MANY CRAVE PORTION OF TOURISM MONEY

Editor's note With the City Council scheduled on Monday to consider 28 proposals on how to use Convention and Visitors Bureau money, The Southeast Missourian today begins a two-part series examining its revenues and expenditures. The proposals will be outlined in an article Monday.

(First of a two-part series)

A gross receipts tax on Cape Girardeau's motels and restaurants has not only generated revenue for the city but also rancor among opponents of the tax since its inception eight years ago.

Cape Girardeau voters approved the tax in 1983 to fund tourism efforts and help fund construction of the Show Me Center, a joint effort with Southeast Missouri State University.

The tax includes a 1 percent levy against gross receipts at restaurants and a 3 percent gross receipts tax on motels.

The tax money can be used only to retire bonds purchased to fund construction of the Show Me Center, operate the city's Convention and Visitors Bureau and for economic development.

But from its inception, opponents have criticized not only the tax, but also the location of the Show Me Center and how the CVB spends its money.

Although little can be done now to change the location of the Show Me Center, the matter of how best to spend the tourism money has resurfaced.

The Cape Girardeau City Council Oct. 21 voted to solicit proposals for use of the tourism funds, which is about $600,000 annually. The tourism fund also includes a reserve of about $485,000 accumulated since 1983.

The council Monday is expected to debate the merits of 28 separate proposals for the fund's use, and some council members have suggested the CVB budget might be eliminated.

Opponents of the tax include some local restaurant and motel operators, who less than a year after the measure was approved began to pay their taxes under protest. Many of the businessmen were opposed to the proposed site of the Show Me Center on the university campus.

Also, Cape Girardeau businessman Robert Drury and his brother, Jim, have filed several lawsuits against the city claiming the motel and restaurant tax violates the city's charter form of government.

In 1985, the Drurys won their case in the Circuit Court in Cape Girardeau County, but the decision was overruled the following year by the Missouri Supreme Court.

Since then, city officials and the businessmen involved in the dispute have continued to meet to try to iron out their differences.

One issue that has been resolved is the suggestion by the Drurys that the tax be repealed in 2004 when the bonds will be paid off. Voters in 1987 approved the sunset clause.

In support of the sunset, Jim Drury, president of MidAmerica Hotels Corp., contended the tax was excessive and that the tourism fund could accumulate a $9 million surplus at the end of 20 years.

He based the projection on a 3 percent growth factor in gross receipts and a 6 percent inflation rate.

Drury said that once the bonds were retired, the tax could be eliminated because interest income generated by the surplus in the tourism fund would be sufficient to finance the Convention and Visitors Bureau.

But John Richbourg, the city's comptroller, said the total reserves in 2004 likely will be considerably less than the Drurys' projection. He said that, according to his estimates, reserves will be $4 to $5 million.

Since 1984, tourism tax revenue has averaged more than $500,000 each year, and city officials expect the tax will generate more than $750,000 annually by 1997.

This year, city officials project tax revenue will top $620,000. The CVB budget this year is about $323,000, and the Show Me Center bond payment is about $528,000.

A 10-cent per $1,000 of assessed value property tax, approved with the motel and restaurant tax in 1983, will fund about $250,000 of the bond payment this year.

The money that accumulates after the bond payment is made goes toward the CVB, and the remainder continues to accumulate.

The current city operating budget projects the $485,000 tourism fund reserve to grow, given current revenue and expense trends including increased funding for the CVB to $1.2 million by the 1996-1997 fiscal year.

Continued negotiations between the Drurys and city officials have failed to resolve the dispute over the tax, and in 1989 a special judge was appointed to hear a mounting number of tax protests filed by the Drurys against the city.

The suits, which are scheduled for trial early next spring, challenge the legality of the restaurant tax and seek to recover thousands of dollars in tax money paid by MidAmerica Hotels, which operates the Holiday Inn motel and restaurant; RIC Inc., which operates the Drury Lodge motel and restaurant, and West Park Bowling Lanes.

As the businesses continue to pay the restaurant tax under protest, the amount they are collectively seeking to recover has grown to more than $80,000, according to the city's finance office.

The Drurys contend the restaurant tax has been unfairly applied and that their motel and bowling alley restaurants are exempt from such taxation under the city's definition of a restaurant.

That definition, as cited from the city's code of ordinances, is: "any inn or establishment engaged solely or chiefly in the sale and serving of meals or lunches, where tables and chairs are provided for the customers."

They contend, since their principal occupation is "the sale of rooms to the traveling public" in the case of the motels and "the renting of bowling alleys" to the public in the case of West Park Lanes, their related restaurant operations are exempt from the restaurant tax.

They also allege the city has no authority under the city's charter form of government to impose such a "license" tax on restaurants and motels.

Other opponents of the tax have charged that the restaurant tax should also be applied to convenience stores. The city council in late 1989 debated the issue at length but refused to put the measure before voters.

On Monday, city officials welcome the funding proposals but want the Convention and Visitors Bureau budget preserved; proposals the council will consider.