CITY WEATHERS SLUMPING TAXES; BUDGET TOPS $27 MILLION FOR 1991-92

Conservative city budgets during the past few years will allow the city to tolerate an economic downturn caused by stagnant sales tax revenues, a top Cape Girardeau city official maintains.

Assistant City Manager Al Stoverink said Thursday that the proposed $27 million, 1991-92 budget contains few cuts in city services, despite sagging sales tax revenues this year.

The city relies heavily on sales and service taxes, which make up more than two-thirds of general-fund revenues.

City officials reported in March that preliminary sales tax revenue figures indicated there could be an $800,000 shortfall in projected operating funds over the next two years.

Despite the tax-revenue stagnation, Stoverink said Thursday that the city will be able to compensate for the shortfalls in this year's budget.

"Basically, we've been carrying reserves so we could withstand one year of recessionary impact without too much trouble," he said.

"There is a significant impact here in terms of capital outlays, and we're deferring a number of equipment replacements that are needed."

Stoverink said the capital equipment replacements might be the only serious immediate casualty of the proposed budget.

But he cautioned that if sales tax revenues don't rebound in the next two years, Cape Girardeau residents likely will be asked to help provide alternative revenues through new taxes.

In March, city officials proposed elimination of across-the-board, city-employee pay raises. Stoverink Thursday said the budget reflected the city staff's earlier pay-raise recommendations, but refused to specify.

"There were some council members who voiced some very strong opinions about finding other areas to cut other than employee salaries," he said.

He said the employee-salary issue will be discussed in a closed-door session of the City Council Monday.

Stoverink said the proposed budget transfers money from the city's motor-fuel tax reserve, which has been set aside the past two years for new construction projects, to the general operating fund.

"When we pull the funds out of the motor-fuel tax, we're basically pulling money out of reserves for capital improvement projects in the future," he said. "It will have a significant impact in the next few years if the sale tax doesn't turn around."

Stoverink said the sagging retail sales in Cape Girardeau might already be rebounding, if April and May tax receipts are an indication.

"April and May were good, but they're typically small-check months," he said. "June, typically, is a big one, so we're really anxious to see how June goes.

"But two months is not enough to show any trend. There can be some wide variations from month to month so it's difficult to make strong projections for the future."

Stoverink said that although next year's proposed budget reflects a more conservative sales tax growth rate than the 4 to 5 percent budgeted in past years, city officials don't expect retail sales to sag further.

"We did project a 2 percent growth in the sales tax, partially on the basis that we feel like the recessionary impact will have subsided some time early in the fiscal year," he said. "Realistically, we expect to get some rebound.

"The net effect though, when you take this year and next, (is) we're still projecting no growth."

But Stoverink said he doesn't expect revenue losses to total $800,000 over the next few years as the city reported in March. But he said losses could total $500,000.

By transferring motor-fuel tax reserves to the general fund for street maintenance, Stoverink said the city next year might have to scale back its five-year capital improvements plan.

"It won't halt or delay any street projects or other projects planned for this year," he said. "Where its impact will show up is when we do next year's capital improvements plan.

"There will be projects out in the four- and five-year plan that will have to be dropped out. At that time we'll be looking at other revenue sources."

Stoverink said the most likely revenue sources would be either a park tax or a transportation sales tax. He said several communities in the area have levied such taxes to supplement sales and property taxes.

"We're not proposing those in this year's budget, but I think it's something that will have to be looked at in the future," Stoverink said. "As far as general operations, we could probably get by if sales tax revenues rebound to their former rate of growth."

But Stoverink said there's no guarantee retail sales in Cape Girardeau will rebound to the previous growth rates, particularly in light of recent retail-mall development in the Southern Illinois cities of Carbondale and Marion.

"When we look at the five-year capital improvements plan this winter, we will be taking a real close look to see if there will be continuing problems," he added.

The most significant change in the proposed 1991-92 budget from the current operating budget is the implementation of a citywide, curb-side recycling program that's slated to begin in October.

Stoverink said the city's past "belt-tightening" has allowed it to weather this year's sluggish local economy. But he said the city might not be able to rely as heavily in the future on its sales tax revenues.

"We have to sound a note of warning," said Stoverink. "It's not a crisis, but it's certainly a year of warning (where) we have to watch our revenue base closely."