CLAYTON — A drop in sales in St. Louis County is in turn cutting county sales tax revenue, but officials say they do not expect any cut in services.

The county's latest check from the state of Missouri, which collects and distributes the revenue, was 7.88 percent below the same period last year, and is expected to translate into a $1.3 million hit over what was expected.

The revenue is from the county's major sales tax — a 1 percent tax. Many municipalities are feeling the same pain because they are in a pool that shares revenue from that tax.

"We really didn't expect the tax revenue to go down this far," said Pamela Reitz, the county's director of administration.

The economic slump and lower vehicle sales in particular are the factors in the reduced receipts, she said.

Sales tax revenue generally has been stable over the last decade.

The drop is not expected to result in reduced services in the county, whose overall operating budget is about $360 million.

The county has been very prudent with its money, said Garry Earls, the county's chief operating officer, and as a result, he said, "We have had no layoffs, no furloughs and no pay reductions."
County Executive Charlie Dooley, however, has already eliminated employee pay raises this year, and a hiring freeze has been in effect for about year.

And Earls has told department heads to prepare two budgets for next year: a "zero" budget that shows no cost increase and one that cuts 5 percent.

The budgets are due by the end of the month. Dooley must submit an overall budget to the County Council by Nov. 1.

Earls said he expected sales tax revenue to improve as federal stimulus programs help the economy recover.

The county next year faces a 7 percent increase in health insurance costs and a $13 million increase in pension costs, Earls said. Dooley has asked the council to extend the time the county would catch up on its unfunded pension liability to 30 years from 15 years. The change would trim $5.6 million next year off the pension cost increase and would not hurt the county's AAA credit rating, Earls said.

On the plus side, Reitz noted the county will receive a one-time boost of $4.6 million in a settlement with AT&T over telephone taxes.

Tim Fischesser, executive director of the St. Louis County Municipal League, called the financial situation terrible. Some municipalities have not filled positions and delayed spending for capital improvements, he said.

The drop in revenue has an impact on Metro, which gets about 50 percent of the money from a half-cent transportation sales tax and all the money from a one-fourth cent transit sales tax.

But John Noce, chief financial officer at Metro, said the reductions were factored into the transit agency's current forecasts. The cut is manageable, he said.