NEOSHO, Mo. — The city of Neosho’s financial turmoil has made marketing the town from an economic development standpoint much more challenging, according to Ray Stipp.

“Whenever prospective industries consider a town, they buy a local newspaper and do research,” said Stipp, president of Community Bank and Trust and chairman of Neosho’s economic development sales tax committee. “Whenever they see police and fire services have been cut back dramatically, they begin to question.”

But Stipp and other members of the committee are hopeful that the City Council will approve a proposal to direct a projected surplus of sales tax revenues to build another spec building in the city’s industrial park as a means to promote growth.

The one-eighth-cent sales tax is expected to generate about $241,000 during the next fiscal year. The city has budgeted roughly $86,000 of those funds to repay debt, while holding the rest in reserve.

Stipp said that much like a model home for a real estate subdivision, a spec building works as a potential showplace to bring prospective employers to the city’s industrial park. He said the goal is not necessarily to fill that particular building with an industry. The goal is to draw a prospect to the city for a visit, and place it either in the spec building or another site in the community.

The city built a spec building in the industrial park in 1996, using it both to lure companies and as a headquarters for other industries. Missouri Sugars bought the building in 2006.

“We have a wonderful history of that happening since 1996,” Stipp said. “Just illustration after illustration of companies that came because of the spec building. It’s just been an excellent tool for recruitment of industry. In this environment, we really need such a tool again.”

Chamber contract

The economic development sales tax committee voted 4-1 last week to advance the proposal in response to interim City Manager Harlan Moore’s budget recommendation that the city not renew a contract with the Neosho Area Chamber of Commerce using money from the sales tax.

Mayor Richard Davidson, who serves as the council’s representative to the committee, cast the dissenting vote.

“I would have rather seen the funds held in a reserve account until we got more clarification to determine if the restrictions that we interpret in the statute are correct,” the mayor said after the meeting. “There’s 20 years of history with this tax. No anomalies were found in the state’s audit in 2000. I think it was prudent of the city manager to hold the money until we have clarification otherwise.”

The city manager and city attorney have both said that under the statutory authority to assess the tax, the revenue may be used only for capital improvements, maintenance of capital projects and repayment of debt on such projects.

Moore recommended in his budget proposal that money from the economic development sales tax be used to pay off debt on capital projects, and that any money over the amount of debt service should be held in a fund for the next fiscal year.

Shana Griffin, executive director of the chamber, and Gib Garrow, economic development director, have declined to comment on Moore’s budget proposal. The contract between the city and the chamber has been for roughly $100,000 in each of the past two years, or about half of the chamber’s operating budget.

Moore said the city has “no plans” to seek a repayment of funds that had been directed to the chamber as part of the contract.

The cash-strapped town has been struggling to overcome a financial meltdown brought on by a combination of sluggish sales tax revenue, significant overruns on capital projects, and revelations by former City Manager Jan Blase that the city borrowed almost $2 million from restricted funds to meet its operating expenses. Blase and former Finance Director Bob Blackwood were fired earlier this year. Each man has been charged with a misdemeanor count of official misconduct. Blase has filed a wrongful-termination suit against the city.

As part of its effort to balance the budget, the city has cut 30 positions this fiscal year, including drastically reducing the number of police and firefighters.

The city is on the hook to repay more than $157,000 from the economic development sales tax fund that auditors found had been misspent. Moore said the city plans to make amortized payments of $31,408 over the next five years to repay the obligation.

Loan likely needed

Stipp said the economic development sales tax committee believes another spec building would help fulfill both the economic development mission and the city’s statutory requirement under the tax.

“We really think that what the voters were thinking about when they approved this tax in 1994 is they wanted whatever tools we could come up with to bring more employers to town and broaden our industrial base, and, boy, this really does that,” he said.

Stipp didn’t have an exact amount for the cost of such a building, but he said the city likely would need to take out a loan — above the amount of tax revenue — to finance the construction.

“It would cost more than ($160,000), but we’d have to enter into a loan to accomplish that,” he said. “That’s the way it was done previously, and it worked well. And we have the revenue stream that we can count on.”

But Moore said he would prefer that the city not take out any more loans until it has more financial stability.

“The council would have to be the ones to approve that,” he said. “But I think if we want something, and if it’s not an emergency, we could save up and pay cash for it. I would not be interested at all in getting a long-term loan for anything.”





Budget deadline



The Neosho City Council has just under a month left to sign off on a budget for the 2011 fiscal year, which begins Oct. 1.