A passes in November, Green said.

“What you’ve got to look at are the buyers of those bonds,” Green said, “Who’s going to buy a bond from a city with unstable revenue? Would you? Would you buy a municipal bond from St. Louis city?”

If the city’s credit rating were lowered to non-investment grade, Green says it could jeopardize several pending public-private partnership projects — including Paul McKee’s northside plan, the Peabody Opera House and the renovation of May Department store downtown.
It's also worth noting that any education of city voters done for November would also carry over to April, so it's especially puzzling that Slay and other city officials have decided to ignore this election. And, of course, if Prop A passed and the earnings tax was repealed in April, the results would be disastrous. Funding for vital city services like the police and fire department would be cut; the tax burden would be shifted to the people who can least afford it.

Vote No on Prop A! Sinquefield won't stop spending money until he runs out or dismantles the public sector, so we might as well stand up to him now!

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