Cape Girardeau sales tax could be lowered under proposal

A proposal presented Friday by Cape Girardeau's city manager could reduce sales taxes in the coming years if the city council decides to ask voters to make permanent portions of restaurant taxes and fire taxes set to expire in 2014.

Under Scott Meyer's proposal outlined during the council's annual retreat, the city would collect about $1.85 million less in taxes each year by allowing half of the 1 percent restaurant tax and a 1/8-cent renewable portion of a fire tax to expire.

Half of the restaurant tax would be made permanent under Meyer's proposal. Voters would have to approve the extension of the taxes during elections later this year.

Part of Meyer's reasoning for lowering taxes in 2014 is the city's need to work through the effects of revenue now received from Isle Casino Cape Girardeau, he said. Even more important to the city is that voters are willing to approve the renewal of another sales tax in 2015. The sales tax that sends money into the Transportation Trust Fund pays for construction and maintenance of roads, bridges, sidewalks and other transportation-related projects. The passage of the tax in 2015 could generate about $4.8 million per year.

"That can't be at risk," Mayor Harry Rediger said Friday. "We need to be very careful how we handle the '14 and the '15. There is no doubt about that."

The city's current tax revenue streams could be dealt a triple blow if voters decided not to allow the city to levy the taxes due for renewal in the next two years.

"Strategically, if we don't take a proactive step forward, and we are asking you to consider a proactive step forward. I think we are putting ourselves in a position to lose them all," Meyer told the council.

A 1/8-cent portion of the fire tax is permanent and supports recurring costs for public safety.

Revenue from the restaurant tax goes toward bonds that helped pay for construction of the River Campus at Southeast Missouri State University. The bonds will be paid off early next year. An out-of-court settlement between the city and late businessman Jim Drury, who owned Mid-America Hotels Corp., means the collection of the portion of the tax that goes toward the bonds must end when the bonds are paid in full.

A 4 percent hotel/motel tax funds operation of the Cape Girardeau Convention and Visitors Bureau by generating about $650,000 per year. That tax would stay in place at the full amount and also become permanent under Meyer's proposal. The lack of a new project on which the city could spend revenue from the expiring portion of the restaurant tax is another reason Meyer proposed it be reduced by half. If the city wanted to fully reinstate the tax, it could be voted on in the future, according to the proposal.

Meyer said the most important reason to continue to charge portions of the taxes are so the bureau can operate and the recurring costs for public safety can be covered.

A committee based in the bureau has been working to come up with potential entertainment/leisure-type capital projects that could be funded with the restaurant tax, but has yet to present a project to the council for consideration.

At its current rate, the tax produces about $1.3 million per year. Council members expressed some concern with eliminating half the tax because they said they believe voters would be receptive to a full extension.

"I don't like the idea of just dropping the restaurant tax at all. If nothing else, we can vote on it. Then if it doesn't work we can vote on it again when we have a project that we really want," Councilwoman Loretta Schneider said.

The city estimates 65 percent to 70 percent of the restaurant tax revenue and up to 95 percent of the hotel/motel tax revenue come from people who live outside Cape Girardeau.

"I'd hate to give up the restaurant tax, merely because it's mostly paid for by outsiders," Rediger said. "I think it would be just as hard to sell at a half [a percent] as it would at 1 [percent]. I don't think that makes the difference."

The bureau supports dropping half the restaurant tax and coming back for reinstatement once a project is identified.

Councilman Mark Lanzotti said the council should consider what amenities could be added to a business park the city plans to build before deciding against asking voters to extend the full amount of the tax. A committee charged with analyzing the development of the business park plans is to present a report to the council in June. The council has so far approved spending $1.2 million from casino revenue fund on planning and installing a sewer system at the business park.

Meyer said the council will continue discussion of the proposal at upcoming study sessions.

eragan@semissourian.com

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