Pact appears likely on hotel, restaurant tax

Though officials aren't ready to say what the changes could be, an amendment to a long-standing legal agreement with Midamerica Hotels that governs the way the city of Cape Girardeau uses revenue from taxes charged at local restaurants and hotels appears to be on its way.

Especially in the past year, city leaders have voiced uncertainty about the future of the revenue stream, which according to a 2003 agreement must end once debt on bonds that helped pay for the construction of Southeast Missouri State University's River Campus is paid. The payoff is expected during the first quarter of this year.

The 1 percent gross receipts tax charged to customers at restaurants and 4 percent tax charged on hotel stays generated just more than $2 million for the city during the most recent full fiscal year.

Mayor Harry Rediger said the city and Midamerica Hotels Corp. have been in talks about the future of the taxes and are looking at a "virtually complete" new agreement -- details of which could become public after a closed session of the city council planned for Monday night.

On the council's agenda is an ordinance that could authorize the city manager to "execute an amendment to the settlement agreement and release of all claims," which means the city manager will receive the authority to sign the agreement with the council's approval.

A disagreement on taxes between the city and Midamerica Hotels goes back many years, but in 2003 a five-year legal dispute over the River Campus ended with an agreement reached between late businessman Jim Drury, who owned Midamerica Hotels, and then-mayor Jay Knudtson.

The legally binding agreement, according to a

December 2003 Southeast Missourian article, included these terms:

* Termination of the taxes once cash reserves from the taxes were sufficient to pay off the city's share of bonds on the River Campus;

* Capping the amount of spending by the city on the River Campus at $16 million;

* Limiting growth of the visitors bureau budget;

* Requiring the visitors bureau to meet goals as reflected by the increase in the receipts from the taxes;

* Random audits to make sure the tax was being properly collected;

* Requiring the university to use local contractors to build the River Campus where feasible and applicable under state law.

The 4 percent hotel tax funds the operation of the Cape Girardeau Convention and Visitors Bureau.

Historically, revenue from the restaurant tax has paid for tourism and recreation-related projects, including River Campus, Show Me Center, Osage Centre and additions to the Shawnee Park Sports Complex.

A committee of civic leaders looked at options for a new project on which to spend the restaurant tax revenue, but did not pitch a project to the city council. Two other proposals -- one from Midamerica president Joel Neikirk to seek voter approval to extend the restaurant tax to pay for an indoor sports complex and another water slide at Cape Splash and one from the city's historic preservation commission to put the money toward a visitor center and other history-related tourism projects -- gained little traction in the city council.

City officials aren't ready to say what the direction of the tax revenue will be if the new agreement allows for extension beyond the River Campus bond debt payoff.

The mayor, however, hinted at the continuance of the revenue flow for the city through the taxes.

"The thrust of where [city officials and Midamerica] have gone with this is that we want to continue to build our community as a regional hub," Rediger said. "Part of that is visitors, tourism and destination events that are funded particularly through hotel and restaurant taxes. That's been very successful. We've built that through the years with the cooperation of the CVB, the hotel industry, the restaurant industry, the city, the chamber of commerce ... as a complete team.

"We want to continue to expand that and continue to develop our regional status as a visitor-tourist destination. If we didn't have those funds to accomplish that and make our city more inviting and interesting and exciting, we would lose some of that edge."

The restaurant and the hotel industry will benefit,

Rediger added, by continuing the revenue streams.

"That's what started the conversations back and forth, and hopefully by Monday evening we'll be looking toward a conclusion," he said.

Reports at the time of the legal battles between Drury and the city indicate he had concerns the city could be illegally incurring debt through sending tax revenue toward the River Campus project. A judge dismissed a suit with related claims by Drury against the city in 2003 before the agreement that set up the requirements for the revenue seen today.

City manager Scott Meyer said the pending new agreement could be considered "a new page" in the story of the taxes.

"If all goes through, I think what this will show is that there has been with that agreement regular accounting and credibility for the city," Meyer said. "That the Drurys are recognizing the city has been responsible with the money."

2013 was a banner year for the city in the restaurant and hotel tax revenue -- the $2,025,089 collected was the highest total collected since voters in 1998 passed a measure that authorized the taxes to be collected at their current amounts through 2030.

The council's closed session Monday will be held before the 7 p.m. regular session at city hall.

eragan@semissourian.com

388-3627

Pertinent address:

401 Independence St., Cape Girardeau, MO