RESERVES COULD TOP $1 MILLION

Cape Girardeau's convention and tourism fund has grown steadily each year since its inception in 1983, and city officials project the fund will have a $1.2 million reserve by 1997.

The fund is financed with revenues from a gross receipts tax of 1 percent on restaurants and 3 percent 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.

The Cape Girardeau City Council Oct. 21 voted to solicit proposals for use of the tourism tax revenues, which total about $600,000 annually. The tourism fund also includes a reserve of about $485,000.

In its first year the tourism tax generated $522,000, of which most was set aside as a reserve. By the second year of the tax, the city was forced to earmark money from the fund to pay the debt on bonds sold to fund construction of the Show Me Center.

A property tax of 10 cents per $1,000 of assessed valuation levied along with the motel and restaurant tax in 1983 pays for a portion of the bond debt, and the tourism tax funds the balance.

City officials say a combination of three primary factors has resulted in a growing reserve in the tourism fund, which has led the city council to seek ways to spend the additional money more effectively.

The reserve has grown primarily because:

Gross receipts at the city's motels and restaurants have increased each year. Revenue from the gross receipts tax has grown from $522,000 generated in 1984-85 to an estimated $621,000 this fiscal year.

This year's budget projects that in fiscal year 1996-97 the revenue, including interest, will total more than $750,000.

Payments to retire the Show Me Center bonds decrease annually, which results in less money transferred from the tourism fund to pay the debt.

The city refinanced the bonds at a lower rate of interest, which will lower bond payments further after 1994.

This year, about $300,000 will be transferred from the tourism tax fund to pay that portion of the Show Me Center bond payment not funded by the special property tax, which generates about $250,000 annually.

But by 1996-97, city officials estimate the property tax will fund all but about $158,000 of the bond payment.

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

Aside from the Show Me Center bond payments, the motel and restaurant tax also funds the city's Convention and Visitors Bureau and various economic development proposals.

The bureau's budget has grown from $52,000 in its first year to $323,000 this year. Although city officials have budgeted increased funding for the bureau, the rate of increase will be surpassed by the rate of growth in the tourism fund reserve.

By next year given current tax revenue trends and a $10,000 increase in funding for the CVB the reserve will grow from $485,000 to $537,000.

Once the city reaps the windfall of the lower interest rates in 1994, officials project the reserve will grow substantially: from $763,000 in 1994-95 to $957,000 in 1995-96 and $1.2 million in 1996-97.

Most of the tourism fund is generated by the restaurant tax. In 1986-87, the restaurant tax generated $337,000, while revenue from the motel tax was $183,000. Interest income from the fund was about $25,000.

This year's budget projects revenue to total $347,000 from the restaurant tax and $244,000 from the motel tax. Interest income from the fund fluctuates annually, but is expected to be about $30,000 this year.