Cape compares city budgets as tax choice looms

Sunday, May 19, 2002

At Cape Girardeau budget meetings in recent years, there have been debates on items of less than $100, mere droplets in the ocean of a $32 million operating budget.

There have been times, city manager Michael Miller said, when a department needed a typewriter, but couldn't afford it.

Many of the city's buildings are in terrible shape with leaking roofs and not enough space. Firefighters, police officers, public works and parks personnel insist they don't have the equipment nor the facilities they need to be most effective.

But many Cape Girardeau residents, who have not seen a decline in services, are skeptical that the city indeed needs an annual $6 million boost that would be generated by a 3/4-cent sales tax increase that could be put on a ballot in August, but more likely in November.

To that end, Cape Girardeau City Council members and business leaders have said recently that before the city goes to voters to raise taxes, it first needs to compare this city to others like it and educate voters of the city's fiscal responsibility, then of its needs.

This is the first story in a series comparing Cape Girardeau to other similar cities.

The Southeast Missourian compiled data from the finance and human resource departments of Jefferson City, Mo., Joplin, Mo., Paducah, Ky., Jackson, Tenn., and Jonesboro Ark. All of the cities are regional hubs of some degree, but are not in close proximity of a major metropolis. All of the cities have been affected in some way by the sluggish economy, but none of them is hurting like Cape Girardeau, which has failed to earn as much as it has spent the last three years.

The numbers seem to indicate that Cape Girardeau falls in line with the other cities in some important categories. Of the six cities, Cape Girardeau is fourth in the ratio of city employees to 100 residents and spends $1,118 per resident, based on the total budget. That figure ranks lower than Jefferson City, Jackson, Tenn. and Joplin, but almost doubles Jonesboro's spending.

Currently, Cape Girardeau's city sales tax rate of two centson the dollar is the second-highest of the cities. It's overall tax rate of 6.725 percent is more than the two other Missouri cities. A 3/4-cent increase would make it a full cent more than Joplin and Jefferson City.

Chamber of Commerce president John Mehner is among those in the business community who suggest that if a tax increase is needed, then the property taxes should be raised instead of the sales tax.

But Cape Girardeau's property tax, though much lower than many of the smaller cities in Southeast Missouri, ranks slightly lower than Jefferson City and more than double the rate of Joplin's.

Comparing tax structures

Comparing budget and tax numbers is not an exact science. All cities have a different tax structure -- especially those from other states -- and provide varying services.

Paducah is prevented by state law from collecting any sales tax. The city's largest percentage of revenue comes from a payroll tax.

Jonesboro provides no utility services. Some cities may pay for a service out of specific tax funds, while others may pay for the same service out of the general fund.

The most logical comparison to Cape Girardeau is Jefferson City. The populations are almost the same as are the percentage of people with city jobs. Cape Girardeau's general fund budget is about $10 million more than Jefferson City's. However, Jefferson City's overall budget is $9 million higher because the state capital is funding a complete overhaul of its sewer system.

Miller, Cape Girardeau finance director John Richbourg, mayor Jay Knudtson and councilman Matt Hopkins all generally agree that the numbers show that the city is similar to the five municipalities of similar size.

Chamber president Mehner, looking out for the best interests of business owners in Cape Girardeau, has voiced doubt that a 3/4-cent sales tax increase is essential to continue city services. The overall numbers only stir those suspicions.

"If we're in line with these other cities, then why are we barely making it?" Mehner said. "What is it that we're doing that's different than other places. What allows other cities to have $10 million in reserve while we're looking for another tax to raise? Somewhere in the details, we're doing something wrong or someone else has figured out how to do things right."

Two main areas

Miller points to two main spending areas that have made budgeting more difficult. Two years ago, the city ended a three-year program that raised the city employees' salaries. A study conducted in the late 1990s found that the salaries were lower than those of other cities of similar size. Correcting that added $800,000 to $900,000 of recurring costs to the city's budget, Richbourg said.

In addition to the raises phased in over three years, insurance costs have gone up, retirement benefits have increased and employees have been given step increases. The step increases elevate salaries annually based on performance. They are capped after 10 years of service to the city.As a result of tightening budgets, some employees who were not eligible for step increases have been given no monetary raises for the past three years. A 1 percent raise is called for in this year's proposed budget.

The other major expense that has taken a sizable chunk out of the budget is the city's equipment replacement program. In the past, the city was able to purchase equipment out of the general fund. But as that budget has tightened, the city could not afford to replace the equipment.

Five years ago, the city started doubling the payments on its vehicles. Extra money is also being put away for future purchases. When there is enough money to purchase new equipment, the city will be able to cut a huge cost out of its budget. Until then, the city limps along with old equipment.

The current financial problem was not a result of spending above the budget, Miller said. It's because the revenue has not been coming in as expected.

Every year, the city sets the budget based on estimated increases in revenue. The proposed budget this year projects a 3 percent increase, but councilwoman Marcia Ritter has said that maybe the budget should have no increase. Such a step might force the city to cut services, and possibly personnel.

Miller said the city could have panicked after the first year of revenue problems and asked for a tax increase. But, he said, the city thought the sales tax revenue increase would bounce back.

After three years, they're not so sure.

As a result, a revenue team was formed last October to look into the situation. Last month, it recommended a 3/4-cent sales tax increase, with a quarter-cent going to the fire department and a half-cent going to parks and stormwater.

Deciding Monday

The council is considering the recommendation and will decide at Monday night's council meeting whether to put it on the August ballot.

Everyone on the council knows that convincing the public to pass a tax will not be easy, a point driven home by Sarah Randolph, a 66-year-old retired nurse.

"We have enough taxes," she said. "Our taxes went up tremendously the first part of the year. I think we are paying enough taxes. I think the city needs to do some good bookkeeping. I will never vote for another tax increase."

Others, such as Drew Stevener, a 21-year-old Cape Girardeau resident who attends Southeast Missouri State University, could be convinced.

"I don't know," he said. "If our fire and police departments are behind the times, why not better them? But I really am too ignorant on the issue to make a decision. I can guarantee most students probably haven't heard about it."

335-6611, extension 127

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