County seeks deal to protect tax base

A compromise in the works could protect Cape Girardeau County's sales tax base while providing a sales tax break for manufacturers.

Sen. Jason Crowell, Cape Girardeau Area Magnet director Mitch Robinson and Presiding Commissioner Gerald Jones have been discussing how to promote economic growth and provide the needed revenue to operate the county. Jones, with support from his fellow commissioners and leaders of Cape Girardeau and Jackson, has raised objections to a proposal to grant a sales tax exemption for utility purchases by manufacturers.

Jones doesn't object to the exemption if lawmakers want to give away state tax revenue. He objects to any attempt to give away county tax dollars.

Jones wrote a letter last week to Crowell, R-Cape Gir?ardeau, questioning whether lawmakers had the legal authority to take away local revenue by granting sales tax exemptions. Jones is worried that the proposal would cost the county hundreds of thousands of dollars annually. In his letter to Crowell, Jones said the county could lose $365,000 based on the electricity and other utilities consumed at Procter & Gamble's plant on Highway 177.

"Cape County lives on sales taxes," Jones wrote. "We simply cannot take that kind of cut in our income."

Cape Girardeau County collects 1 percent on taxable sales for a total of about $12 million a year.

The tax-limiting Hancock Amendment in the Missouri Constitution bars the legislature from imposing new duties or costs on local governments, Jones noted in his letter. Those provisions raise the question of whether the legislature can reduce local revenue by limiting what is taxable, he said.

"Sometimes it appears the legislature feels they can do what they want even if it severely affects a local government," Jones wrote.

Discussing two options

Two options to quiet the county's objections are under discussion, Robinson and Crowell said. One idea would leave the local tax exemption out of the bill, which is in the final stages of work in the Missouri Legislature. The other would be an agreement by Procter & Gamble to make payments to the county to replace the lost revenue while preserving the full exemption in the legislation.The bill that includes the sales tax exemption has passed both chambers of the legislature. The bill originally included a simple expansion of the tax credits available under the Quality Jobs Act, but was expanded by the Senate to include almost every economic development proposal under consideration by lawmakers.

Crowell is a member of the House-Senate conference committee appointed to work out the differences between the two versions. He said he's leaning toward limiting the exemption to the state's portion and leaving the local tax unchanged.

That would make the exemption similar to the exemption allowed for food sales in grocery stores. Grocery customers pay the full local sales tax and 1.225 percent for statewide sales taxes earmarked for schools, parks and conservation. During debate on the food exemption in 1997, lawmakers were concerned that a court might order the state to replace lost revenue if food were exempted from local sales tax.

Robinson said the exemption is important because it will make Missouri more competitive in the scramble for manufacturing jobs. Of the states bordering Missouri, only Illinois charges sales taxes on utilities consumed by manufacturers, he said.

"We are always extremely conscious of maintaining our competitiveness," Robinson said.

The most recent analysis of the economic development bill showed it could reduce state tax receipts by $97.1 million within two years. That figure doesn't include the potential cost of the utility exemption, which could remove up to $46 million from state and local treasuries.

Sen. John Griesheimer, R-Washington, and Rep. Ron Richard, R-Joplin, who are leading the committee negotiating a final version of the bill, said they were counting on Crowell to forge a compromise over the local tax exemptions.

Both said the full bill contains more than they wanted. Competing views could make a compromise on the whole measure difficult, Griesheimer said. "Everybody is growling to keep stuff in, and there's one senator that is pretty adamant that the costs are too high," he said. "I don't know what to do."

Richard said he's most concerned about shaping state policies to make Missouri attractive to business. "I am just trying to level the playing field, and my decisions are based mostly on what happens on the state side," he said.

rkeller@semissourian.com

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