Olivette finance director: sales-tax dip shrank revenue mix, reserves will cushion shortfall

Darren Mann, finance director for the City of Olivette, told the Economic Development Commission on Jan. 27 that the city is in an “adjustment year” after sales-tax receipts fell sharply following a major tenant vacancy.

Mann said the city prepares financial statements on both a cash and full-accrual basis and has received awards from the Government Finance Officers Association (GFOA) for its reporting. He said the city administered more than $2,000,000 in grants in the fiscal year and included one-time receipts such as ARPA and CARES Act allocations in recent years.

Mann warned the commission that sales taxes — the largest single component of the city’s revenue mix — fell after the Enterprise building vacated, and that the loss reduced sales-tax share of general-fund revenue from an elevated peak toward a historical norm. “When the Enterprise Building vacated, there was a major sales tax revenue source there,” Mann said. He described the drop in some schedules as “a lot, like, 45%.”

He said about 75% of the city’s expenditures are personnel-related and that public-safety budgets (police, fire) comprise roughly half of general-fund spending. Because payroll and union contracts limit short-term reductions, Mann said the city will rely on reserves established under its council-approved reserve policy. “We’re gonna be leaning on this reserve policy,” he said, adding that the fund balance built up after the 2018 sales-tax ramp-up gives the city time to adjust.

Mann provided a preliminary outlook that, absent additional changes, the fiscal year could close with an estimated $500,000–$700,000 deficit but said development activity and modest revenue recoveries could improve the position. “Preliminary this year, we’re gonna be within our budgets… I think we’re gonna be a little bit lower. I think we’re gonna end up, I think, about 5 to $700,000 deficit,” Mann said.

He reviewed mechanisms that affect local receipts, including the county sales-tax “pool” ("b pool") and Tax Increment Financing (TIF) and Special Improvement District (SID) structures that allocate portions of sales or property tax to developers or project-specific accounts. Mann described how the city’s participation in TIFs and SIDs can yield short-term foregone revenue in exchange for long-term capture after obligations are retired.

Commissioners asked about fixed versus variable costs and the potential to cut expenditures without disrupting public safety. Mann said most costs are structural because of staffing and contractual commitments: “This is what it cost to have 23 police officers without significant shifts in that service level.” He also said wage pressure and recent raises to retain staff have contributed to higher baseline expenditures.

Mann urged diversification of the revenue mix, noting the community center’s opening increased some non-tax revenues but also raised operating costs. He cited redevelopment and retail recruitment as slow-moving but meaningful ways to broaden the tax base, and described the city’s approach to incentives such as abatements and sales-tax rebates used on particular development projects (examples cited included Oliver, EZ Storage and Irvington Place).

The presentation closed with Mann’s assessment that finances are stable for now thanks to reserves and previous one-time receipts, but that long-term structural adjustments may be needed if revenues do not recover. “We’re responsible with people’s money. It's a nice place. We got nice buildings,” he said.

Ending: Mann invited further questions and offered to provide more detailed breakdowns on request, and commissioners discussed follow-up items such as the revenue mix, TIF mechanics and options for educating the commission about incentive tools.