Motel owner, city await Missouri Supreme Court hearing on tax

Sunday, September 30, 2001

JEFFERSON CITY, Mo. -- Had development of Southeast Missouri State University's River Campus proceeded as planned, the transformation of the old St. Vincent's Seminary into a visual and performing arts center would today be nearing completion.

University and Cape Girardeau city officials would be busy preparing to dedicate a new facility touted to become one of the region's crown jewels and help spur economic development in an area of town sorely in need of it.

Instead, the site along the Mississippi River at Morgan Oak Street is dormant, and the fate of the River Campus is in the hands of the Missouri Supreme Court.

But the city and its supporters, which include St. Louis, Kansas City, the state attorney general and the Missouri Municipal League, say much more than a new facility is at stake. They contend, among other things, that untold numbers of state and local laws could be in jeopardy.

Such arguments are steeped in hyperbole, says the attorney for Cape Girardeau businessman James L. Drury, who initiated the litigation, and Drury's MidAmerica Hotels Corp.

The Supreme Court last week agreed to hear Cape Girardeau's appeal in the lawsuit. Drury claims that the 1998 ordinance passed by the city council putting a proposed 1-cent hike in the city's hotel, motel and restaurant tax on the citywide ballot is invalid.

Lower courts, most recently the Missouri Court of Appeals Eastern District in St. Louis, agreed with Drury.

The Supreme Court is expected to hear oral arguments in the case in December or January and issue a ruling no later than March. Until that time, the project is in limbo.

Millions set aside

Dr. Ken Dobbins, Southeast's president, said the university is ready to move forward as soon as the last legal hurdles are cleared. Its total cost, which includes renovating several of the former seminary's mid-19th century structures as well as new construction, is tabbed at $36 million. That doesn't include the cost of the property, which Southeast purchased in May 1998 for an undisclosed price using a portion of an $800,000 gift from Cape Girardeau resident B.W. Harrison.

The Missouri General Assembly has set aside $16.55 million for the project, with the university expected to raise about $10 million in private donations. The city's contribution through the hotel tax was to be $9 million.

Dobbins says the university's share isn't entirely in the bank, but should be easy to raise if the high court rules in the city's favor.

"There are businesses, corporations and individuals who have said that as soon as everything is clear, they are going to pledge and give," Dobbins said.

Dobbins says he is frustrated by the continuing delay caused by the lawsuit, but "there is a light at the end of the tunnel" with the Supreme Court preparing to weigh in.

"The reason it is frustrating is this is an excellent contribution to our community, and I'm not talking just Cape Girardeau but Southeast Missouri," Dobbins said. "There are going to be so many positive activities and opportunities for our region in having a great facility for a school of visual and performing arts."

Walter S. Drusch, Drury's attorney, says this issue could have been settled long ago -- and with substantially less cost to the taxpayers footing the bill for legal fees -- had the city simply agreed to pass a more clearly titled ordinance and hold another election.

"Mister Drury has said all along that we should have another election," Drusch said. "He will draw in blood that if we have another election, he will agree to the results. But they won't do it."

Title at issue

In November 1998, city voters approved the tax increase with 53 percent support. The measure also extended the expiration date of the previous, 3-cent hotel tax from 2004 to 2030.

In his lawsuit, Drury argued, while the election results were valid, the ordinance that put the matter on the ballot wasn't.

At issue are the "clear title" provisions of the state Constitution and city charter. Both documents require that the contents of a proposal be accurately reflected in the title in order to avoid deceptive or misleading legislation.

The appeals courts sided with Drury in saying the ordinance's title, while calling for a tax increase, didn't spell out that the money would be used for the River Campus.

This narrow interpretation of what constitutes a clear title is why Cape Girardeau has drawn the unusual support of Missouri's two largest cities to its cause.

Mark Grimm is the attorney who wrote the legal brief on behalf of St. Louis and Kansas City urging Supreme Court intervention.

"They felt strongly enough about the precedent being set by that decision that they felt it important for the Supreme Court to take the case," Grimm said.

Both of those cities, like Cape Girardeau, are among the handful in the state that have home rule charter forms of government. A ruling against Cape Girardeau, Grimm said, could open up ordinances in other home rule cities to scrutiny.

Drusch said there is ample case law on this matter backing his client's position.

"It's not like we sprung something on them and got a silly judge down here and a bunch of silly judges in St. Louis to go along with this," Drusch said.

Aside from the ordinance at issue in this case, Drusch says no one has been able to identify what ordinances or state statutes would be jeopardized.

Cape Girardeau Mayor Albert M. Spradling III cites as an example a new law lowering the state's legal blood alcohol content limit for driving while intoxicated from 0.10 to 0.08.

That law, passed by the General Assembly this spring, includes provisions requiring persistent offenders to complete treatment programs and establishing a fund for spinal cord injury research to be subsidized with fees paid by those convicted of driving while intoxicated. The measure carries the broad title of "an act ... related to traffic offenses."

"I think there could be a legal challenge to that law because the title doesn't cover all that the bill contains," Spradling said.

State Solicitor James Layton, in his brief on behalf of the attorney general, says the case has far-reaching impact, creating "confusion and uncertainty" for the General Assembly, as well as cities with charter forms of government.

Not misled by ballot

The intent of clear title provisions to prevent deception raises another issue, Layton said.

Whereas the ordinance title may not have said the tax revenue would be used for the River Campus, the ballot language voters read in the voting both did. Since voters knew what they were voting on, they weren't misled and tossing out the tax "would defeat the popular will of the people."

Layton, as do others, also claims Drury's lawsuit is a de facto effort to overturn election results. State law requires lawsuits challenging an election to be filed within 30 days of the election. Drury's lawsuit was filed after that period.

"The Court of Appeals provides no justification for letting (Drury) wait so long," Layton wrote. "By implicitly writing the deadline out of the law, the Court of Appeals creates a basis for belatedly challenged public votes at all levels."

Drusch says Drury accepts the election results but believes the foundation upon which the election was held is faulty.

"We have never said voters were deceived," Drusch said. "We said the ordinance presented to the city council was invalid. Did the city council get a clear title ordinance?"

Money in escrow

The city's ordinance requires that the state and university have their shares of River Campus funding secured by the end of this year. If not, the deal would be called off, the tax increase voided and the revenue already raised by it shifted to paying off other city debts.

Dobbins says there is no similar provision killing the project if the city's contribution isn't in place by a certain time, though the state's funding is contingent on the city's financial participation.

Spradling says the city council may push back the its deadline in any event.

"Just to be on the safe side and not create another legal issue, something probably should be done to extend the time frame," Spradling said.

As of June 30, the city had collected $291,655 from the disputed portion of the tax. That money is held in escrow. Should the city lose its appeal, the fate of that money is uncertain, but might have to be returned to the businesses that paid it.

Drusch says Drury wants it known that he didn't pursue this lawsuit with the intent of recouping that portion of the revenue paid by his businesses.

"He does not want his tax money back and will not accept it," Drusch said. "That is not why he got into this."

mpowers@semissourian.com

(573) 635-4608

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