LAWSUIT PLACES HIGHER MOTEL-HOTEL TAX IN LIMBO

Despite collecting revenue from an increased hotel-motel tax in the city, Cape Girardeau has yet to spend the money.

A legal challenge by businessmen Jim, Robert and Charles Drury keeps the nearly $40,000 a month out of city coffers. Generally, the city collects $1 million a year from the tax.

The city has the money in an escrow account but cannot spend it pending a decision on the case, said City Finance Director John Richbourg.

Because the hotel and motel taxes paid by the Drurys were paid under protest, the money cannot be spent or taken into city revenues.

"Whenever the lawsuit disappears, then the money will be available," Richbourg said.

Even without the tax increase revenue, the city has seen a rise in its hotel-motel-restaurant tax revenues.

In April 1998, Cape Girardeau voters approved a change to the way the city collected its hotel-motel-restaurant tax.

In an effort to be more just, the city extended the restaurant tax to all restaurants, convenience stores, department stores with snack bars, bookstore coffeeshops, ice cream parlors, bakeries, delis and pizza delivery businesses. Grocery stores that sell any prepared foods like deli sandwiches or fountain drinks are also required to collect the tax.

The tax rates, which were set at 3 percent on gross hotel and motel receipts and 1 percent on gross restaurant receipts, did not change with that vote.

The tax change took effect in July 1998.

Within the first year, the tax generated $92,521 in revenue from businesses that hadn't been paying the tax previously, but an exemption for businesses or entities that didn't pay any state or federal taxes meant a drop in revenue of $33,905.

Overall, the city's revenue grew by $58,615 within the first year of collection.

Originally the hotel-motel-restaurant tax was set to expire in 2004. Its revenue was to retire debt on the bonds used to build the Show Me Center and the Osage Community Centre and Shawnee Sports Complex. It also funds operation of the Convention and Visitors Bureau.

The city and Southeast Missouri State University devised a plan to increase the hotel-motel tax and extend the restaurant tax to generate revenue that would fund improvements to the former St. Vincent Seminary downtown. Under that proposal, the hotel-motel tax increased to 4 percent of gross receipts; the restaurant tax remained at 1 percent of gross receipts. Both taxes were extended to 2030.

Voters approved the plan to increase and extend the taxes but not for authorization of bonds to fund the improvements.

The River Campus project, as it became known, costs an estimated $36 million. The city agreed to fund $8.9 million of the project with bonds, with the remainder to be paid by the university.

The bonds would be paid by a hotel-motel-restaurant tax increase and extension. The restaurant tax would only be extended.

Voters approved the measure in November 1998, allowing the city's bonds to be retired from the revenue from motel and hotel taxes.

But the Drury lawsuit has held up the process. The city can't issue the bonds until the issue is resolved.

A decision on the case is expected soon, city officials say.