FATE OF CITY'S RIVER CAMPUS TAXES UNCERTAIN

Cape Girardeau has collected $266,559 from the voter-approved tax intended to provide the city's share of funding for Southeast Missouri State University's River Campus. But it remains uncertain what will happen with that money should court rulings declaring the tax invalid be upheld.

City officials initially said the money would be used to help pay off outstanding bonds used to finance construction of the Show Me Center but backed off that assessment, saying the fate of the money likely will be determined in court.

The attorney for Cape Girardeau businessman Jim Drury, who brought a lawsuit challenging the city's participation in the River Campus project, said the money would be returned to the merchants who paid the tax.

On June 26, a three-judge panel of the Missouri Court of Appeals Eastern District ruled that the title of the August 1998 city ordinance that put the tax issue on the ballot the following November violated the Missouri Constitution and the city charter, because it didn't describe in detail how the money would be used. The decision upheld the findings of a lower court.

The appeals court on Thursday denied the city's motion to rehear the case or transfer it to the Missouri Supreme Court.

Direct appeal

City manager Michael Miller said Tuesday that the city will now appeal directly to the state Supreme Court. Should the court decline to take the case or uphold the prior rulings, the question of whether the city can keep the money already collected becomes an issue. The money is currently held in escrow.

Spokespersons with both the Missouri Department of Revenue and the attorney general's office said the fate of the funds is a local issue and out of their jurisdiction.

John Richbourg, the city finance director, said he was unsure what would happen. "It would be up to the city council to decide what to do with the money or up to a court," Richbourg said.

The tax ordinance authorizes the city to use revenue in excess of what would be needed for obligations to the River Campus for repayment of the Show Me Center bonds. That language led both Richbourg and Miller to at first assume that if the city was prevented from using the money for the campus it would go to pay off the arena bonds. However, if the ordinance is ultimately declared invalid, that means the city never should have collected the tax.

"What would happen to the money as far as us keeping it or not would be up to a judge, I assume," Miller said. "It we kept it, it would go to pay off the bonds."

But Sam Drusch, Drury's attorney, said it is clear the money would have to be returned to his client's business and others who paid the tax.

Ordinance extended tax

The disputed ordinance extended the life of an existing restaurant and hotel tax plus increased it from 3 cents to 4 cents on the dollar. The 1-cent hike is the only portion currently being set aside for the River Campus.

Because the tax is on the gross receipts of affected businesses and not individual sales, Drusch said Drury and other business owners would keep the money, not return it to customers since customers weren't directly charged the tax.

"It is a tax on all the year's receipts," Drusch said. "It is not a sales tax. It is not added to the customer's bill."