July 04, 2009 11:39 pm
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By Debby Woodin
dwoodin@joplinglobe.com
A Farmington attorney is stirring up a statewide fight over sales taxes, the bread and butter of many city budgets.
He’s already targeted some Southwest Missouri towns and has plans to go after others — namely Joplin and St. Joseph — soon.
Some officials in the cities and the state Legislature question his tactics, and some, his ethics.
But that hasn’t stopped Tom Burcham.
At issue is what is called “stacked” sales taxes. Burcham says Missouri law allows a town, with voter approval, to assess: one sales tax to pay for general-use, or general-fund, expenses; one sales tax to pay for capital projects, one for transportation-related expenses, and one for parks and storm-water projects.
Burcham has said he will challenge Joplin’s public-safety sales tax this summer, citing it as a general-use, or general-fund, assessment that city officials have designated for public safety. He says the half-cent public-safety tax on top of the city’s 1-cent general-fund tax constitutes stacking and is illegal.
He’s won his argument against a couple of small towns, Iberia and Purdy, though on different types of sales taxes. He has lawsuits pending against Mount Vernon and Granby. Mount Vernon may have sidestepped the fight by letting its disputed tax sunset.
High stakes
In all, 51 cities in Missouri have multiple general-use sales taxes and 15 have more than one capital-projects tax, said Gary Markenson, executive director of Missouri Municipal League. That state organization represents about 660 cities.
“If he is successful and the judge nullifies these taxes, these cities are going to have to lay off fire and policemen,” Markenson said. “It’s pretty serious. If a judge orders the money collected refunded, they’ll be bankrupt overnight. And I’m not being alarmist either.”
No refunds have been ordered in the Burcham challenges.
Joplin’s city attorney, Brian Head, said the city did not intend to enact a stacked tax. He said city officials relied on an interpretation of the law supplied by the state Department of Revenue.
“The stakes are very high,” Head said of Burcham’s challenges. “The stakes are very high because a lot of improvements we have seen in crime and the Police Department are funded with this tax. Fire safety also is at risk, since added firemen and additional fire substations are paid for with the tax revenue.
“If this tax goes away, there is no additional authority in the law to replace it with some other tax.”
Joplin’s tax
Voters approved the half-cent public-safety sales tax in 2006. It has generated about $12.4 million since collections began in early 2007. Since then, about $5 million has been spent, leaving a balance in the fund of about $7.3 million.
The fund has been used to install more streetlights in neighborhoods with elevated crime rates, hire more police officers and firefighters, and equip police with more sophisticated computers, laptop computers and ticket writers, and establish a police substation. The city is looking for a site to build a fire substation to serve residents in the growing west section of the city.
Mount Vernon’s tax
Burcham has a lawsuit pending against Mount Vernon, but city officials there appear to have found a way to skirt the challenge.
Voters in Mount Vernon approved a 1-cent general sales tax in 1976. In 1988, they passed a half-cent sales tax for capital projects and, in 2003, another half-cent tax for capital projects to be used for street projects.
Even though state law seems to say that cities can have only one capital-projects tax, the city in 2003 “got a letter from the (state) Department of Revenue saying it was OK,” said John Rice, the city administrator.
Burcham had an associate come to Mount Vernon, buy $10 worth of items at a store there, and later filed a lawsuit against the city’s sales tax in Lawrence County Circuit Court, a tactic Rice questions.
“Our stance on the whole thing is it was a fair election, the people voted on it, the people of Mount Vernon imposed the sales tax, so we’re really not sure how a person from Farmington has an interest in that.”
“If this were a tax levied only on the people of Mount Vernon, the city administrator might have a point,” Burcham responded. “However, sales taxes are levied on people both within the city and people who don’t live in the city who don’t have a chance to vote on the tax.”
He estimates that up to 40 percent of a city’s sales-tax revenue is paid by outsiders.
The two Mount Vernon taxes generate about $1 million a year, half of the city’s $2 million operating budget if revenue from the water, sewer and electricity utilities are excluded, the administrator said.
City officials didn’t wait on the lawsuit to be resolved to take action to avert a loss of revenue.
In February, they obtained approval from voters to impose a half-cent transportation tax to pay for street projects and, on June 30, they let one of the half-cent capital projects taxes lapse.
While the city may have dodged a loss in revenue as a result of Burcham’s actions, it didn’t come without penalty to the taxpayers.
Rice said the city had to conduct a special election on the tax question, which cost about $4,200, and the legal fees won’t be totaled until the lawsuit is resolved or dismissed.
“We’re going to have a fair amount of money in legal fees,” said Rice.
Granby challenge
Granby is another Southwest Missouri town facing one of Burcham’s lawsuits. Voters there, in 1994, enacted a 1-cent general revenue tax. On Dec. 14, 2004, another one-eighth cent general sales tax was imposed.
The lawsuit was filed on behalf of Andrea D. Penberthy, an associate of Burcham’s. She visited Granby on March 1, 2008, where she bought $4.38 worth of items at a Fastrip convenience store and paid sales tax of 33 cents, according to the lawsuit.
The Granby city attorney, Jared Thomas, did not return a telephone message seeking comment on behalf of the city.
In court filings, Thomas sought a delay of a June 19 hearing on the lawsuit saying the city is hiring Daniel G. Vogel, an attorney from a St. Louis firm, to proceed with representing the city.
Joplin’s city attorney said that Vogel may represent Joplin and any other cities sued by Burcham because the issues surrounding the multiple sales taxes would be complicated to research and litigate.
“This is going to be fairly complex litigation,” Head said. “There will be substantial briefing on the issues, and I suspect there will be quite a bit of work to be done.”
Part 2
Accusations fly as cities square off against Farmington attorney Tom Burcham on the issue of tax stacking. A bitter political war of words develops after the state Legislature fails to act on the side of cities. Those words are reported in Part 2 of “A taxing issue” to be published Monday.
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