Cape city officials talk use tax, say employee raises not in the cards

Cape Girardeau city officials voiced concern Friday about eroding sales tax revenue and discussed seeking voter approval of a use tax next year to help make up the difference.

City tax revenue and the proposed operating budget for fiscal 2019 were major topics of discussion at the city council�s annual retreat. The all-day session was held in the city�s emergency operations center at Fire Station No. 3 on North Sprigg Street.

City manager Scott Meyer told the council, �We are so tight financially.�

He added, �Our revenue projections for next year are flat.�

As a result, the city can�t afford to give a pay raise to city employees for the upcoming fiscal year, which begins July 1.

�We just could not find enough reoccurring revenue to fund a pay increase,� Meyer said.

The proposed budget, however, does include better retirement benefits, which has the backing of council members.

Council members and city staff discussed placing a use tax measure on the ballot while eliminating a quarter-cent, sewer capital improvements sales tax. A use tax could generate about $2 million a year, money that could help fund general operations, Meyer said.

The sewer capital improvements tax is slated to expire Dec. 31, 2019.

City officials have estimated the use tax would generate about the same amount of revenue as the capital improvement sales tax.

The use tax would be levied on out-of-state purchases, and the rate would equal the total city sales tax rate charged on purchases in Cape Girardeau. The current sales tax is 2.75 percent. It would be lowered to 2.5 percent if the capital-improvement sales tax expires.

Council members voiced concern about the city�s heavy reliance on sales taxes.

�Long term wise, it does not look good,� Mayor Bob Fox said.

Ward 1 Councilman Daniel Presson said if retail sales decline dramatically, city government would face a financial hardship.

Meyer said the council could consider raising the property tax, which now generates about $1.9 million in general fund revenue.

But he added a property tax would likely be a tough sell to the voters.

Ward 4 Councilman Robbie Guard suggested the council might have to consider a combination of tax measures.

City officials voiced concern about the growth in online sales. The city doesn�t receive taxes from online sales because it does not have a use tax.

Meyer cited statistics showing total retail sales nationwide grew by 4.36 percent from 2009 to 2017. The city�s restaurant tax grew by 3.8 percent, but overall city sales tax grew by just 2.32 percent during that period, he said.

Those figures reflect the growth of online sales, according to city officials.

�At some point, if you don�t address that, you have to start eliminating services,� Meyer told the council.

While voters in recent years have approved sales taxes to fund capital improvement projects, city officials said operating expenses are paid for largely out of the general fund. Sales tax accounts for nearly half of the projected $25.3 million in general fund revenue for fiscal 2019, budget figures show.

More than $18 million in general fund revenue goes to pay salaries and benefits, city officials said.

mbliss@semissourian.com

(573) 388-3641