Utility tax increase could cost businesses thousands

Chamber: Talk of rate hike could impact sales tax vote

Businesses are seen along High Street in downtown Jefferson City in this August 2015 News Tribune photo.
Businesses are seen along High Street in downtown Jefferson City in this August 2015 News Tribune photo.

The Jefferson City Council is considering whether to increase the city's gross receipts utility tax, a move that would affect the largest businesses the most.

Last week, the council heard a presentation from staff on several possibilities for increasing the gross receipts utility tax, which is capped at 7 percent. A public hearing will be held Monday on a potential increase for gas and electric rates, which currently are at 5.65 percent.

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AP

Lebanese people carry national flags as they attend a rally in Beirut's Martyrs' Square, Lebanon, Sunday, Feb. 14, 2010. Thousands of flag-waving Lebanese gathered in Beirut's main square Sunday to mark the fifth anniversary of the assassination of former Prime Minister Rafik Hariri, a killing that sparked a cascade of political turmoil in the Middle East.

The original 7 percent rate for utilities was set in 1968. The telephone tax has remained at 7 percent over the years, but the gas and electric taxes were lowered to 6.55 percent in 1982 and to 5.65 percent in 1984.

Increasing the rate to 7 percent is estimated to bring in roughly $1.1 million in new revenue and likely would affect commercial businesses far more than residents. Increasing the rate to 6 percent is estimated to raise $294,000 in new revenue, while increasing it to 6.5 percent would raise $714,000 in new revenue.

If the city opts to increase the tax rate on electric and gas, two businesses would be unaffected. Due to prior agreements with the city, ABB Power and Unilever have caps on how much they can be charged. The amount is adjusted for inflation each year and currently has a limit of $39,152.

The state Capitol complex also is capped, as outlined in city code. The amount also is adjusted for inflation each year and currently has a limit of $115,175.

Two other businesses also had caps on their tax rates, but are no longer in business in the area. Those exemptions were for Von Hoffman Press and Florsheim.

When the options for increasing the rate were presented, council members did not state whether they were in favor or opposed, but did emphasize the city's need to find funds to help address a growing list of capital replacement and building maintenance needs. The council also indicated a strong desire to hear from residents and businesses on the issue before council members make a decision.

At the council's request, Randy Allen, president and CEO of the Jefferson City Area Chamber of Commerce, will give a presentation Monday on how an increase would affect businesses. As of Friday morning, Allen said the chamber was still developing a position and gathering feedback from the city's largest electric and gas users, who stand to see their bills jump thousands with any potential increase.

According to figures provided by city staff, a business with an annual combined electric and gas cost of $1.2 million would see an annual increase of $16,200 if the tax rate was increased to 7 percent.

"They're generally skeptical about it," Allen said. "Primarily just because of the increased cost to them. Several of them use $1 million worth of power a year, so that would be significant."

But that's not the only reason businesses may be against an increase, Allen said.

He said several business owners believe if the council approves an increase with the stated reason being to pay for capital replacement needs, it could create confusion as officials gear up to campaign for a renewal of the city's half-cent capital improvement sales tax. If voters believe a rate increase was approved to pay for capital needs, they may be less likely to renew a sales tax meant for capital improvements.

"A lot of them say they don't want to hurt any chance of some of these other things getting passed," Allen said.

The public hearing on the gross receipts utility tax will be held at 6 p.m. Monday at City Hall.