CAPE SEES DROP IN SALES TAX REVENUE; BUDGET BASED ON 2 PERCENT INCREASE

Sales tax revenues are down in Cape Girardeau, but the city's operating budget for next year projects a 2 percent increase in sales tax revenue.

"If you have 2 percent inflation, your sales tax should grow by at least that much," said John Richbourg, Cape Girardeau's finance director. Inflation has averaged nearly 3 percent for the last few years.

The new budget year starts July 1. Sales tax revenues are down 1.5 percent from the same time in the budget year last year. Last year at this time revenues were up 7 percent.

Other cities contacted -- Jackson, Jefferson City and Columbia -- said their revenues weren't growing as fast as last year but still were higher than last year.

Mayor Al Spradling III said past budgets projected much larger increases than the 2 percent in this year's budget. He said the figures for May were up dramatically from last year's, indicating that the decline might be over.

The March and April figures were down 3 percent and 8 percent respectively from 1996, while the state's May check for the 1 percent sales tax went up nearly 17 percent over last year.

These figures do not include the transportation and capital improvements sales taxes that flow into separate funds.

The mayor said there is enough flexibility in the budget that if revenues fall short the city can handle it. Nearly two-thirds of the city's $14.5 million operating budget goes for wages and benefits. About 4 percent goes for buying new equipment and special projects.

Spradling said if the city's revenues fall short it would reduce expenditures in those areas.

"It there's a shortfall, then obviously we don't spend it," he said. "We just don't spend the money on a new police car or a grader."

The city has reserves of about $3.4 million in its general fund. The city could use some of that in a pinch, Richbourg said.

Sales taxes provide 47 percent of the city's operating revenues, by far the largest single source of city revenue. The city's utility tax provides the second largest chunk, 17 percent.

Donald Phares, an economist at the University of Missouri-St. Louis who studies municipal finances, said he believes the drop in sales tax revenue "could be an aberration in reporting" and not a true reflection of future sales tax figures.

Cape Girardeau is growing economically so sales tax revenues should rise, Phares said. But glitches do happen in the way the state distributes sales taxes.

Richbourg said the big jump from April to May could indicate that some stores were late in reporting sales, so the money showed up later.

Richbourg said that the addition of Sam's Club should boost sales tax revenues for next year. Although some of its sales will come at the expense of other local businesses, Sam's should draw some out-of-town shoppers who might not shop in Cape Girardeau otherwise.

Nearly all of the additional revenue projected in the budget will go to raising city employees' salaries. A survey of four similar-sized cities showed Cape Girardeau pays its municipal employees on average less. The increase will make up less than half the difference between Cape Girardeau and the average.