County boosts Blair Oaks surtax funds

The Cole County Commission has approved an increase to the supplement the county pays to help the Blair Oaks School District pay off its part of a 2012 settlement over problems with a surtax collection.

"The county is paying the entities that were owed money under the settlement - we are not paying Blair Oaks," said County Auditor Kristen Berhorst. "The county created separate bank account to pay the money out to those entities known as the surtax redistribution account."

"This is being done to meet the terms of the agreement calling for all money to be paid out in 15 years," Berhorst said. "Any surtax being collected by Blair Oaks is being held back and put into the redistribution account. Blair Oaks is paying off their debt using their current surtax collection. The increase the commission approved will guarantee everyone else is paid. The county is the only entity Blair Oaks will owe money to after the 15-year mark."

Eleven parties reached a settlement in April 2012, more than a year after lawsuits were filed over a 20-year-old mistake in the surtax that resulted in taxing entities being overpaid or underpaid. Although a total of $4.6 million was distributed incorrectly during the 20-year period before the error was found, officials contended a three-year statute of limitations applied.

The surtax is a statewide commercial property tax, and state lawmakers created it in the 1980s to replace the Merchants and Manufacturers Tax. Cole County Collector Larry Vincent said prior to 1985, the Merchants and Manufacturing tax was applicable to all merchandising and manufacturing inventories.

A constitutional amendment was adopted exempting merchants' and manufacturers' inventories from taxation. In 1984, to replace the revenues lost because of the exemption, lawmakers imposed a tax on commercial property - the surtax.

The replacement tax was calculated to provide the same amount of tax in the first year as the old Merchants and Manufacturing tax provided in the previous year.

Lawmakers also wrote a formula to be used for distributing the tax money, but a mistake made in the Cole County clerk's office apparently changed the distribution formula, resulting in five taxing entities - including Jefferson City government - getting substantially less than they should have received, while the other six got too much.

The agreement called for all money to be paid back in 15 years.

Under the settlement, Blair Oaks agreed to repay the county $625,255.07, without interest, by foregoing and assigning the district's right to future surtax distribution the district would be entitled to until the misappropriated surtax funds are repaid.

Recently, it was discovered the surtax collections in the R-2 district were not coming in at the expected rate.

To fix that, the county will increase the amount it's been paying from the county's general fund and tax maintenance fund from $20,000 to $26,000.

County officials said it will be more than 15 years before the district will pay back all the money it owes. Blair Oaks has to pay the entities and the county as part of the 2012 agreement.

County officials added, as of now, all other entities that owed money will have paid their amounts off before the 15-year period.