Councilman: Cape may end gross receipts tax if use tax passes

The Cape Girardeau City Council may eliminate the gross-receipts tax on small- and medium-sized businesses and replace it with a flat fee if voters approve a use tax in April.

The council will discuss possible spending uses when it meets Monday night.

Councilman Wayne Bowen said the proposed use tax is "clearly a tax increase" on businesses. Eliminating the gross receipts tax on businesses with annual gross receipts of $1 million or less and replacing it with a flat fee of $40 would give a tax cut to those businesses, he said.

Bowen said some of the use-tax revenue would be used to make up for the estimated $125,000 to $135,000 the city would lose as a result of doing away with the gross-receipts tax.

Bowen and other city officials want the bulk of the use-tax money to fund public-safety improvements, including development of a new police station at Arena Park and hiring more police officers. "We need to add seven more police officers," he said, explaining that would increase the staff size to more than 80 people.

The councilman said additional police are needed to patrol the city. The city currently has a limited number of patrol officers, he said.

"At times, we have five or six police officers on patrol."

Bowen said the money also could be used to pay the salaries of three police officers who are funded with government grants. When those grants run out, the city will have to absorb the cost of those salaries, he said.

He and other council members have suggested the use tax be used to improve public safety.

"That clearly is the greatest need in our city," Bowen said.

Mayor Harry Rediger, councilwoman Loretta Schneider and city manager Scott Meyer talked last week of using some of the use tax money for public-safety upgrades, including hiring of police officers, but none of them mentioned the possible tax cut.

City officials have suggested the hiring of police officers might be done a few at a time rather than at once. Schneider said public safety remains the top priority for the city. She said passage of a use tax remains "a big if." The use tax would be a permanent tax and the current council can't dictate how future councils would spend the money beyond the projects now being discussed, Schneider said.

"We have to have confidence in future councils to look at the best way to spend that money," she noted.

Meyer said he would make recommendations to the council at Monday night's meeting, but declined to get into specifics before the public meeting.

"I don't want to get out ahead of them," he said.

The city manager said the council may or may not take formal action on any funding list. Regardless, he said, the council would be making a promise to voters as to how the money would be spent.

The use tax could generate over $1 million annually, he said. That figure is higher than originally suggested. City officials recently revised the estimate after reviewing how much revenue Cape Girardeau County receives from its 1 percent use tax.

Even if voters approve the use tax, the city won't start receiving revenue from the tax until October, Meyer said.

Rediger said he expects the council to disclose a specific list of projects to the voters.

"I am an advocate of doing it sooner than later," he said.

The council last month gave preliminary 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 purchase of out-of-state vehicles would pay only the vehicle tax. They won't be taxed twice, the city manager stressed.

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.

mbliss@semissourian.com

(573) 388-3641

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401 Independence, Cape Girardeau, Mo.

with council agenda