City faces major decisions on future funding

The federal government is spending more than it is getting from taxpayers in large part because of the cost of conducting the war on terrorism. State government in Missouri is struggling to balance its budget before Jefferson City lawmakers are due to go home at the end of this week. And now city government is looking for ways to raise revenue and put an end to dipping into reserves, which has kept Cape Girardeau afloat for three years.

The city's financial situation came into the spotlight last week when a committee of city employees reported to the city council on its recommendations. The committee has been at work since October.

However, city officials knew as long as two-plus years ago that there was a financial problem. That's when reserves were used to make up a shortfall in revenue. The same thing happened the next fiscal year. And this fiscal year, the city expects to use dwindling reserves to cover its expenses.

Sales tax for capital improvements

The committee's recommendation was a sales tax rather than increases in user fees or the city property tax, although a blend of those three revenue sources was not ruled out. With anticipated increases in spending needs of some $6 million a year, much of it in capital programs like sewers and parks, the committee suggested a three-quarter-cent increase in the city sales tax. This would raise the overall sales tax on retail items purchased in Cape Girardeau -- state sales tax included -- to 7.475 cents.

An increase in the city sales tax would require a vote. The committee recommended putting the sales-tax question on the August ballot.

There are a good many key issues that need to be resolved before any decision is made about the sales-tax recommendation or the timing of a citywide vote.

For example, the city hasn't made a big deal these last two years about being in a financial situation that requires using reserves to make ends meet. As a result, many taxpayers wonder how the city got to the point of needing such a hefty revenue increase.

Moreover, the public has heard little about belt-tightening, although city officials say overall spending is down when inflation is factored in. It has been widely reported that city employees are going without a pay raise for the third year. That's partially correct. Newer employees have received step increases as provided by the city's salary schedule. Older employees, however, have reached salary caps and have received no increase other than a one-time bonus.

Another question being asked since the committee's report to the council is how much of the extra $6 million a year is absolutely vital to city operations. Some options considered by the committee, for example, call for smaller revenue increases all the way down to $2.4 million a year.

All of the options would earmark revenue from a sales-tax increase for specific purposes: parks, stormwater improvements and firefighting equipment. But no specific needs have been identified yet, and voters would want a clear list of what they're paying for before approving a tax increase.

One big consideration is how the proposed increase in city sales tax would affect retail sales, particularly when state lawmakers are also considering increasing the state sales tax to pay for transportation needs.

And what about the city property tax and user fees? Surely the city council will want to study each of these options carefully. A blend of increases in all three areas -- sales tax, property tax and user fees -- might be more acceptable to voters.

Property tax is lowest in area

Currently, the Cape Girardeau property tax is one of the lowest in the area: 46 cents for each $100 of assessed valuation. In order to generate an additional $6 million a year, the property tax would have to be increased to $2.20 for each $100 of assessed valuation -- a jump that wouldn't fare well with voters.

There is no need to rush this decision. August is probably too early to ask voters to decide on any revenue-increase plan. City officials have a big task ahead of them to educate taxpayers about the city's needs and how to pay for them.

For now, city residents have been alerted to the fact that there appears to be a need to increase revenue. Details about how much the city can tolerate and how the money would be spent will have to be developed by council members. Ultimately, voters will have to be convinced that any plan is the best plan.