Price says tax legislation will hurt city

Maricopa Mayor Christian Price said he and other Valley municipal leaders will continue to fight for the fragile fiscal health of their cities and towns after losing a key vote on tax reform Wednesday in the Senate Finance Committee.

Price was one of several leaders from Arizona cities who addressed both the media and the committee pleading for state lawmakers to take more time in calculating the fiscal impact the proposed law could have on municipalities, especially a change in how tax is collected on construction activity.

“Our job is to fight for every dollar,” Price said after the committee vote, adding it was “unfortunate” the bill passed the way it was written.

There is still time for city leaders to make their arguments, though, before the bill becomes law, Price said. It next goes to the Senate Appropriations Committee.

Price has pointed out the Joint Legislative Budget Committee issued a report March 11 stating there was a lack of data available to accurately estimate the fiscal impact of the proposed legislation.

It offered two estimates using different methodology to figure the impact on the state’s general fund. In one estimate, the fund would see a net gain of $19 million in the first year of implementation. In the other estimate, the fund would see a reduction of $137 million.

On Wednesday, the finance committee considered legislation that stemmed from Gov. Jan Brewers efforts to reform the state’s transaction privilege tax system, or TPT. Last year, the governor formed a nine-member task force charged with developing proposals to simplify the task system. The group submitted its final report to the governor, as well as House and Senate leaders, in December.

The committee approved the legislation, House Bill 2111, in a 6-to-1 vote, with one member abstaining.

The League of Arizona Cities and Towns, of which Maricopa is a member, has taken issue with certain parts of the proposed law and has been working with lawmakers to iron out concerns. Price spoke at the press conference and testified before the finance committee.

One of the major issues – one Maricopa leaders say would greatly impact the city – is the possible elimination of a construction-sales tax. The current legislation wipes away the local tax on construction activity and has cities making up the costs through the statewide redistribution of tax revenue generated from the sale of construction materials.

Maricopa leaders have estimated that a loss of the construction sales tax could result in more than a 20 percent reduction in the city’s budget by fiscal year 2015-2016, or more than $6.3 million.

As far as making up the money through retail sales on construction material, the League of Arizona Cities and Towns has questioned how much building material is bought in-state – which creates that revenue – and whether cities that have lots of construction activity will actually make up all the revenue loss from redistribution.

Between the League of Arizona Cities and Towns press conference and the committee hearing, Price said eliminating the construction-sales tax would result in cuts to city services.

When asked what services specifically, Price drew a large picture.

“It would literally be everything on the table,” he said. “Everything.”

Lawmakers have been negotiating with city leaders to make changes to the current legislation, including keeping the construction-sales tax. State Rep. Debbie Lesko, who sponsors the bill, said there’s a proposal for cities to be able to charge their local construction tax on new home building and new commercial construction.