Cape council agrees to funding plan for use tax

The Cape Girardeau City Council agreed to fund public-safety improvements and eliminate gross-receipts tax paid by some businesses if voters approve a use tax.

The use tax would generate an estimated $1.25 million annually to fund public safety improvements and eliminate a gross receipts tax paid by some businesses, Cape Girardeau city officials announced Monday night.

The council agreed in study session Monday night how to initially spend the estimated $1.25 million annually that would be generated by a use tax.

The council accepted a list of seven items recommended by city manager Scott Meyer for spending money generated by a use tax. Those items include $385,000 to hire seven more police officers, $333,000 to go toward development of a new police station at Arena Park, $165,000 to pay the salaries of three grant-funded officers now on duty, $70,000 to hire a fire training officer, $70,000 to hire a safety coordinator. $92,000 to fund public mental-health professional services through the police department and $135,000 to replace revenue that would be lost with elimination of the gross receipts tax.

At its regular meeting, the council gave final approval to placing two tax measures on the April 5 ballot.

The first ballot measure would allow the city to retain the sales tax on out-of-state purchases of vehicles. The second would enact a use tax on items bought out of state, primarily by businesses. The use tax would be levied at the same 2.75 percent rate as the vehicle tax.

The vehicle sales tax generates $200,000 to $250,000 annually for the city.

Meyer said those taxed on purchases of out-of-state vehicles would pay only the vehicle tax. They won't be taxed twice, he said before the meeting.

State law, crafted after a Missouri Supreme Court decision in 2012, allows local governments to collect a use tax if it is approved by voters before November 2016. State law allows cities to continue collecting the vehicle tax, but only until the November deadline unless approved by voters.

Meyer said the vehicle tax and use tax must be voted on separately and not as a single tax measure.

The estimated $1.25 million in revenue includes the money generated from the existing vehicle tax.

While the use tax would be permanent, Meyer told the council the 2.75 percent sales tax on out-of-state purchases equals the total percentage rate of all the city's sales taxes. Some of those sales taxes have sunset clauses, meaning voters in the future would decide whether to continue those taxes. They include the park, capital improvements and transportation trust fund sales taxes, which all will be voted on within the next four years.

If voters turn down renewal of any of those taxes, the use-tax rate would have to be reduced, accordingly, Meyer explained.

Money earmarked toward the police station project would replace restaurant sales-tax money that is earmarked for the project. Passage of the use tax would allow the city to use $333,000 in restaurant tax money annually to maintain, upgrade and market the Shawnee Park fields to attract larger tournaments. Those improvements could cost over $3 million, according to Meyer.

Mayor Harry Rediger said the proposed use tax would help protect local businesses, eliminating any tax advantage for consumers to buy vehicles and services out of state.

"We are doing this to support our local businesses and help save jobs for our community," the mayor said.

He suggested the city might not hire the additional police officers at one time.

Council members said they were reluctant to prioritize the list of items. But Meyer said the first two items -- funding for the three grant-funded officers and replacement of restaurant tax funds for the police station -- are at the top of the list.

The city plan would eliminate the gross-receipts tax or license fee on any retail businesses with less than $1 million annual gross receipts, replacing it with a flat $40 fee, the amount currently paid by professional services businesses such as law and doctors' offices, officials said.

Even if voters approve the use tax, the city won't eliminate the gross-receipts tax until January 2017, which would coincide with business-license renewals, Meyer said.

Councilwoman Loretta Schneider said for some in-home businesses, the $40 flat fee would be more than the $10 fee they pay now.

City officials acknowledged the tax issue is confusing to voters.

But Meyer said those who don't pay a county or state use tax likely won't pay a city use tax. Meyer said the tax primarily would be charged on business purchases.

mbliss@semissourian.com

(573) 388-3641

Pertinent address:

401 Independence, Cape Girardeau, Mo.

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Use-tax spending plan

• Keep three grant-funded police officers on duty, $165,000
• Replace restaurant tax funds for police station, $333,000
• Hire seven police officers, $385,000
• Hire fire training officer, $70,000
• Hire safety coordinator, $70,000
• Public mental-health professional services through the police department, $92,000
• Replace revenue lost from proposed elimination of gross-receipts tax for some businesses, $135,000

Source: City of Cape Girardeau