Cape officials concerned about sales tax's support

The Cape Girardeau City Council will hold a special study session at 5 p.m. Tuesday at the Osage Community Centre to discuss a proposed half-cent increase in sales tax to fund parks and storm-water projects.

While council members were split at Monday's meeting on the lack of a sunset clause in the proposed increase, all expressed some level of concern about whether voters will support the increase in any form.

Mayor Jay Knudtson said although a sales-tax increase is one of few means the city can use to cover operating costs, he has serious concerns about raising the sales tax again.

"We're clearly the economic hub for the region, and we can't afford to drive people away with a high sales tax," Knudtson said. "We could reach a threshold where people just won't tolerate it, and I worry with the other increases in the past 18 to 24 months that this could be it."

Knudtson said he and fellow council members need to gauge the public's appetite for any additional sales-tax increases. He stressed the need to find creative, alternative sources of revenue and said he hopes to define and explore current ones to raise funds. City officials have said they may explore the possibility of a payroll tax later this year.

Councilwoman Loretta Schneider said she's aware the city needs additional revenue to address problems, but a raise in the sales tax could cause residents to shop elsewhere.

"I don't think the people want to cut back on services," Schneider said. "But I don't think we can put much more on the sales tax."

The proposed increase would raise the total sales tax on purchases in Cape Girardeau from 7.475 to 7.975 cents on the dollar. Cape Girardeau currently assesses 2.25 cents of the tax, which the city uses to fund several separate operations. Cape Girardeau County assesses one cent of the tax, and the remaining 4.225 cents goes to the state.

Of Cape Girardeau's portion, one cent helps fund the general operating budget of the city. The city has collected almost $8 million, 36 percent of its operating budget, from that portion of the tax so far in fiscal year 2007, which began July 1.

The tax was approved by voters in June 1971 and has no sunset clause.

Cape Girardeau County depends even more on its revenue from sales tax.

County Auditor David Ludwig said more than half of the county's annual operating budget is generated by sales tax. Half of the one-cent sales tax assessed by the county goes to the general operating fund, and the other half goes to road upkeep and law enforcement.

Ludwig said the funds have enabled the county to put $5 million aside in an emergency fund that draws interest. The fund would allow the county to operate for up to 120 days in the wake of a catastrophic event, according to Ludwig.

"We want to emphasize conservative spending because we appreciate the voters' support on these taxes," Ludwig said.

In addition to the one cent general funds tax, Cape Girardeau assesses 1.25 more cents that is used to fund various city services: a half-cent for road construction and repair, a quarter-cent for capital improvements to the city's sewer system, a quarter-cent for capital improvements to the water system and a quarter-cent for public safety split equally between the fire and police departments.

The transportation tax was first passed in 1995, and voters approved a second five-year extension to the tax in 2005.

The sewer tax was passed in 1988 and has been extended twice. It will be up for renewal in 2019.

The water tax was passed in November 1996 and has a sunset date of March 2017.

The public safety tax was passed in June 2004. Half of the tax has a sunset clause for December 2014, and the other half, used for police and fire operational costs, has no sunset clause.

pwylie@semissourian.com

335-6611, extension 127