Cape mayor examining commuter tax

'OUTSIDE THE BOX'

By Bob Miller ~ Southeast Missourian

Cape Girardeau's new mayor has met with the city manager on several occasions.

He's met with department heads and examined budgets.

And Jay Knudtson has concluded that there's not a lot of fat to cut. Some city employees have gone three years without a raise. Some departments are operating with outdated equipment and not enough employees. Still, the city spent more than it made last year.

Given the tight financial situation, Knudtson said, the best way for the city to move forward is to increase revenue. And that means raising taxes.

But Knudtson, who was elected mayor on April 5, wants to be creative. He wants to come up with ways to take advantage of the city's location and its appeal to the rest of Southeast Missouri as the region's economic hub.

He said he wants to "think outside the box."

To that end, Knudtson said he wants to look into an earnings tax that would oblige non-Cape Girardeau citizens who work within the city limits to pay an extra income tax -- a commuter tax, if you will.

He has spoken publicly about the tax issue to at least one civic group. His idea, though in the early exploratory stage, is a spin-off of earnings taxes already in place in St. Louis.

"They come in, they use our roads, our infrastructure, they use things that Cape citizens paid for, then they leave," Knudtson said.

Knudtson has a point, according to Jim Roche, who commutes from Jackson, Mo., to work at St. Francis Medical Center.

"I do use the city services, no doubt about it," he said. "I'm not particularly in favor of any tax, but I kind of understand where he's coming from."

Kim St. Cin, a commuter from Oran, Mo., who works at Union Planters Bank, didn't agree.

"That would be terrible," she said. "I shop here, I pay for gas here. And my employer, being in Cape, helps contribute to the city."

Cape's biggest asset

Cape Girardeau's status as a regional hub is its biggest asset, many area leaders say. The city gets a large portion of its revenue from commuting shoppers, as much $4 million per year, said Dr. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University.

There is no data available on how many workers commute to the city of Cape Girardeau. However, an estimated 18,000 of Cape Girardeau County's workers commute from outside the county.

Knudtson's idea to further tap the city's commuters for funds is unlike any tax in Missouri and possibly the nation.

In Missouri, the only cities that have any type of earnings tax -- another term for a city income tax --are Kansas City and St. Louis. St. Joseph received approval from the state to hold an election for an earnings tax, but voters in that city defeated the proposal twice.

St. Louis collects a 1.5 percent tax from all employees in the city, said Larry Unber, an assistant collector for earnings tax in St. Louis. And the city also takes one percent of the net profit of any business done in the city. These taxes make up approximately a third of the city's general revenue budget, Unber said.

But St. Louis does not differentiate between those who live within and outside the city limits.

Other possibilities

In addition to investigating an earnings tax, Knudtson said he also wants to explore the privatization of more public services. The city already contracts a private company to operate the city's water facilities, and Knudtson said the city might find that it could save money if it contracted out its trash services also. Many cities do that, he said.

"I'm not advocating that we do either of these things," he said. "It may prove totally irresponsible to do, but the point I'm trying to make is that we don't have the luxury of ruling certain ideas and concepts off limits. We owe it to the citizens to explore any and all options. If that exploration makes people uncomfortable, so be it."

John Mehner, the Cape Girardeau Chamber of Commerce president, said he was concerned about an earnings tax idea when he first heard it. Though he said he wasn't speaking on behalf of the chamber, his personal opinion was that any type of earnings tax would be counterproductive and hurt the city's chances of attracting business and industry.

"There has to be a concern when the same payroll in the city would be less than in the county," Mehner said. "If they're starting to investigate this, I would love to sit with the council and discuss the effects."

There is a question whether or not a selective earnings tax, which would tax only those who would have no vote on the issue, would even be legal.

City attorney Eric Cunningham said he had not yet been contacted by the city manager or mayor and, without doing any research, did not want to speculate on the legality of Knudtson's idea.

Knudtson said he would be interested in exploring an earnings tax even if it wasn't possible to specifically tax commuters.

bmiller@semissourian.com

335-6611, extension 127