Sunset Hills voters will consider a permanent extension of the city’s existing half-cent, capital-improvement sales tax in the Tuesday, Aug. 7, election.

The Board of Aldermen voted 6-2 last week to adopt an ordinance placing the proposition on the ballot. Ward 2 Aldermen Scott Haggerty and Thomas Musich were opposed.

The city’s Finance Committee recently voted 4-0 to recommend aldermen consider placing the sales-tax extension on the Aug. 7 ballot. Finance Committee member Mike Sawicki, a former Ward 1 alderman who was elected city collector last month, was absent from the April 30 meeting.

Because the deadline to place a proposition on the Aug. 7 ballot is May 29, aldermen voted 7-1 May 8 to suspend the rules to conduct a second and final reading of the ordinance. Musich was opposed.

The ballot language asks voters if the city should continue to impose the half-cent sales tax for the purpose of funding capital improvements and paying the costs of operation and maintenance of those capital improvements.

The half-cent, capital-improvement sales tax was approved by voters in 1994 to fund a more than $5.7 million bond issue for City Hall repairs, a new police station, a new public works building and street improvements, among other items.

Because the sales tax is tied to a bond issue, restrictions exist on how revenue from it can be used.

For example, for every dollar the city wants to spend from the capital-improvement tax for street improvements, 57 cents must be appropriated from general revenue, according to Mayor Bill Nolan. As a result, a surplus has accumulated in the capital-improvement fund because the city has been unable to match the sales-tax revenue with general revenue.

The bonds were issued in 1996, refunded in 2004 and are set to be retired in 2016.

If the bonds are retired, the tax would end unless voters elect to extend it.

At last week’s meeting, Ward 4 Alderman Art Havener, who serves as Finance Committee chairman, reported on the panel’s recommendation to pursue the sales-tax extension.

“… Due to the decline in general fund revenues, a surplus of revenue has accumulated in the capital-improvement fund. In 2012, a surplus of $103,000 is projected,” he said. “The capital-improvement fund, as of the end of April, has a cash balance of $688,184 and the remaining bonds have a principal value of $450,000.”

Though it was reported at the April 30 Finance Committee meeting the capital-improvement fund was generating 0.03-percent interest, that is not the case, according to Havener.

“It is important to note the capital-improvement fund is a non-interest bearing account. Thus, the city currently generates no interest on its positive cash balance,” he said. “The current interest rate paid on the bonds themselves stands at 4.125 percent. This is through 2013. In 2014, the rate will move to 4.25 and in 2015 and through ’16, will move to 4.5 percent.”

If the bonds are redeemed after the August election, the city would save an estimated $41,000 in net interest expense. In addition, the tax will continue to generate $875,000 per year for capital improvements.

Redeeming the bonds also will eliminate the requirement that capital-improvement funds be matched with general revenues.

“… This will provide greater clarity and certainty in project financing, something that cannot be underestimated. Sunset Hills has been dependent on this tax since 1996, or for the last 16 years. The capital-improvement tax represents 12.5 percent of the city’s current budget. Without the tax, it would be a large burden for the city and its citizens,” Havener said.

Havener also told the board the proposed ordinance contained a provision for the establishment of a capital-improvement committee that would recommend how the sales-tax revenue will be spent.

The committee will formulate long-term and intermediate capital-improvement plans, which will be updated every five years.

Though both Musich and Haggerty said they were not opposed to extending the sales tax, they had concerns about placing the issue before voters.

At one point, Musich questioned whether the board was placing the cart before the horse because he was uncertain how the sales-tax revenue would be spent.

“… I’m not against the half-cent sales tax. I just want to know where it’s going,” he said.

Haggerty said he particularly was concerned the proposed extension of the sales tax contains no sunset provision.

“… I’m just concerned that there’s no sunset in here for the citizens. I think — I’m all for the half-cent sales tax, extending it. I just don’t like the fact that there’s no sunset …,” he said at one point.

On Saturday, Nolan told the Call he is appointing four aldermen and six residents to the serve on the capital-improvement committee.

Serving on the committee will be the four aldermen who are on the city’s Public Works Committee — Chairman Stephen Webb of Ward 3, Richard Gau of Ward 1, Musich and Pat Fribis of Ward 4. Citizen members include Diane Stolzer, Robert Flynn, Bruce Studer, Michael Fitzgerald, Thomas Lynch and Greg Zvietel.

Nolan last fall appointed an 11-member committee to study the city’s revenue stream, including reviewing a number of commercial fees and taxes that have remained unchanged since 1994.

The Revenue Review Committee recommended the Board of Aldermen place a measure on the April 3 ballot asking voters to approve a permanent extension of the half-cent, capital-improvement sales tax.

After a first reading of the ordinance on Jan. 10, the board voted 6-2 against a second reading, effectively rejecting the measure.

Ward 1 Alderman Dee Baebler’s motion to suspend the rules and conduct a second reading of the measure was seconded by Webb. Opposed to the second reading were then-Ward 1 Alderman Frank Hardy, Haggerty, then-Ward 2 Alderman Tom Hrastich, Ward 3 Alderman Jan Hoffmann, then-Ward 4 Alderman Claudia Svoboda and Fribis.

None of the aldermen opposed to the second reading commented on their “no” vote at the meeting, though Hrastich later termed the Revenue Review Committee’s analysis and presentation “inadequate.”

Hrastich withdrew his candidacy for the April election and Musich was elected to fill Hrastich’s seat. Havener defeated former Mayor Mike Svoboda in the April election to fill the Ward 4 seat previously held by Svoboda’s wife, Claudia, who did not file for re-election, and Gau defeated Hardy for the Ward 1 seat.