On Monday the Cape Girardeau City Council voted unanimously to opt out of a statewide sales tax holiday during the first weekend in August for the first time since the statute was enacted in 2005.
Low operating reserves in the city budget led the council to opt out of the tax holiday and maintain the local 2.75 percent sales tax. The decision is projected to increase city revenue by between $37,444 and $71,088, according to a May 18 city council letter from city finance director, John Richbourg, and interim city manager, Ken Eftink.
Cape Girardeau Mayor Jay Knudtson said it is clear that city revenue is down.
"We needed to do the responsible thing on behalf of our citizens," Knudtson said.
The ordinance passed by the city council will not affect the exemption from the state sales tax during the first weekend of August. Buyers will still benefit from a 66 percent tax decrease. Richbourg said he did not believe opting out of the holiday would compel shoppers to avoid spending their money in Cape Girardeau.
Cape Girardeau Target manager Tom Prendergast sees a potential drawback in the decision.
"I am a little bit concerned because the tax-free holiday always generates a lot of traffic into the Cape Girardeau area," he said. "We can anticipate a more normal business weekend as opposed to a holiday weekend."
Knudtson said he was not personally notified by one business owner about concerns related to opting out of the tax holiday.
Cape Girardeau Chamber of Commerce president John Mehner said a small number of businesses have expressed concerns that customers will go elsewhere, particularly when a business has stores in multiple locations.
"There was no overwhelming response in either direction," Mehner said.
He said he understands the reasons for the decision made by the city council and that next year the situation can be reanalyzed if necessary.
Cape Girardeau is unlikely to be the only city in the region to opt out of the tax holiday. Scott City Mayor Tim Porch said that, although it has not been discussed formally, he will probably recommend that Scott City also opt out.
"It's an extremely rough time for all of these municipalities," Porch said.
Jackson has chosen to continue the local sales tax exemption during the tax holiday.
Brian Gerau, executive director of the Jackson Chamber of Commerce, agrees Cape Girardeau City Council made the right decision for the city under the circumstances.
"They made the right call," Gerau said, but he sees the decision as a potential motivation for buyers to search for alternative shopping destinations in which the local sales tax will be dropped.
"Tax money is tax money, and in this economy every dime counts," he said.