Neosho council gives initial approval to budget, talks use tax

Sep. 17—NEOSHO, Mo. — Shortly after giving initial approval for a construction-heavy annual budget, Neosho council members wrangled with whether to ask voters for a use tax for the fourth time.

The council during its regular meeting last week gave initial approval to a budget with $33,520,408 in planned expenditures and $30,435,988 in anticipated revenues, for a deficit of $3,084,420.

The budget is expected to be formally approved during the council's next meeting, currently set for Tuesday. The city's fiscal year begins Oct. 1.

The budget reflects two major construction projects that the city is cost-sharing with state and federal agencies:

—Installation of stormwater upgrades along Stratford Place and Freeman Road. The city is receiving about $2.5 million in federal Community Development Block Grants for the $2,651,000 project. It is designed to reduce flooding in an area near Hickory Creek that has seen major damage to residential areas twice since 2017.

—Installation of a roundabout at Highway 86 and Hammer Road in northwestern Neosho, as well as an outer road near that intersection and a stoplight farther east on Highway 86 at Gateway Road. The city and the Missouri Department of Transportation are splitting costs of the project. The city has already hired engineering firm Allgeier, Martin and Associates to complete design of the roundabout. When completed, it is hoped to better manage traffic at the intersection just east of Highway 86's interchange with Interstate 49.

Other cost-sharing projects on the budget are the construction of a bridge over Hickory Creek at Coler Street and a T-hangar at the Neosho Municipal Airport, City Manager David Kennedy said.

Other expenditures include a 4% cost of living raise for city employees and continuing work on halting water loss in the city's system, Kennedy said.

Sales tax revenue growth contained a surprise over the current fiscal year, coming in at 10% — considerably over budget. Kennedy said the upcoming budget is based on anticipated sales tax revenue growth of 3%.

Kennedy said Neosho is not alone in experiencing higher sales tax revenues, but the reasons for the significant jump aren't immediately clear.

"I've talked to a lot of people, and read a lot of things to determine what is going on, and the only thing it comes back to is more money being spent in town," Kennedy said. "I think anyone would be grateful for this. For me, I'm more ready to see what our new normal is going to be, so that we have a better understanding of how to truly budget in the future."

Use tax discussion

While Kennedy notes that this year's boon is a surprise, what is not surprising is the increasing costs of services, because the cost of utilities, wages, insurance and more are increasing at higher rates than revenues.

In the budget summary provided to council members, Kennedy wrote that while staff must be diligent in keeping costs down, additional revenue sources, such as a use tax, increased property taxes or pursuit of additional grants, will be needed to handle continuous increases of operating expenses.

During last week's meeting, Kennedy asked for additional guidance about which of those to pursue, with an emphasis on, if a use tax is favored, getting it on an upcoming ballot in time. Council members, without reaching a vote or a clear consensus, seemed receptive to asking voters for a use tax a fourth time, but only if the city increases its educational efforts about it through the formation of a committee

Use taxes are similar to sales taxes, but use taxes are assessed only on online and other out-of-state purchases. Local use taxes in Missouri are assessed at the same rate as local sales taxes, with the revenue going to governmental bodies such as cities, counties and the state.

Like other cities in Southwest Missouri, Neosho has asked for the use tax because it offsets sales tax revenue that is lost through online purchases. The city has asked for a use tax three times since 2019.

"I'm of the opinion that the people have spoken, and spoken, and spoken," council member Charles Collinsworth said at the beginning of the discussion.

While it has failed all three times, the rejections have been by slim margins:

—In April 2019, the measure lost by 15 votes, 335 to 320.

—In November 2019, it lost by eight votes, 348 to 340.

—In April 2021, it lost by 33 votes, 562 to 529. That election featured a higher turnout, with Neosho voters electing council members to an expanded council.

Council member Angela Thomas said that if they want to ask for it again, the city must do a better job at demonstrating how online purchasing is costing the city money.

"There is also a lack of education in letting citizens know about the revenue we have lost," Thomas said. "It's not just that we need more tax money. That is a big revenue loss that the city could gain, and I'm not sure that has been emphasized enough."

Council member Ashton Robinson and Collinsworth both recommended forming committees to help educate voters exactly about what the tax is and what it helps recover.

Council member Richard Davidson said that he has no problem with placing it on the ballot again, as long as the need is clearly explained.

"I'm not saying we need it, but if we're saying without it that city revenues would continue to erode, then it should be a vote of the people," Davidson said. "If they voted it down every time, that's fine. But they will be the first to come to us when we can't provide a service anymore."