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Published on Thursday, April 28, 2016

Disappointing session for municipal finance issues

While the enacted state budget ultimately provided full funding of state revenues distributed to cities, such as liquor taxes and city-county assistance, the 2016 legislative session brought no real consideration of ways to ensure the fiscal sustainability of cities. In addition, while AWC priority bills to restore the growth in liquor revenue received hearings in House and Senate committees, budget writers would not allow these bipartisan bills to move forward.

On the positive side, proposals with direct impacts to city finances were heard in legislative committees but did not advance after AWC and cities showed opposition. These include a proposed cap on city utility taxes on water and sewer businesses at 6% unless voter-approved and a bill that would have redirected certain lodging tax revenue to statewide tourism funding.

Legislators were looking for ways to keep the business community happy in this election year. A proposal to reduce the frequency of sales tax changes from four times per year to three, HB 2565, passed unanimously in both chambers. As a result, local governments will no longer have the option of making sales tax changes effective October 1. Because cities seldom make changes on October 1, AWC took a neutral position on the bill.

The Legislature also passed HB 2959, which establishes a task force on local business tax and licensing simplification. The nine-member task force is chaired by the Department of Revenue and includes four business representatives, three city representatives, and one representative from FileLocal. The bill directs the task force to develop options for centralizing and simplifying the administration of local business and occupation taxes and business licensing. Earlier versions of the bill would have required the task force to propose legislation for the 2017 legislative session, the final version requires the task force to prepare a report to the Legislature instead. AWC’s CEO Peter King will serve on the task force, and meetings will get underway next month. We will provide regular updates about the task force in our monthly Legislative Bulletin and direct communications with the 43 cities who have a B&O tax.

BillTracker Bill # Descriptive title Final status
Yes HB 2565 Reducing the frequency of local sales tax changes Law; Effective 6/9/2016
  HB 2959 Establishing a task force on local business tax & licensing simplification Law; Effective 6/9/2016
Yes HB 2148 Allowing audits to be conducted by a private entity Failed
Yes HB 2438 Gradually restoring local liquor revenue Failed
  SB 6033 Establishing a task force to examine state and local regulations that affect small businesses Failed
Yes SB 6115 Limiting water & sewer utility taxes Failed
Yes SB 6425 Gradually restoring local liquor revenue Failed
Yes SB 6672 Redirecting a portion of local lodging tax revenue to a statewide tourism marketing program Failed
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