It appears the Cape Girardeau City Council is likely to ask voters in November to approve a sales-tax increase. The three-quarter cent increase -- recommended by a task force of city employees who have been studying the city's financial situation since last year -- would raise the overall city sales tax to 2.75 cents on each dollar of taxable sales. Combined with state and county sales taxes, consumers would pay a total of 7.475 cents on each dollar of taxable sales inside the city limits -- or more, if a proposed increase in the state sales tax is approved.
Cape Girardeau -- like Cape Girardeau County, other area cities and other communities around the state -- is heavily dependent on sales-tax revenue. In the decade prior to last year, sales-tax revenue served the city well as retail sales in the county grew to more than $1 billion. But that trend has shifted in the past year, and the city says even its conservative estimates of revenue growth have not materialized.
Salary, equipment expenses
Meanwhile, other factors have had an impact on the pressure between city revenue and expenditures. Two of the biggest changes have been city salaries and equipment replacement.
Several years ago, the city faced up to the fact that employee salaries were lower than comparable salaries in other cities. A program was initiated over a three-year period to bring up the overall level of city salaries. As a result, the city now has to come up with an extra $800,000 to $900,000 a year to pay for these increases.
As for equipment purchases, the city has had an aggressive program to pay off equipment purchases and to build up a reserve for future purchases.
The task force that has been studying the city's financial situation has suggested that the city needs an extra $6 million a year to pay for equipment needs, infrastructure improvements and ongoing city expenses such as salaries and pay increases. At the same time, it is necessary to generate revenue to offset estimated sales-tax dollars that have not materialized.
While the sales-tax proposal currently before the city council is ambitious, it is, according the task force, preferable to a major increase in the city property tax -- which is low, but which would require a huge increase to generate anything close to $6 million a year.
Meanwhile, a good many Cape Girardeau residents wonder how the city got into this financial predicament. They've read and heard about the growth in retail sales for so long that, for many of them, it's difficult to understand why sales-tax revenue is in such a slump.
Moreover, the city's attention to its own economic situation has been conducted, for the most part, internally with very little -- if any -- public fanfare. As a result many Cape Girardeau residents have been caught by surprise that the city is struggling with money.
In addition, many residents are weary of budget talk, having just endured weeks of budget maneuvering in Jefferson City as the governor and state legislators tried to find enough money to cover Missouri's $19 billion budget for the fiscal year that starts July 1.
Out of those state deliberations came a ballot proposal that will ask voters to approve an increase in the state sales tax for transportation needs. Combined with that proposed half-cent increase in state sales tax (along with another four cents of fuel tax), the sales-tax lug in Cape Girardeau would increase by 1.25 cents to 7.975 cents from the current 6.725 cents on each dollar of retail sales -- provided voters approve both the city and state sales-tax increases.
Making a convincing case
The city intends to make a convincing case for the increase, as does the Missouri Department of Transportation for the proposed increases for transportation projects. Along the way, the Southeast Missourian will be reporting on various aspects of the city budget situation. Last Sunday, a report on overall city budgets compared Cape Girardeau to five other cities of similar size in four states.
Future reports will take an in-depth look at city salaries and specific city needs, as well as examining why the city's task force thinks a sales-tax increase is better than property-tax increase.
All of these issues make up critical components of a complicated issue. Taxpayers who intend to vote on this question -- provided the city council puts it on the ballot later this year -- need to make every effort to be fully informed.